Income/Franchise:
Texas Supreme Court Rules for Taxpayer in Case on Sourcing Satellite Radio Subscription Receipts

Case No. 20-0462, Tex. (3/25/22). The Texas Supreme Court (Court) reversed the judgment of the Texas Court of Appeals’ franchise tax ruling from 2020 concerning sales factor sourcing [see previously issued Multistate Tax Alert for more details on this 2020 ruling ruling], which had held in favor of the Texas Comptroller of Public Accounts that the “receipt-producing, end-product act” that allowed each customer to receive a satellite radio subscription service’s programming effectively occurred at the customer’s residence. Instead, the Court agreed with the taxpayer and the Texas District Court ruling from 2018, which had allowed the taxpayer to apportion its subscription receipts for Texas franchise tax purposes based on the location where the taxpayer produced the satellite programming services [see previously issued Multistate Tax Alert for more details on this 2018 lower court ruling]. As a result of the Court’s decision, the case has been remanded to the Texas Court of Appeals to determine the cost of performing the taxpayer’s services in Texas.

See forthcoming Multistate Tax Alert for more details on this recent decision, including some related taxpayer considerations, and please contact us with any questions in the meantime.