Texas Register, Volume 45, Number 21, Pages 3389-3544, May 22, 2020 Page: 3,501

                                
Sheets and Cindy Olson Bourland, on behalf of the City of Round
Rock, commented that change to the definition is not a clarifica-
tion because the words "fulfill" and "fulfillment" do not appear in
Chapter 321 and that sales are taxed where they are "consum-
mated," not "fulfilled." Mr. Sheets proposed to add a new sen-
tence to the definition stating that "except for sales under sec-
tion (b)(1)(C), where a sale is consummated does not depend
on where a sale is fulfilled."
Ms. May commented that the definition of "fulfill" is clear for
tangible personal property, but it is unclear how it applies to in-
tangible items such as access to research on online platforms.
She requested further clarification in the section for how services
such as information services are fulfilled.
The comptroller declines to make the suggested changes. The
definition gives effect to Tax Code,  321.203 (Consummation of
Sale) and the comptroller will consider addressing consumma-
tion of certain services at a later date.
The proposed rule added a definition for "Internet order" in
new subsection (a)(10) to distinguish between an order placed
through the Internet as opposed to an order placed in person
at a seller's location as contemplated in Tax Code,  321.203(c)
and  323.203(c). The comptroller received comments regarding
this definition. Commenters stated that the definition of "Internet
order" will create confusion and requested that the comptroller's
office make revisions to clearly define what constitutes an
"Internet order."
During the Ways and Means hearing, Texas State Represen-
tative Erin Zwiener requested clarification regarding orders re-
ceived over cellular phones. Mr. Kennedy made similar com-
ments and requested clarification on the treatment of email or-
ders. Ms. Olson Bourland and Bob Scott requested clarifications
on Voice over Internet Protocol (VoIP) and whether that consti-
tutes an Internet order.
Mr. Kennedy also requested that the comptroller define the term
"order" to clarify when an order is received. Brian Pannell, on
behalf of Dell Technologies, made similar comments and also
requested clarification concerning purchase orders.
Mr. Sheets commented that the comptroller should define the
word "Internet" as found in Tax Code,  151.00393 (Internet),
which provides that the Internet is used to "communicate infor-
mation." He commented that the concept of an "Internet order"
does not appear in Chapter 321 of the Tax Code and that it is
nothing more than one of many tools for communicating infor-
mation, no different than the US Postal Service and telephone
land lines. Mr. Kroll and Mr. Harris echoed these comments.
Mr. Sheets proposed a revised Internet order definition.
Both, Mr. Camareno and Mr. Kroll, commented that the amend-
ment is unclear whether an Internet order can cease to be an
Internet order. Mr. Camareno commented that there are times
when an Internet order involves human interaction to fulfill an
order, and other times when it is automated. Additionally, Mr.
Kroll; Craig Morgan, on behalf of the City of Round Rock; Mr.
Camareno; Mr. Kennedy; Kyle Kasner; and Karen Hunt, on be-
half of the City of Coppell, requested that the amendment be re-
vised to adequately address business-to-business transactions
through the Internet because those orders are fundamentally dif-
ferent from business-to-consumer transactions. Mr. Kroll stated
that the definition also causes issues when businesses lease
computers from a seller because under the property tax rules,
the seller retains ownership of the leased computer.

David Edmonson, on behalf of TechNet, and Mr. Pannell com-
mented that rather than choosing specific points in the sales
process and giving them more weight than others (thus creating
loopholes for sellers and purchasers to use to their advantage),
an alternative approach might be the creation of a composite of
selling activities test similar to the one used by the state of Illinois
to help identify the local sales tax that is most appropriate.
The comptroller declines to make this revision because the cre-
ation of a composite of selling activities test is not within the
comptroller's rulemaking authority. A composite of selling ac-
tivities test would require a legislative change because it is not
supported by Tax Code, Chapters 321 and 323.
Additionally, in response to these comments, the comptroller is
deleting the proposed definition of "Internet order" and the pro-
visions for consummation of sales for Internet orders.
The comptroller amends the definition of "itinerant vendor" in
subsection (a)(10) to clarify that an itinerant vendor is a seller
who does not have a place of business in the state as provided in
Tax Code,  321.203(e)(1). The comptroller also removes the ex-
ample of an itinerant vendor concerning a person who sells rugs
because it is no longer necessary. The comptroller also clarifies
that a salesperson operating out of a place of business is not
an itinerant vendor. The comptroller deletes from the definition
"office" or "other location that provides administrative support to
the salesperson" because those do not meet the definition of a
place of business of the seller in Tax Code,  321.002(a)(3)(A)
(Definitions).
The comptroller adds a definition for "marketplace provider" in
new subsection (a)(14) as defined in  3.286 of this title.
The comptroller adds a definition for "order placed in person"
in new subsection (a)(15). Orders placed in person are those
orders placed with the seller while the purchaser is physically
present at a seller's place of business, regardless of how the
seller subsequently enters the order. Subsequent paragraphs
are renumbered.
Mr. Kroll proposed defining the term as "an order placed by a
purchaser with the seller while physically present at the seller's
place of business." The comptroller agrees to make the revision
for clarity.
The comptroller amends the definition of "place of business of
the seller - general definition" in renumbered subsection (a)(16).
Tax Code,  321.002(a)(3)(A) defines "place of business of the
retailer" as "an established outlet, office, or location operated by
the retailer or the retailer's agent or employee for the purpose
of receiving orders for taxable items and includes any location
at which three or more orders are received by the retailer during
a calendar year." The reference to the retailer's "agent or em-
ployee" indicates that sales personnel must be at the site, and
this requirement has been added to the definition.
In addition, the amended definition clarifies that the term does
not include a computer server, an Internet protocol address, a
domain name, a website, or a software application. Many sell-
ers house their computer servers at a co-location facility or rent
computer server space at a managed hosting site. But an ordi-
nary person would not consider the physical locations of these
computer servers to be places of business of the seller. Simi-
larly, an ordinary person would not perceive an Internet protocol
address, a domain name, or a website as an "established outlet,
office, or location" so as to constitute a place of business. The
comptroller reflects these changes throughout the section.

ADOPTED RULES May 22, 2020 45 TexReg 3501