Justia Tax Law Opinion Summaries

A taxpayer that conducts business in multiple states must apportion its business revenue among the states in which it does business. Texas Tax Code section 171.106 provides for such apportionment under a single-factor formula, which compares the taxpayer’s gross receipts derived from its Texas business to its gross receipts everywhere. Section 141.001, however, adopts the Multistate Tax Compact, which sets out a three-factor formula for apportioning“business income” for an“income tax” and provides that a taxpayer subject to a state income tax may elect to apportion its income “in the manner provided by the laws of such state” or may elect to apportion using the Compact’s three-factor formula. The appeals court affirmed the trial court’s summary judgment, holding that apportionment of the Texas franchise tax is exclusively the province of chapter 171. The Supreme Court of Texas affirmed. Section 171.106 provides the exclusive formula for apportioning the franchise tax and, by its terms, precludes the taxpayer from using the Compact’s three-factor formula.The Compact is severable and contains no unmistakable language waiving the state’s exercise of the sovereign tax power. Nothing in the Compact expressly prohibits the states from adopting an exclusive apportionment method that overrides the Compact’s formula. View "Graphic Packaging Corp. v. Hegar" on Justia Law

At issue in this case was whether the Commerce Clause’s limitations on a state’s power to tax interstate commerce bar property taxes levied on natural gas held in Texas without a destination while awaiting future resale and shipment to out-of-state customers. The court of appeals found the tax in this case valid. The Supreme Court affirmed, holding (1) a nondiscriminatory tax on surplus gas held for future resale does not violate the Commerce Clause; and (2) the tax levied in this case withstands constitutional scrutiny, and because it does not violate the Commerce Clause, neither does it violate Tex. Tax Code 11.12, which provides a state-law exemption for taxes that would otherwise violate federal law. View "Etc Marketing, Ltd. v. Harris County Appraisal District" on Justia Law

Southwest Royalties, Inc, an oil and gas exploration company, filed a tax refund claim with the Comptroller asserting that its purchases of casing, tubing, other well equipment, and associated services were exempt from sales taxes under a statutory exemption. The Comptroller denied relief. In response, Southwest sued the Comptroller and the Attorney General. After a bench trial, the trial court rendered judgment for the State, concluding that Southwest failed to meet its burden of proving the exemption applied. The court of appeals affirmed. The Supreme Court affirmed, holding that Southwest was not entitled an exemption from paying sales taxes on purchases of the equipment. View "Southwest Royalties, Inc. v. Hegar" on Justia Law

Southwest Royalties, Inc., an oil and gas exploration company, filed a tax refund claim with the Comptroller, arguing that it was entitled to a tax exemption for some of its equipment related to oil and gas production operations such as casing, tubing, and pumps, together with associated services. The Comptroller denied relief. Southwest subsequently sued the Comptroller and the Attorney General, asserting that the equipment for which it sought refunds was used in separating oil, gas, and associated substances (collectively, hydrocarbons) into their different components. The trial court rendered judgment for the State, concluding that Southwest failed to meet its burden of proving that the exemption applied. The Supreme Court affirmed, holding that Southwest was not entitled to an exemption from paying sales taxes on purchases of the equipment because it did not prove that the equipment for which it sought a tax exemption was used in “actual manufacturing, processing, or fabricating” of hydrocarbons within the meaning of Tex. Tax Code Ann. 151.318(2), (5), or (10). View "Southwest Royalties, Inc. v. Hegar" on Justia Law

The Texas Tax Code provides that “only the net gain” from the sale of investments should be included in a key component of the statutory franchise-tax formula. In implementing Texas’ statutory franchise-tax liability scheme, the state comptroller adopted a rule requiring businesses to include net gains or net losses. Hallmark Marketing Company filed a franchise-tax protest suit against the state comptroller seeking a refund of more than $200,000 in taxes it paid, arguing that the comptroller’s rule conflicts with the very statute it purports to enforce. The trial court and court of appeals ruled in favor of the comptroller. The Supreme Court reversed, holding that Tex. Tax Code 171.105(b) does not require Hallmark to include a net loss from the sale of investments. Remanded. View "Hallmark Marketing Co., LLC v. Hegar" on Justia Law