Texas Court of Appeals Finds Federal Law Preempts Franchise Tax on Baggage Fees

The Texas Court of Appeals decided, in an issue of first impression, that the federal Anit-Head Tax Act (AHTA) preempts the Texas franchise tax as applied to American Airlines transportation revenue. American filed its franchise tax report under protest, arguing the tax was preempted by the AHTA as applied to its transportation revenues. The trial court found the AHTA preempts the tax as applied because it is an impermissible tax on gross receipts from air commerce. The Comptroller argued the tax is a composite tax calculated on the entire business and imposed on a taxable margin. The Court found that ...