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

§ 171.1013. It also arbitrarily distinguishes between employee salaries of $330,000 or
less and employee salaries in excess of $330,000. See id. §§ 171.006, 171.1013(c).
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.
The numerous disparities within the calculation of Margin lead to an arbitrary
number, called Margin, which has no relation to the value of a taxpayer’s Privilege. A
taxpayer may have a tax base that is twice that of another taxpayer that receives the same
Privilege due to a COGS deduction or Compensation deduction that is arbitrarily
conferred on the latter. This disparate treatment of similarly-situated taxpayers does not
end with the calculation of Margin, but is compounded by the arbitrary application of tax
rates.
The Margin Tax imposes two tax rates on two classes of taxpayers – 0.5% to
wholesalers and retailers and 1.0% to manufacturers. Id. § 171.002(a), (b). Whether or
not a taxpayer is subject to the higher or lower tax rate depends on the taxpayers’
activities throughout the United States, not just in Texas. Accordingly, a taxpayer such
as Nestle who only wholesales in Texas, but manufactures in other states is treated
differently from other taxpayers who only wholesale in Texas. These taxpayers enjoy the
same Privilege in Texas, but the taxpayer who manufacturers elsewhere is subject to
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