Republican-Led TX House Smacks Down Gov. Rick Perry, Forces Through Legislation To End Internet Sales Tax Dodging

Large online retailers like and have exploited a loophole in state tax codes to avoid paying sales taxes. As ThinkProgress has reported, this brazen tax dodging has cost states across the country hundreds of millions of dollars in desperately needed revenue. Last month in Texas, Gov. Rick Perry (R-TX) vetoed legislation, passed by a bipartisan majority in the state Legislature, to end the loophole.

However, Republicans in the Legislature have struck back at lobbyists and are circumventing Perry’s veto. State Rep. John Otto (R) added an amendment to a “must-pass” spending bill restoring language to the tax code that would end the Internet sales tax loophole. Perry’s allies in the legislature moved to table the Otto amendment, only to be rebuked by a landside vote:

Rep. Bill Zedler, R-Arlington, filed an amendment to strip the language from SB 1, but his provision did not survive a spirited debate in the House, where members voted 106–34 to table it. […] The fiscal matters bill still has to pass the House, and then likely would have to go back to the Senate for approval. If the online sales tax-related language from Otto survives that process, Perry would have to veto the entire fiscal matters bill to remove it.

The success of the Otto amendment to close the loophole shows the growing bipartisan support for ending corporate welfare and other tax giveaways. As Otto explained during the debate over his amendment, the effort has less to do with “raising taxes” and is actually about creating a “level playing field” with other “retailers who are competing against these companies.” Tax fairness creates a better business environment, and it strengthens the state’s finances.


Earlier this year, Texas Comptroller Susan Combs filed a report showing that’s exploitation of the loophole has cost the state $269 million in sales taxes it failed to collect from 2005 to 2009. As Texas struggles with a large deficit, Perry has moved to slash education, health, and other vital services.