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11 Apr 2023

Texas Tax Roundup | March 2023: Flowback, Welding, Local Taxes, And More!

Welcome back to another Texas Tax Roundup! March 2023 brought us a lot of administrative action, especially for Texas sales or use tax. Let’s get started!

Rules

Franchise Tax

Apportionment

34 Tex. Admin. Code § 3.591 (Margin: Apportionment)—The Comptroller adopted his amendments outlined in our previous post to implement the Texas Supreme Court’s opinion in Sirius XM Radio, Inc. v. Hegar, No. 20-0462 (Tex. March 25, 2022).[1]

Notable Additions to the State Tax Automated Research System

Franchise Tax

Apportionment

Comptroller’s Decision No. 116,251, 116,252 (2023)— The ALJ upheld assessments of sales tax and franchise tax against an out-of-state corporate taxpayer for periods in which the corporation had only a single employee in Texas. The taxpayer was in the business of selling telecommunication services. The Comptroller had become aware of the taxpayer’s business activities in Texas due to information from the Texas Workforce Commission. The ALJ found that the presence of an employee in Texas created nexus for purposes of both sales and franchise tax.[2] Outside of asserting that Texas lacked jurisdiction to tax, the taxpayer didn’t provide any evidence showing that the assessments were incorrect.

Sales And Use Tax

Flowback Services
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Written by TL Fahring | Posted in Franchise Tax • Sales And Use Tax Manufacturing Exemption

20 Sep 2022

Shocking Court Cases In Texas: Franchise Tax, Sales & Use Tax, Miscellaneous Gross Receipts Tax, Beverage Tax

Court Cases

Franchise Tax

Apportionment

Conagra Brands, Inc. v. Hegar, No. 03-21-00111-CV (Tex. App.—Austin Aug 24, 2022, no pet. h.)—The Third Court of Appeals held that a taxpayer could not include gross receipts from certain securities in its apportionment-factor denominator for purposes of calculating its Texas franchise tax.[1]

The taxpayer in question was in the business of producing food products for sale to grocery stores, convenience stores and food service businesses. In order to mitigate the risks associated with potential fluctuations in the price of necessary components and raw materials, the taxpayer bought and sold commodity futures contracts.
The taxpayer argued that these securities were inventory for federal tax purposes and that the gross proceeds from the sale of these securities should be included in its apportionment factor denominator. On appeal, however, the taxpayer didn’t dispute the trial court’s finding that the securities weren’t inventory as defined in the Internal Revenue Code. Instead, the taxpayer argued that the securities were in substance inventory under the U.S. Supreme Court’s decision in Corn Products Refining Co. v. Comm’r, 350 U.S. 46 (1955).