TAX NEWS - 2010

Texas Tax: Comptroller explains tax treatment of specific items in computing Texas gross receipts for apportionment

Tax Policy News, Texas Comptroller (6/10). With respect to the Texas franchise margin tax, the comptroller explains that "apportionment is the key to how much tax an entity will ultimately owe." Once a taxable entity's margin is calculated, the margin is apportioned to Texas using a single gross receipts factor to determine the percentage of business the entity has done in Texas.

The proper tax rate is then applied to the apportioned (or taxable) margin. The comptroller explains that the gross receipts apportionment factor is a fraction – the numerator is the entity's gross receipts from business done in Texas, and the denominator is the entity's gross receipts from its entire business. "With few exceptions, gross receipts everywhere will equal total revenue."

Accordingly, the comptroller has provided guidance for determining how "the most common items of revenue (receipts) are to be apportioned to Texas," including how to apportion gross receipts from the sale of computer software services, dividends and interest, leases/sub-leases, loans and securities, services, tangible personal property, and transportation, as well as the net gain or loss on sales of intangibles held as capital assets or investments.