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Texas Court of Appeals Finds Radio Service Provider’s Apportionment Methodology for Franchise Tax Calculation Incorrect

May 4, 2020, 5:00 AM

The Texas Court of Appeals May 1 reversed the trial court’s judgment in a franchise tax dispute. The Comptroller of Public Accounts audited Taxpayer, a foreign corporation providing a subscription-based satellite radio service. The comptroller determined that Taxpayer’s apportionment of its subscription receipts was incorrect. On Taxpayer’s protest, the trial court concluded that the comptroller’s adjustment was incorrect. However, the trial court upheld the comptroller’s decision to deny Taxpayer’s request to include revenue share and hardware subsidies in its revised cost-of-goods-sold (COGS) deduction. On cross-appeals, the appeals court found that: 1) the service resulting in the subscription revenue was the ...