On June 28, 2019, the Texas Supreme Court accepted and scheduled for oral argument three important Texas franchise tax cases involving excluded revenue and the COGS calculation.

The Gulf Copper case concerns whether a company that builds and repairs offshore drilling rigs may exclude from its revenue payments made to the company’s hourly contractors that work on the rigs. It also concerns whether the company may include the costs of manufacturing incurred throughout its installation processes.

The AMC Theaters case asks whether showing movies to the public for a fee constitutes the sale of tangible personal property and, thus, whether a movie theater can include costs to exhibit movies in its COGS calculation.

The Sunstate Equipment case concerns whether a lessor of heavy construction equipment may include in its COGS calculation the costs of delivering the rented equipment to construction sites, and, later picking it up.

All three cases are schedule to be heard October 9, 2019. An in-depth analysis is forthcoming.