Texas taxpayers seeking to challenge a Comptroller’s assessment through the administrative process will have 60 days from the issuance of the assessment notice to file a Petition for Redetermination. This applies to notices issued on or after September 1, 2017. See S.B. 1095 (amending Texas Tax Code § 111.009). Previously, taxpayers had to file within 30 days. The bill’s sponsor originally sought to extend the deadline to 90 days, but the Legislature ultimately reduced the extension to 60 days. The purpose of the amendment is to give taxpayers additional time to review assessments, to decide whether to contest them, and, if so, to reduce boilerplate petitions that included numerous transactions and legal theories designed to preserve potential grounds until the taxpayer had sufficient time to review the assessment in more detail. Boilerplate petitions are inefficient and a drain on taxpayer and Comptroller resources.
However, the requirements for a state court protest suit remain unchanged. Taxpayers may continue to file...more
Our law firm set MMR Research Associates, Inc. v. Hegar (Cause No. D-1-GN-16-005569) for trial the week of October 16, 2017. This case concerns whether MMR’s market research consulting service is subject to Texas sales and use tax. Clients hire MMR to provide professional expertise and opinions about the clients’ business goals or decisions, such as the chance of success of a potential product or identifying the cause of and proper response to a decline in customer volume or sales. MMR employs academically-trained, senior research professionals to lead its client projects. The Comptroller audited MMR and assessed sales tax on its service, alleging that the service constitutes either taxable data processing or a taxable information service. MMR asserts that no tax is due because it provides a non-taxable consulting service and, even if shoe-horned into the data processing or information services rules, MMR’s service would fall within the professional services exclusion to taxable data processing and constitute a non-taxable information service because the information...more
Our firm has a busy seminar calendar this summer. Jimmy Martens is scheduled to teach the following courses in June and July:
· Texas Franchise Tax Seminar – July 7, 2017 (Austin, Texas)
· Texas Sales & Use Tax – July 13, 2017 (Dallas, Texas)
· Texas Franchise Tax Seminar – July 17, 2017 (Dallas, Texas)
· Texas Franchise Tax Seminar – July 19, 2017 (Houston, Texas)
· Texas Sales & Use Tax – July 20, 2017 (Houston, Texas)
Don’t forget to visit the seminars page of our website to stay up to date with our firm’s upcoming speaking engagements.more
On May 23, 2017, Jimmy Martens presented argument on behalf of Gulf Copper before the Third Court of Appeals. The courtroom was packed with spectators interested in hearing both parties’ arguments about two key franchise tax provisions of the Texas Tax Code: First, whether the revenue exclusion for subcontractors is only available in those narrow circumstances where the parties contract in writing to share fees on a percentage basis. Second, whether taxpayers may calculate their Texas cost of goods sold deduction by starting with their federal deductions and adjusting them for the Texas-specific list of disallowed costs and 4% cap on service department costs.
Oral argument primarily focused on COGS qualification and calculation issues. Many of the Justices’ questions addressed the scope of Texas Tax Code § 171.1012(i), which states that a taxable entity “furnishing labor or materials to a project for the construction, improvement, remodeling, repair, or industrial maintenance… of real property is considered to be...more
In a hearing decision issued in May 2017, the Comptroller held that an auditor’s COGS allocations for labor costs incurred by a grocery store in its deli and pharmacy department were understated.
Taxable entities are entitled to include all direct costs of acquiring or producing goods in their Texas franchise tax COGS subtraction. An entity may include in its COGS calculation labor costs (other than service costs) that are properly allocable to the acquisition or production of goods.
During a refund-verification audit of a grocery store, an auditor allocated a small percentage of the taxpayer’s costs related to deli clerks, deli and meat market managers, and pharmacy employees. The auditor contended that certain costs were related to selling goods, rather than acquiring or producing goods, so these costs should be excluded. The taxpayer disagreed, arguing that the auditor’s production allocations for labor costs in the deli, meat...more
A recent edition of the Comptroller’s Tax Policy News publication clarifies that hotel occupancy taxes are due on rentals of houses, condos, or apartments. State hotel occupancy tax is due when taxpayers rent sleeping accommodations for more than $15 per day, and local hotel occupancy taxes may also be due. In Texas, the hotel occupancy tax is 6%.
Detailed information on the hotel occupancy tax is available on the Comptroller’s website.more
Hegar v. Gulf Copper & Manufacturing Corp. (No. 03-16-00250-CV) is set for oral argument before the Third Court of Appeals on May 23, 2017. Jimmy Martens will present argument on behalf of Gulf Copper.
Gulf Copper inspects, repairs, and upgrades rigs for offshore drilling. Its work includes manufacturing and installing large, steel components on the rigs. Gulf Copper was audited and assessed additional Texas franchise tax. Gulf Copper disputed the assessment, alleging that the auditor improperly (1) disallowed the entire amount of Gulf Copper’s revenue exclusion attributable to subcontractor costs and (2) limited Gulf Copper’s COGS deduction to one half of the amount Gulf Copper claimed. The trial court ruled in favor of Gulf Copper and the Comptroller brought this appeal.
The Third Court of Appeals’ opinion will result in important determinations for Texas taxpayers about two key franchise tax provisions of the Texas Tax Code: First, whether the revenue exclusion for...more
Martens, Todd, Leonard & Ahlrich is pleased to announce that Danielle Ahlrich has been selected as a 2017 Texas Rising Star in business tax. The Rising Stars list is comprised of the top up-and-coming Texas attorneys who are 40 or younger or have been in practice for 10 years or less. Rising Stars are selected based on nominations by members of the elite Texas Super Lawyers list. No more than 2.5 percent of Texas attorneys were chosen for this honor. The Texas Rising Stars list will be published in the April 2017 issues of Texas Monthly and Texas Rising Stars magazines.more
The Third Court of Appeals recently held that a buyer of the assets of a small business was liable for the sales tax liability incurred by the business prior to the sale. This potential liability is known as “successor liability.” Successor liability may arise when an individual or a business entity purchases assets of an existing business, and unknowingly assumes the business’s tax liability as a result of the purchase. See Tex. Tax Code § 111.020. If a buyer fails to withhold the amount specified by the Comptroller, the buyer will be personally liable up to the amount of the purchase price, for the taxes of the seller. See Tex. Tax Code § 111.020(b).
The seller can request that the Comptroller issue a certificate stating that no tax is due or the amount that must be paid before a certificate can be issued. See Tex. Tax Code § 111.020(c). The Comptroller must issue the certificate or statement within 60...more