Petition for Writ of Mandamus - Filed - Supreme Court of Texas

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See TEX. TAX CODE ANN. § 171.101. Total Revenue. The Margin Tax calculation begins with the made-up concept of “Total Revenue,” which is equal to the income reported on a taxpayer’s federal income tax return, less certain ad hoc exclusions available to only some taxpayers. Id. § 171.101(c). Narrow exclusions are allowed for lending institutions, legal services providers, pharmacy cooperatives, live event promotion companies, destination management companies, courier and logistics companies, staff leasing companies, management companies, health care providers, health care institutions, and operators of facilities for the federal government. Id. § 171.1011 (g-1)-(q). Cost of Goods Sold. The Margin Tax statute defines Cost of Goods Sold (“COGS”) differently from federal income tax law and Generally Accepted Accounting Principles. See id. § 171.1012; Treas. Reg. § 1.61-3(a); CODIFICATION OF ACCOUNTING STANDARDS AND PROCEDURES 330-10-30-1 (Am. Inst. of Certified Pub. Accountants 1972). Texas COGS includes “all direct costs of acquiring or producing goods,” some indirect costs, and up to 4% of overhead and administrative costs. TEX. TAX CODE ANN. § 171.1012(c), (d), (f). The statute excludes certain listed items from COGS, such as distribution, advertising, and interest expenses. Id. § 171.1012(e). A COGS deduction is allowed only to taxpayers that sell real or tangible personal property, with two exceptions: (1) lending institutions that “offer loans to the public” and (2) lessors of motor vehicles, heavy construction equipment, and rolling stock. Id. § 171.1012. Compensation. Compensation is defined as selected cash compensation, plus the cost of health, retirement, and workers’ compensation benefits paid to employees of a 2
taxable entity and to owners of certain taxable entities. Id. § 171.1013(b). The Compensation deduction does not include amounts paid to independent contractors 1 or to an employee or owner in excess of $330,000 in 2012. 2 See id. § 171.1013(b), (c). The Compensation deduction with respect to partners, S corporation shareholders, or LLC members includes only cash distributions to the partner, shareholder, or member, and does not include the owner’s entire distributive share of income, even if less than $330,000. See id. § 171.1013. Special deductions are allowed for staff leasing companies and management companies. Id. § 171.1013(d)-(f). Combined Reporting. All taxable entities with more than 50% common ownership that are engaged in a unitary business file a single, combined franchise tax return. Id. § 171.1014(a). Total Revenue, COGS, and Compensation are calculated separately for each entity within a combined group, after eliminating transactions between members of the combined group, and then are added together to determine the Total Revenue, COGS, and Compensation of the combined group. Id. § 171.1014(c), (e)- (f). All entities within a combined group must choose the same deduction, either COGS or Compensation. Id. § 171.1014(d). Margin. If the Margin yielded by the deduction of COGS or Compensation is greater than 70 percent of Total Revenue, the Margin calculation is disregarded. See id. 1 2 “Independent contractors” means workers who receive federal Form 1099 rather than Form W-2 from the taxable entity. See Tex. Tax Code Ann. §§ 171.1013(a)(West 2008). The $300,000 maximum stated in Section 171.1013(c) is adjusted annually according to changes in the Consumer Price Index. Id. §§ 171.006 and 171.1013(c). The maximum for 2012 is $330,000, as published by the Comptroller on page 1 of the 2012 Texas Franchise Tax Report Information and Instructions. App. 5. 3
Page 1 and 2: No. __________ In The Supreme Court
Page 3 and 4: TABLE OF CONTENTS IDENTITY OF PARTI
Page 5 and 6: Rylander v. Fisher Controls Int’l
Page 7 and 8: U.S. CONST. art. 1, § 8...........
Page 9 and 10: STATEMENT OF JURISDICTION Section 1
Page 11: STATEMENT OF FACTS I. The Margin Ta
Page 15 and 16: Texas. Id. Nestle conducts exclusiv
Page 17 and 18: the same standard for all taxpayers
Page 19 and 20: esults in an arbitrary amount of co
Page 21 and 22: As detailed above, each step of the
Page 23 and 24: twice the tax rate. There is no rat
Page 25 and 26: or activities within the taxing sta
Page 27 and 28: CERTIFICATE OF SERVICE I certify th
Page 29 and 30: Appendix 1 Texas Tax Code, Chapter
Page 31 and 32: TAX CODE CHAPTER 171. FRANCHISE TAX
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TAX CODE CHAPTER 171. FRANCHISE TAX
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UNITED STATES CONSTITUTION AMENDMEN
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UNITED STATES CONSTITUTION ARTICLE
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Appendix 4 Texas Constitution Artic
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(f) The occupation tax levied by an
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C -ki§, rod, AO ;i* 2012 Texas Fra
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Report (Form 05-163) annually to af
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Final Reports An entity that ceases
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An affiliated group can include:
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entity at the address listed on the
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Specific Line Instructions for Each
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• For a taxable entity filing as
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Item 11. Cost of goods sold (COGS)
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To compute Net Distributive Income
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Item 30, Tax due Item 28 multiplied
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e included in the combined group re
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Form 05-166 Texas Franchise Tax Aff
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Note: Do not enter any amount relat
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Appendix 6 Affidavit of Alan Pasets
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would have had a compensation deduc
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'32212 vet-. 35 ,3 :".f! A Texas Fr
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2.2 Val:, 3 liTexpavel rixliter 05
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7E2012 Vet- , 3.0 Texas Franchise T
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TX2112 er, • ,q,p: Texas Franchis
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TX2012 Ver. 3.7 Ct 102 Rev 9- 1 1.'
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TX27.12. Var . Texas Franchise Tax
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TX201.2 ver. 05 102 (Rev 9-11/3c gi
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TXn12 'tee. Texas Franchise Tax Pub
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:x1:12 Texas Franchise Tax Public I
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PAYER'S name, street address, city,
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WINSTEAD Austin Dallas Fort Worth H
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Texas Comptroller of Public Account
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Exhibit A Nestle USA, Inc. Nestle T
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11E Co May 15, 2012 COMPTROLLER OF
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AFFIDAVIT OF DONALD DEERE 1. My nam
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Revised Draft 10/19/2011 Economic A
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CAUSE NO. Filed 12 June 15 P3:17 Am
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activities in Texas, it is subject
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determination of the tax rate, cont
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elationship to the value of the Pri
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excess of $330,000. See id. §§ 17
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discriminate against interstate com
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Petition for Writ of Mandamus - Filed - Supreme Court of Texas

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