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Government/Politics

Coalition Rallies To Dump The State Franchise Tax In 2015 Legislative Session

A group of Republican lawmakers, business alliances and tea party activists are hoping to gather enough support ahead of the 2015 legislative session in order to do away with the Texas franchise tax.   

The state’s franchise tax, also known as a margins tax, is accessed as a privilege to do business in the state, similar to a fee. State Rep. Dan Flynn, R-Canton, said the fee is unfair because of what’s known as “showcasing.” According to the industry definition, showcasing is where a consumer goes to their local retailers and tries on the product only to purchase it online, where there is not franchise tax.

“It’s unfair to mom-and-pops who have to pay a sales tax and then you can go online and someone can go around you," Flynn said. "So that means we lose money locally."

The Texas franchise tax has existed in some form since the early 1800s. In 2006 the state faced with a potential shutdown so lawmakers revamped the franchise tax along with a handful of other tax reforms hoping to glean additional revenue. Since that year, reforming it has been one of the most talked about tax reforms.

In 2013 Gov. Rick Perry vetoed a bill that would have eliminated the franchise tax, because he said the bill couldn't do enough on it’s own to eliminate a federal loophole that allows online companies to bypass the margins tax.

“Step 1 is the United States Congress has to close the loophole before anyone of us can act, and they do that then we can consider some of the issues we’ve looked at before,” Flynn said.

Flynn said they will introduce a bill that calls for a series of tax reforms that ultimately eliminates the Texas franchise tax in 2015 if Congress is able to act.