July 14th, 2019

How does the $5,000 confidential threshold work?

The Texas Comptroller’s Confidential Information Reports, which power the bulk of ZacTax, contain several limitations. For example, if you have a taxpayer with multiple locations in your city, you’ll only receive the total taxes paid at all locations. We wrote about various proposals to fix this issue, but none of them passed through the Legislature. Another limitation is that the reports don’t include all taxpayers:

The Confidentiality Report shows the aggregate local sales and use tax amounts paid to the local sales taxing jurisdiction each month by businesses that annually remit to the Comptroller state and local sales and use tax payments totaling more than $5,000.

$5,000 in state and local taxes is around $61,000 in taxable sales in most jurisdictions, so it’s not necessarily a huge threshold to reach. However, it does mean that small businesses may not show up in your reports and new businesses may take a few months before they show up. 

How is the threshold rule applied?

The threshold rule is applied each time you request a Confidential Information Report, and is based on a rolling 12-month total. This means that a taxpayer could theoretically show up one month and disappear the next, if the 12-month total dipped below the threshold. It also means that quarterly payers, which often includes small businesses with lower tax collections, may not show up for several months. For example, say you have a new small business open up shop on January 1. If they don’t meet the $5,000 threshold until their second quarterly filing, they won’t show up in your ZacTax data until August. 

It’s important to keep this threshold rule in mind when you’re waiting for a new taxpayer to show up in ZacTax.