| TAMACC Leads Legislative Effort to Ease Financial Strain of Sales Tax Collection on Small Businesses
The Texas Association of Mexican American Chambers of Commerce (TAMACC) is spearheading a new legislative initiative aimed at easing the financial burden retailers face when collecting and remitting state sales taxes. The proposed Fair Business Reimbursement Act seeks to modernize Texas’ decades-old reimbursement structure to reflect today’s digital payment landscape and rising operating costs.
“Texas businesses shouldn’t be penalized for collecting taxes for the state,” said TAMACC President and CEO Pauline E. Anton. “This legislation ensures fair compensation for retailers and provides meaningful relief that small businesses will feel month after month.”
Modernizing an Outdated System
Texas imposes a 6.25% state sales and use tax on most goods and taxable services, with local jurisdictions authorized to add up to 2%, bringing the maximum combined rate to 8.25%. According to the Texas Comptroller’s Office, 1,149 cities across Texas currently levy the maximum rate.
Retailers are required to collect these taxes and remit them to the state. In return, they may withhold a small percentage of the tax collected to offset administrative costs:
- 0.5% for on-time payments
- 1.75% for pre-payments made midway through the tax period
These rates were set in an era when cash dominated retail transactions. However, today’s marketplace is driven by credit card and electronic payments, which come with significant processing fees that increasingly cut into business profits. The Hidden Cost of Tax Collection
For many retailers, credit card processing fees are now the second-largest operating expense, behind labor. Nationwide, these fees have surged from $20 billion in 2001 to $138 billion in 2021, fueled by the acceleration of digital payment adoption during the COVID-19 pandemic.
The issue is compounded by the fact that processing fees apply to the entire transaction amount, including the sales tax portion — a cost that retailers must bear, even though the tax revenue ultimately goes to the state.
A Real-World Impact on Small Businesses
Consider a retailer that processes $1 million in monthly credit card sales, generating $80,000 in sales tax at an 8% rate:
- A 2.5% processing fee on the $1.08 million total equates to $27,000 in fees, including $2,000 on the sales tax portion.
- Yet under current law, the business can withhold only $400 to $1,400 depending on payment timing.
- This creates a monthly loss of $600 to $1,600, simply for collecting sales tax on the state’s behalf.
A Fair and Practical Solution
The Fair Business Reimbursement Act proposes allowing retailers to withhold 2.5% of the tax remittance on credit card transactions, more accurately reflecting the actual cost of tax collection. For a business processing $1 million per month in credit card sales, this adjustment could translate into annual savings between $7,200 and $19,200.
A Step Toward Fairness and Sustainability
Supporters say the bill realigns the reimbursement system with its original intent—to fairly compensate businesses for their role in tax collection. That responsibility has grown significantly since the 2018 U.S. Supreme Court Wayfair ruling, which extended sales tax obligations to remote sellers and small businesses previously exempt.
This expanded tax base has delivered substantial new revenue for the state, creating both a practical and fiscal opportunity to modernize reimbursement without a major budget impact.
If passed, the Fair Business Reimbursement Act will offer a tangible monthly benefit for small businesses across Texas, helping them remain competitive in a digital-first economy. As credit-based transactions continue to dominate retail, TAMACC, and its partners argue that this legislation isn’t just timely, it’s essential. | 
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