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Martens, Todd, Leonard & Ahlrich is pleased to announce that Danielle Ahlrich has been selected as a Texas Rising Star in business tax for the third year in a row. 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. No more than 2.5 percent of Texas attorneys were chosen for this honor.

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Seeking to turn the tide of numerous court loses, the Texas Comptroller has adopted a new strategy to use against Texas businesses. Specifically, the Comptroller directs our legislature to amend Texas sales tax statutes and label the amendments as “clarifications” of existing law so that he may retroactively tax Texas businesses. The Comptroller seeks to do this through amendments offered this legislative session. The amendments, if passed, would overturn at least one pro-business Texas Supreme Court opinion, and bolster the Comptroller’s litigating positions in several pending cases. It seems as though the Comptroller used the list of litigation pending against him to craft his proposed legislation.

For instance, in Senate Bill 1525, the Comptroller seeks to overturn the Texas Supreme Court’s opinion in Combs v. Roark Amusement & Vending. In Roark, the court held that the resale exemption applies to...

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Texas State Capitol

On February 19, 2019, Legislators in the Texas House and Senate filed identical bills mandating sales tax collection by marketplace providers, such as Amazon, Etsy, and EBay. If enacted, the bills would require “marketplace providers” to report as taxable sales, and collect and remit Texas sales tax on, sales of items by third parties through their marketplaces. “Marketplace providers” means “a person who owns or operates a marketplace and directly or indirectly processes sales or payments for marketplace sellers.” The proposed legislation is intended to shift the compliance responsibilities from smaller retailers who sell taxable items, to the marketplace platforms through which the retailers sell their products. The marketplace providers will likely have the algorithms, software, and know-how, to comply with Texas’s confusing web of sales and use tax laws.

The legislation comes on the heels of the Comptroller’s recent amendments to his administrative rule regarding sellers’ and purchasers’ responsibilities. He amended his rules to implement a safe harbor from the duty to...

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Martens, Todd, Leonard & Ahlrich has been named a Tier 1 law firm in Austin for Tax Law by U.S. News – Best Lawyers® “Best Law Firms” in 2019. We’re looking forward to another great year!

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On February 15, 2019, Gulf Copper & Manufacturing Corporation filed its reply brief with the Texas Supreme Court in its franchise tax dispute with the Texas Comptroller. Gulf Copper’s brief explains to the Supreme Court why both the trial court and appeals court correctly rejected the Comptroller’s arguments denying Gulf Copper a reduction in the margin tax base for (1) payments to subcontractors who rebuilt the drilling rigs that were destined for offshore drilling projects and (2) the full scope of costs generated by Gulf Copper’s manufacturing process.

If the Texas Supreme Court grants review, taxpayers in a wide range of industries will benefit from guidance on two key components of the franchise tax calculation: the subcontractor revenue exclusion and the cost of goods sold subtraction.

For more information on this case, please see our...

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Gulf Copper rebuilds offshore drilling rigs. Its employees and subcontractors manufacture new rig components and install them on rigs. The manufacturing process continues into installation. The Gulf Copper case addresses two critical components of the Texas franchise tax base of “margin”: (1) the availability of the revenue exclusion for payments to subcontractors who assist in rebuilding offshore drilling rigs and (2) the scope of cost of goods sold for businesses who manufacture and install component parts on offshore drilling rigs.

The Gulf Copper case is presently pending before the Texas Supreme Court.

On December 12, 2018, Gulf Copper and the...

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We are pleased to welcome Chase Howell to our firm. Mr. Howell assists members of the firm with tax litigation in a variety of forums. Mr. Howell also joins other members of the firm in writing about Texas tax topics including the Texas sales tax and Texas franchise tax.

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The Third Court of Appeals’ recent opinion in Badger Tavern, L.P. v Hegar provides several key takeaways for Texas taxpayers, including the court’s willingness to find jurisdiction outside of indigency suits, that Comptroller statements made in a rule’s preamble may constitute an invalid rule, and potential ramifications for the Comptroller’s recent amendments to the franchise tax cost of goods sold rule.

First, although the Third Court’s most recent jurisdictional opinions show that its hands are tied with respect to indigent taxpayers, Badger Tavern, L.P. confirms the court’s reluctance to pour a taxpayer out of court due to Comptroller complaints about insufficient...

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On August 21, 2018, Gulf Copper filed its Response to the Comptroller's Petition for Review. The Comptroller had previously filed a Petition for Review asking the Texas Supreme Court to reverse the decisions by the trial court and court of appeals. Gulf Copper won in both of those courts.

Gulf Copper rebuilds offshore oil rigs. The case concerns whether Gulf Copper may exclude payments to subcontractors and subtract its operating costs when calculating its "margin," which is the tax base under the Texas franchise tax. Despite the...

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The Texas Comptroller issued guidance in the wake of the Supreme Court’s landmark decision in South Dakota v. Wayfair, broadly advising businesses of how his agency will implement the decision. The decision allows a state to force out-of-state sellers (called “remote sellers”) to collect and pay over sales taxes of instate residents who purchase goods and services from the out-of-state sellers.

At the outset, the Comptroller recognizes that the physical presence nexus standard remains Texas’ law of the land for the time being. The Comptroller’s office expects to amend Texas’ rules to establish new rules for remote sellers, imposing tax collection obligations when the remote seller exceeds minimum thresholds for revenues and/or number of sales in the state. The Comptroller’s office stated it anticipates that the new rules will be effective in early 2019.

In an attempt to allay fears and foster “a smooth transition and a successful partnership with...

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