Reed Smith’s State Tax Group has significant experience handling Texas tax matters, with a special focus on Texas sales and use tax and franchise taxes. We help clients across a range of industries with a variety of Texas tax matters, including tax planning, identification of refund opportunities, and audit defense and appeals.
Due to our in-depth knowledge of and experience in litigating Texas tax issues, we are well-equipped to provide front-end advice to minimize clients’ chances of adverse audit assessments. We also help our clients obtain letter ruling guidance from the Texas Comptroller and procure voluntary disclosure agreements, where appropriate.
However, we recognize that Texas is an aggressive audit state, and we understand the impact that a costly or unexpected assessment can have on our clients. Therefore, our Texas tax lawyers bring a unique combination of subject-matter expertise and advocacy skills that enable us to achieve successful results in all phases of tax controversy. While we love to secure favorable settlements for our clients and we look for every opportunity to do so, we have the know-how and resolve to handle clients’ Texas tax litigation all the way from the administrative hearing process through the highest appellate courts.
Here is a brief summary of a few of Texas tax issues and opportunities that we are working on for our clients:
Franchise Tax: Apportionment
Apportionment has been and will continue to be a hot topic in Texas – especially as it relates to the sourcing of receipts from services. We stay on top of the latest changes in Comptroller policy, as well as the evolving case law, to help clients minimize audit risk and identify refund opportunities.
Franchise Tax: R&D Credit
Recent Comptroller rule amendments seek to restrict the scope of the Texas franchise tax R&D credit. Consistent with this change in policy, auditors are now reducing credits claimed on franchise tax reports. We believe the rule amendments and their retroactive application are inconsistent with governing law. We are actively challenging these changes to preserve clients’ properly-claimed credits.
Sales Tax: Taxable Data Processing
The Comptroller aggressively subjects electronic services and apps to Texas sales and use tax as taxable data processing. We think the Comptroller’s policy positions violate the taxing statute, as interpreted by recent court guidance. Therefore, we challenge data processing audit assessments on behalf of clients and identify refund opportunities where electronic service providers have incorrectly collected tax.
Sales Tax: Construction
The Texas sales and use tax rules governing construction purchases can be difficult to navigate, and, on audit, these purchases can quickly result in a sizeable assessment. Proper sales tax consequences depend on a host of project-specific factors, so we work with clients to craft contracts that comport with the intended Texas sales and use tax consequences. We also defend clients during audit and challenge their audit assessments, which often arise from contract pricing issues and failed exemptions. We also help clients obtain refunds of overpaid tax on capital improvement projects.
Texas State Tax Intelligence
We are committed to staying up to date on all things Texas tax so that we can monitor issue trends and deliver accurate and timely information to clients. We track all pending Texas tax administrative matters, lawsuits, and appeals across a variety of tribunals, and our lawyers frequently write and speak on Texas tax topics.
