Texas Margin Tax Revenue Sourcing Changes Adopted

Thoughtware Alert Published: Jan 21, 2021
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The Texas Comptroller of Public Accounts adopted several changes to revenue sourcing rules affecting the inclusions and exclusions from the apportionment factor as well as the sourcing of service revenue. The amendments published in the Texas Register as of November 13, 2020, were proposed amendments.

The adopted amendments to Texas Admin Code 3.591 replace the term “Revenue” with “Gross Receipts” and include new and revised provisions that affect the sourcing of gross receipts from a variety of services. The gross receipts sourcing changes affect general services as well as telecommunications, advertising, internet hosting, digital property, capital assets and investments, financial derivatives, and the sale of single-member LLC interests. The amendments also provide guidance on the inclusion of net gains and losses. The changes in gross receipts sourcing seem to indicate that Texas is moving more toward market sourcing.

Out-of-state taxpayers may be significantly affected by the amendments that source more gross receipts to Texas, while in-state taxpayers could benefit with more gross receipts being sourced outside the state. In addition, most of the amendments do not have an effective date, which could allow the Comptroller to apply the changes retroactively to the January 1, 2008, effective date of the current rules.

Please contact your BKD Trusted Advisor™ or submit the Contact Us form below with any questions regarding the proposed changes to Texas Admin Code 3.591.

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