I don't really understand how this could work. How does purchasing a service from a Texas company give you a physical nexus in Texas? Maybe if Texas was arguing this applied to those who colocate physical servers they own in a Texas data center I could buy it. But merely being a customer of a hosting company, where you are being sold some storage space and bandwidth on a computer? Whether it's shared hosting, VPS or renting a server, you don't own any physical property in the state.
The test for nexus is not "do you own physical property in the state." It gets a little complicated -- see Quill v. North Dakota or flag down your friendly neighborhood grellas.
Applying these principles, [the US Supreme Court has] held that if a foreign corporation purposefully avails itself of the benefits of an economic market in the forum State, it may subject itself to the State's in personam jurisdiction even if it has no physical presence in the State. [They then reason that jurisdiction to resolve lawsuits establishes a sufficient level of judicial authority to satisfy the Commerce Clause's requirement that states not unduly hinder interstate commerce.]
Policywise, I think it is almost certainly a poor decision for Texas, but legally this could be a close call. There are many, many unsettled questions about how the Internet economy intersects with tax regulations drafted back when Sears Roebuck consumed a measurable percentage of the world's total paper output. (Ask me sometime about tax treatment for BCC. It is an international boondoggle.)
I really have to agree. It's not my server. They are letting me use their server and store some files on it, but in no way do I believe that I would have a nexus in Texas.
Under these conditions, anyone with a Gmail account would have to pay taxes where ever their email is stored by Google.
And if a company uses a service that happens to be hosted in Texas? e.g. a wiki. Do they have to pay taxes there as well? Why is a virtual server different?
