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Texas Franchise Tax: Sourcing Rules, COGS Calculations, Entity Issues, and Combined Reporting

Note: CLE credit is not offered on this program

A live 110-minute CPE webinar with interactive Q&A

This program is included with the Strafford CPE Pass. Click for more information.
This program is included with the Strafford CPE+ Pass. Click for more information.
This program is included with the Strafford All-Access Pass. Click for more information.

Thursday, May 9, 2024

1:00pm-2:50pm EDT, 10:00am-11:50am PDT

or call 1-800-926-7926

This course will provide a guide to various compliance requirements and planning opportunities related to the Texas Franchise Tax. The program will discuss options for calculating and reporting the most challenging aspects of the tax, including the most recent sourcing regulations, identifying Texas cost of goods sold, apportioning margin to Texas, issues particular to partnerships and LLCs, and combined reporting questions.

Description

The Texas Franchise Tax remains one of the most complex and controversial state business taxes in the entire country. The tax is essentially based on gross receipts but is complicated by both entity identification and computational challenges. This margin calculation has routinely been the subject of numerous lawsuits, partially due to its complexity and structure.

Texas' franchise tax applies to most entity types. Out-of-state entities with annual gross receipts of $500,000 or more from businesses in Texas have economic nexus even if they have no physical connection with the state. Texas does provide a cost of goods sold deduction and has its own R&D credit that can reduce the tax burden for eligible businesses. However, its rules are specific to Texas and do not follow federal guidelines.

In March 2022, the Texas Supreme Court ruled in favor of Sirius Radio in Sirius XM Radio Inc. v. Hegar. The court determined that it is the location where a service is performed rather than received by the customer that determines whether a service is taxed in the state. SALT practitioners need to understand the impact of this decision on businesses providing services in Texas.

Listen as our panel identifies compliance challenges and planning opportunities related to the Texas Franchise Tax.

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Outline

  1. Introduction
  2. Legislative and case law update
  3. Elimination of No Tax Due Report
  4. Other updates
  5. Recent amendments
  6. Margin tax calculation options
  7. Issues in computing revenues
  8. Recent changes to tax rates and structure
  9. Electing deductions
  10. Combined reporting and affiliated entities
  11. Other recent developments

Benefits

The panel will give guidance to deal with these and other key issues:

  • Industry-specific issues, particularly concerning the cost of goods sold calculation
  • Identifying affiliates and addressing combined reporting issues
  • How the Sirius XM Radio decision affects the taxation of companies doing business in Texas
  • Tax base alternatives: identifying the method that will result in the lowest tax bill for your company
  • Mining tax planning opportunities: the apportionment formula, passive entities, maximizing deductions, and other areas
  • Anticipating tough audits: where the state is likely to challenge your business on the tax calculation, a unitary filing declaration, etc.

Faculty

Crow, Bill
Bill Crow, JD

Lead SALT Counsel
Christian Tax Advisors

Mr. Crow is Lead SALT Counsel for CTA. He brings over 25 years of multistate tax experience including tenure as an...  |  Read More

Mondrik, Christina
Christina A. Mondrik, Esq., CPA

Attorney
Mondrik & Associates

Ms. Mondrik, focuses her practice on state and federal tax controversies and litigation. She is board certified in...  |  Read More

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