State & Local Tax
Faced with budget shortfalls, state and local governments are focusing increased resources on audits and forensic investigations to discover non-filers and other businesses with nexus. As a Texas-based firm, we understand the specific tax issues that affect companies doing business here, and we have extensive experience helping those firms navigate the complexities of state and local tax laws. We help companies minimize their exposure to tax liabilities, successfully resolve tax conflicts and attain incentives or exemptions for new development when available.
Our attorneys are among the state’s foremost authorities on the Texas franchise, or “margin,” tax and recently represented a client in a leading Texas franchise tax apportionment case before the Texas Supreme Court. The court’s decision marked a significant taxpayer victory with important implications for other Texas businesses.
We are regularly involved in state tax planning, Texas Comptroller audit defense, and tax litigation at the state and local level. Additionally, we have knowledge of key state taxation issues including sales tax on data processing and other taxable services, aircraft sales and use tax compliance, insurance premium and retaliatory taxation, and the Texas margin tax. We are skilled in helping clients qualify for valuable tax exemptions and incentives, and we serve as an advocate for our business clients by monitoring and providing advice on pending and proposed Texas tax legislation and policy.
Texas Insurance Premium Tax
We are one of the few law firms in the state with extensive experience in this state-specific tax, which is imposed on all insurers and health maintenance organizations that provide coverage in Texas. As a result of our knowledge and experience, we represent many of the largest U.S. life and property and casualty insurers and have helped many of these firms successfully resolve Texas premium tax and retaliatory tax audits. We also provide advice on planning and compliance with insurance taxes.
As government budgets have tightened over recent years, the Texas Comptroller’s Office and local property tax authorities have stepped up sales, use, and property tax enforcement on aircraft, the sales of which are well documented by the FAA. We help companies and individuals structure aircraft acquisitions, sales and ongoing operations to comply with current Texas Comptroller policy and to achieve the best possible sales tax treatment.
Texas margin tax
We have been actively engaged in the evaluation and interpretation of the franchise tax since 1991, and have been heavily involved in the original interpretations of the new Texas franchise (a.k.a. “margin”) tax passed in 2006. This practice includes structuring and planning to allow efficient compliance with the new tax, as well as qualifying for exempt “passive” status is some cases. We are currently heavily involved in the interpretation and enforcement of the correct standards for utilization of the .5% rate available to some industries and the use and scope of the cost of goods sold deduction.
Texas sales taxes
Texas sales tax compliance is greatly complicated by the taxation of 17 taxable services, whose scope is very often encountered in unexpected scenarios. We have long-term experience in helping clients spot potentially taxable transactions and comply with sales tax collection responsibilities or work to legitimately avoid the application of such taxes. We provide due diligence and sales tax compliance with respect to corporate reorganizations and merger and acquisitions, with emphasis on the appropriate contractual allocation of transfer tax liability and scope and availability of the Texas occasional sale exemption.
Energy-specific tax practice
Working closely with attorneys in the Energy practice group, we provide state and local tax solutions that add value for our clients in this burgeoning sector. We are also skilled in advising on the scope of the manufacturing exemptions from sales and use taxes for the purchase and lease of certain types of energy facilities.
- Represented client in leading Texas franchise tax apportionment case to the Texas Supreme Court (TGS Nopec v. Combs).
- Represented client in a State Office of Administrative Hearings (SOAH) hearing with a favorable proposal for decision on the interpretation of franchise tax exemption applicable in the renewable energy industry (currently under appeal).
- Represented client in judicial appeal of Texas franchise tax assessments based on the applicable rate and deductibility of cost of goods sold under the Texas “margin” tax.
- Successfully resolved premium tax audit assessments and sales tax assessments for clients in the construction industry.
- Represented client with defeating enforcement of “informal” rules not properly adopted under the Texas Administrative Procedures Act.
- Represented oil and gas seismic company in a major Texas franchise tax apportionment before Texas Supreme Court. This case is quite significant to IP licensors because it will determine the situs of license revenues for state franchise tax purposes.
- Represented client at the State Office of Administrative Hearings regarding applying the Texas franchise tax exemption in Section 171.056 of the Texas Tax Code to certain renewable energy wind farm contractors. Jackson Walker obtained favorable proposal for decision.
- Represented various clients in several successfully resolved audits including an insurance premium tax audit dealing with the sourcing of premiums on certain credit enhancement insurance products.
- Successfully prevented a material audit assessment against a commercial construction firm based on the contractor’s use of joint-payee checks to subcontractors.
- Successfully negotiated Texas retaliatory tax audit abatements for out-of-state insurers that were not notified of asserted new retaliatory tax calculation formulas in accordance with the Texas Administrative Procedures Act.