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The 2013 Changes to the Texas Franchise Tax

The 83rd Regular Legislative session is at an end, and the Legislature passed many changes to the Texas franchise tax in the session’s final hours. The bill that included most of these changes was HB 500. I previously covered the House version of this bill, as well as the very different Senate version. The Legislature worked out the differences in conference committee over the Memorial Day weekend. I cover what they finally agreed upon below. I also include a few other Texas franchise tax changes that are in bills other than HB 500. Governor Perry still has an opportunity to veto these bills, but it’s unlikely that he’ll do so. His deadline is June 16.

Unless otherwise noted, the changes below are in HB 500. I’ve organized the changes by topic:

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By | May 31, 2013

A Guide to the Legislature’s Changes to Texas Sales and Use Tax Law

The Texas Legislature passed several changes to the Texas sales and use tax laws. None of these Texas sales tax law changes are particularly sweeping – they only impact particular industries.  This article summarizes the Texas sales tax law changes that the Legislature passed. These will all become law provided that Governor Rick Perry doesn’t veto them.

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By | May 30, 2013

The Senate’s Plan for Texas Franchise Tax Relief

The Texas Senate just passed its plan for fixing the Texas Franchise Tax.  It’s quite different from the Texas Franchise Tax reform bill the House passed two weeks ago, which I detailed in an earlier post.  Of course, this means that the House and Senate must reconcile the differences over the weekend if the Legislature is going to make any changes to the Texas Franchise Tax for 2014.

So, how does the Senate’s Texas Franchise Tax reform plan differ from the House’s? In short, while the Senate’s approach is simpler than the House’s, it fails to address many of the inequities in the Texas franchise tax that so many taxpayers have complained about. I’ll compare the two.

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By | May 24, 2013

Court Decision May Make Texas Sales and Use Tax Refund Claims Easier to File

A recent Travis County District Court decision steps back the Texas Comptroller’s efforts to make it more difficult for taxpayers to file Texas sales and use tax refund claims.  The case is Ryan, LLC v. Combs, Docket No. D-1-GN-12-002388.  Judge Amy Clark Meachum issued a final order in the case on May 10, 2013 that invalidated two Texas Comptroller rules that stated the documents and information taxpayers need to file with Texas sales and use tax refund claims.

Judge Meachum’s order states that the two Texas Comptroller sales and use tax rules are illegal and invalid because they impose “additional burdens, conditions, and restrictions on sales and use tax refund claims” in excess of the Texas Tax Code’s requirements.  Texas law prohibits administrative agencies like the Texas Comptroller from issuing rules that impose requirements not found in the underlying statutes because it undermines the intent of the Texas Legislature.

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By | May 22, 2013

Band-Aids on a Critical Patient: Changes to the Texas Franchise Tax in 2013

Last week, the House passed HB 500, a major revision to the Texas franchise tax. This is the first indication of what changes may be in store for the Texas franchise tax, or margin tax, in 2013.  Below is a fairly complete list of all of the changes that HB 500 includes. Of course, the bill still must make its way through both the Senate and Governor Perry before it becomes law. Even if this bill becomes law, it may not be the only revision to the Texas franchise tax–Governor Perry has already threatened to call a special session because he believes HB 500 (and the other franchise tax revision bills) don’t provide  enough tax relief to Texas businesses.

As any reader of this blog knows, the major problem with the Texas franchise tax is that it treats various taxpayers differently depending on their industry. This means the entire tax is at risk of violating Texas’s constitutional requirement that a tax must be equal and uniform among taxpayers. Over the last two years, members of the Legislature have repeatedly admitted in hearings that the tax is both not equal and uniform and grossly unfair.

In my opinion, the proper fix is to remove the various industry specific rules and lower  the tax rate for everyone. However, the House feels differently. Through HB 500, the House strives to make the tax “fairer” by adding industry-specific rules. However, in reality, the bill seems to provide relief only to the industries that complained the loudest (often by filing lawsuits) while leaving other industries out in the cold.

Moreover, these changes make the tax even more complicated. We’re not yet to the level of complexity of the federal income tax, but we’re heading that direction.

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By | May 13, 2013

Many More Taxpayers May Soon Pay Sales Tax on Online Purchases under the Marketplace Fairness Act

Hello, everyone.  I’m very glad to have joined The Seay Law Firm and am looking forward to the opportunity to help you with your Texas tax law issues.  I hope to share lots of interesting Texas tax information with you on this blog, particularly information about the Texas sales and use tax.

For my first post, I’d like to update you on what could be the most important federal sales and use tax bill in decades – the Marketplace Fairness Act.  If it becomes law, it’s likely that many more taxpayers will end up paying sales tax on online purchases.  This is because the bill will allow states to require out-of-state retailers to collect sales tax from state residents when they previously could not.  While it’s not certain that this bill will become law, it’s likely — The Senate just approved it, and the House will vote on it soon.

In this post, I’ll explain what the bill does and what it may mean for sales and use tax law in general and Texas sales and use tax in particular. Continue Reading…

By | May 9, 2013

A Warm Welcome to Amanda Traphagan, Texas Tax Attorney

I’m pleased to announce that the firm has hired Amanda Traphagan, Texas tax attorney. You can read more about her by following the link.

I worked with Amanda at my previous firm, and she is one of the brightest and most creative attorneys I’ve ever met. She also always has her clients’ best interests in mind. As a Texas tax attorney, she has spent her entire legal career defending taxpayers against the Texas Comptroller and looks forward to the opportunity to continue to do so. I’m very glad to reunite our team.

Amanda is also very up-to-date on Texas tax law, particularly issues and opportunities surrounding the Texas sales and use tax. Therefore, she will be a frequent contributor to this blog.

Welcome, Amanda, to the firm. To contact her, call 512-582-0120 or send her an e-mail.

By | May 7, 2013

Major Change in the Works for Texas Franchise Tax Cost of Goods Sold Rules

Last Friday, the Texas Comptroller posted to the Texas Register a proposed revision to her Rule 3.588, which explains how to calculate COGS (cost of goods sold) for Texas franchise tax purposes. The Comptroller appears ready to significantly expand which costs are included in the cost of goods sold deduction.

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By | March 18, 2013

Not Much Deference to the Comptroller From the Courts These Days

Over the last few weeks, Texas courts haven’t been giving much deference to the Texas Comptroller—at least, not to her administrative rules. Two courts have determined that certain Comptroller rules are unnecessary at best, and invalid at worse. One of those courts was the Texas Supreme Court.

The Roark Case and the Texas Sales Tax Sale-For-Resale Exemption: Courts Need No Help Determining What “Integral” Means

Image for Roark Texas Sales Tax CaseIn Combs v. Roark Amusement & Vending, L.P., the Texas Supreme Court determined that “the Comptroller cannot through rulemaking impose taxes that are not due under the Tax Code.” The Roark case is near and dear to my heart, and I’ll write more about it later. The case involves crane machines—those machines you often see in arcades and grocery stores. Continue Reading…

By | March 13, 2013

More Complexity with the Texas Franchise Tax: Does a rent-to-own store qualify for the half-percent rate?

Over the next couple of weeks, I plan on writing about several Texas tax cases currently pending before the Texas appellate courts. Several cases involve the Texas franchise tax. Many more involve the Texas sales tax.

Today we’ll discuss a Texas franchise tax case recently argued in Travis County District Court: Rent-a-Center, Inc. v. Combs, Docket No. D-1-GN-11-001059. This case involved the qualifications for the margin tax half-percent rate.

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By | February 8, 2013

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