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

determination of the tax rate, contain classifications that bear no relationship to the value of the
Privilege exercised and, accordingly, are unreasonable, arbitrary, and capricious. The Margin
Tax calculation begins with a baseline concocted by the Legislature called "Total Revenue."
TEX. TAX CODE ANN. § 171.101(a). The calculation of total revenue begins with the gross
income of all taxpayers (this is equal and uniform), but then allows only certain income and
expense deductions to some taxpayers engaged in certain lines of business (this is neither equal
nor uniform).
Id. § 171.1011. Section 171.1011 allows deductions for various income or
expense items of 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).
16, These deductions plainly, randomly, and unreasonably allow certain income and
expense deductions from total revenue only to certain taxpayers. While the resulting value for
total revenue includes all gross income of some taxpayers, it includes only a portion of gross
income for other taxpayers. Consequently, the calculation of total revenue does not actually
determine the amount of gross income that all taxpayers derive from exercising the Privilege but,
instead, departs from such a calculation in an unreasonable, arbitrary, and capricious manner
unrelated to the value of the Privilege.
17, The calculation of COGS under Section 171.1012 similarly allows certain
deductions only to certain taxpayers. A COGS deduction generally is allowed only to taxpayers
that sell goods, but lending institutions are uniquely allowed to deduct interest expense as COGS
and lessors of motor vehicles, heavy construction equipment, and railcar rolling stock are
expressly allowed to deduct costs associated with the leased property as COGS.
Id.
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