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

After the due date or the extended due date of the report, a
taxable entity may not amend its report to change its election
to COGS or compensation. However, a taxable entity may
amend its report to change its method of computing margin
from COGS or compensation to 70% of total revenue or, if
eligible, the EZ computation.
Note: A taxable entity may elect to use COGS to compute margin
ONLY if the taxable entity sells real or tangible personal
property in the ordinary course of business OR if the taxable
entity qualifies to compute COGS under any one of the
exceptions noted in Texas Tax Code Section 171.1012 or
Rule 3.588.
The instructions for Items 1-7 and 9 below are for taxable
entities that are filing as a separate entity and not as part of
a combined group. A combined group should follow these
specific instructions for each member of the group and then
add across each item to determine the amounts that will be
reported for the group. Intercompany eliminations should
be reported on Item 9 as an exclusion from revenue.
The amounts referenced in the instructions presume that a
separate federal income tax return was filed by each
separate taxable entity. If a taxable entity was part of a
federal consolidated return or was disregarded for federal
tax purposes and is not being treated as disregarded in a
combined group report for franchise tax purposes, report
the amounts on Items 1-7 and 9 as if the entity had filed a
separate return for federal income tax purposes.
The instructions for Items 11-13 and 15-17 below are also
for taxable entities that are filing as a separate entity and
not as part of a combined group. A combined group should
follow these specific instructions for each member of the
group, add across each item, and then subtract any
intercompany eliminations to determine the amounts that
will be reported. Eliminations may be made only to the extent
that the related items of revenue were eliminated.
The line items indicated in this section refer to specific
lines from the 2011 Internal Revenue Service (IRS)
forms. The statute and administrative rules base total
revenue on specific line items from the 2006 IRS forms
and state that in computing total revenue for a
subsequent report year, total revenue:
• is based on the 2006 equivalent line numbers on any
subsequent version of that form and
• is computed based on the Internal Revenue Code in
effect for the federal tax year beginning on Jan. 1, 2007.
The actual line numbers in the statute and rules are not
updated to reflect subsequent changes in the federal
form line numbering. Although the instructions are
updated annually to reflect federal line numbering
changes that affect total revenue, be aware that federal
line numbers are subject to change throughout the year.
FAQ #22 under Tax Rule 3.587 Margin: Total Revenue
tracks the cumulative changes in federal form numbers.
Item 1. Gross receipts or sales
• For a taxable entity filing as a corporation for federal tax
purposes, enter the amount from line le, 2011 Form 1120.
12
• For a taxable entity filing as an S corporation for federal tax
purposes, enterthe amount from line 1 e, 2011 Form 1120S.
• For a taxable entity filing as a partnership for federal tax
purposes, enter the amount from line le, 2011 Form 1065.
• For a taxable entity filing as a trust for federal tax purposes,
enter the amount from line 3, Schedule C, Form 1040.
• For a taxable entity that is a single member LLC filing as
a sole proprietorship for federal tax purposes, enter the
amount from line 3, Schedule C, Form 1040.
• For a taxable entity filing a federal tax form other than those
mentioned above, enter an amount that is substantially
equivalent to the amounts discussed in this section.
Item 2. Dividends
• For a taxable entity filing as a corporation for federal tax
purposes, enter the amount from line 4, Form 1120.
• For a taxable entity filing as an S corporation for federal
tax purposes, enter the amount from line 5a, Schedule
K, Form 1120S.
• For a taxable entity filing as a partnership for federal tax
purposes, enter the amount from line 6a, Schedule K,
Form 1065.
• For a taxable entity filing as a trust for federal tax
purposes, enter the amount from line 2a, Form 1041.
• To the extent dividends earned by the LLC are included
for a taxable entity registered as a single member LLC
and filing as a sole proprietorship for federal tax purposes,
enter the amount associated with dividends from line 6,
Schedule C, Form 1040.
• For a taxable entity filing a federal tax form other than those
mentioned above, enter an amount that is substantially
equivalent to the amounts discussed in this section.
Item 3. Interest
• For a taxable entity filing as a corporation for federal tax
purposes, enter the amount from line 5, Form 1120.
• For a taxable entity filing as an S corporation for federal
tax purposes, enter the amount from line 4, Schedule K,
Form 1120S.
• For a taxable entity filing as a partnership for federal tax
purposes, enter the amount from line 5, Schedule K, Form 1065.
• For a taxable entity filing as a trust for federal tax
purposes, enter the amount from line 1, Form 1041.
• To the extent interest earned by the LLC is included for a
taxable entity registered as a single member LLC and
filing as a sole proprietorship for federal tax purposes,
enter the amount associated with interest from line 6,
Schedule C, Form 1040.
• For a taxable entity filing a federal tax form other than those
mentioned above, enter an amount that is substantially
equivalent to the amounts discussed in this section.
Item 4. Rents
• For a taxable entity filing as a corporation for federal tax
purposes, enter the amount from line 6,2011 Form 1120.
• For a taxable entity filing as an S corporation for federal tax
purposes, enterthe amount from line 3a, Schedule K, Form
1025S, and the amount from lines 18a and 19,2011 Form
8825.
• For a taxable entity filing as a partnership for federal tax
purposes, enterthe amount from line 3a, Schedule K, Form
1065 and the amount from line 18a, 2011 Form 8825.