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

esults in an arbitrary amount of compensation that is unreasonable, and capricious
among taxpayers exercising the Privilege.
The Margin Tax calculation creates further arbitrary classes by requiring all
entities within a combined group to choose the same deduction, either COGS or
Compensation. See id. § 171.0014(d). If a combined group chooses COGS, any entity
within the group that has no COGS is allowed no deduction at all, even if it has
Compensation expense.
As a result of the differences in total revenue, COGS, and compensation, the
Margin Tax calculation does not ascertain the value of the privilege of doing business in
Texas the same way for all taxpayers—it is not uniform. A dollar of income earned from
exercising the Privilege, regardless of the source of the income, has the same value to all
taxpayers. A dollar of expense incurred in exercising the Privilege, regardless of the
nature of the expense, has the same value to all taxpayers. See Bullock v. Sage Energy
Co., 728 S.W.2d 465, 468 (Tex. App.—Austin 1987, writ ref’d n.r.e.). In calculating a
franchise tax that is commensurate with the value of that Privilege, it is not reasonable to
restrict some deductions for income and expense items only to some taxpayers who
exercise that Privilege.
To the extent the Legislature does allow exclusions and
deductions from the franchise tax base, those exclusions and deductions must be
available to all taxpayers in order for the franchise tax calculation to bear a reasonable
relationship to the value of the Privilege.
The assignment of a tax rate of 0.5% to retailers and wholesalers, and 1.0% to all
other taxpayers, is unreasonable in the same respect. See id. § 171.002. Retailers and
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