“Instead, what it’s all about is, how do we use the tools that are available to us right now to really make sure that we create good quality of life, business development and economic development within the community we reside in?”Ĭity officials in San Marcos said the Chapter 380 statute is one of the few economic tools they have in their arsenal to compete with bigger cities.
“I don’t think there ever is an intent to say that a community is going to be stealing sales tax from another community,” Wright said. “If the city of Round Rock had not stepped up and offered Dell an incentive to stay in Central Texas, all of these tax dollars would have been lost,” Sheets said.ĭeSoto City Manager Brandon Wright said the city’s deal with Kohl’s helped bring hundreds of jobs to DeSoto, and the 95 percent tax rebate diminishes over time, resulting in a higher share of tax revenue for the city. Round Rock City Attorney Steve Sheets said Dell likely would have established its headquarters in another state or country if the city hadn’t offered an incentive package to the company.Īside from the local sales taxes Round Rock collected, Sheets said Dell has paid $1.5 billion in state sales taxes since the 1990s. Local officials staunchly defend the deals. The true cost is actually higher because some cities haven’t released payment records to the Chronicle, saying they’re tied to sales tax figures that are confidential under Texas law. Overall, e-commerce deals reviewed by the Chronicle generated more than $220 million in corporate incentives in Texas. In DeSoto, which signed an agreement with Kohl’s in 2011 to open a distribution center, the city agreed to rebate 95 percent of the sales taxes collected by the company during the first phase of its 40-year agreement. The computer giant Dell has received more than $164 million in sales-tax rebates from the city of Round Rock during the duration of its incentive agreement, a 60-year deal that lasts until 2053. The firm charged online customers a local sales tax rate of 1.5 percent for San Marcos and half a percent for Hays County. Cities, counties and other taxing entities in Texas collect up to 2 percent in local sales taxes from customers the state of Texas charges 6.25 percent.īuying the same products on Best Buy's website or smartphone app triggered a different method of tax collection.īest Buy created a subsidiary in 2016 to operate its e-commerce center in San Marcos and centralize internet orders in Texas. If Kadiwal had walked into an electronics store and bought his merchandise in person, his local sales taxes would usually be collected by the community where the store is located. What’s changed is how online shopping has transformed tax rebates into money-making machines for a growing number of businesses and Texas communities. HOW IT ALL BEGAN: In Texas, tax incentives were often against the lawĪ wide variety of incentives can be offered under such agreements, and rebates on sales taxes are nothing new. There’s no limit on the duration of each deal no minimal job-creation requirements and no reporting on how much the agreements ultimately cost taxpayers. Known as “Chapter 380” for cities and “Chapter 381” for counties, the laws were passed during the recession of the 1980s without the typical safeguards that lawmakers placed on other economic incentive programs. "I feel like it should have gone to the town where I was living in, you know?"īest Buy’s tax incentives were made possible by obscure Texas laws that allow cities and counties to sign such deals with few restrictions - even if it means taking tax money from Texans who have no say in the agreements. "It does bother me," Kadiwal said in a recent interview after he learned how his tax dollars were spent. Total payments to Best Buy since 2017: more than $40 million. Under economic incentive agreements signed with Best Buy, San Marcos and Hays County gave 75 percent of the net tax revenue to the company after it opened an “e-commerce sales operation” and hired up to 112 new full-time employees. The true number is probably higher because some cities are trying to withhold that information.Īnd most of the tax dollars collected by the city and county weren’t spent on fixing streets, paying firefighters or funding other essential government services.
More than $220 million in sales-tax rebates have been paid to retailers.
Much of that tax revenue goes right back to huge online retailers such as Dell, Kohl's and Best Buy thanks to economic incentive agreements made possible by an obscure Texas law.Online shoppers across Texas are paying millions in sales taxes to a handful of cities and counties - even if they don't live in those communities.