Reed Smith’s State Tax Group has significant experience handling Texas tax matters, with a special focus on the Texas sales and use tax and the Texas franchise tax. 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: Cost of Goods Sold
In 2020, the Texas Supreme Court decided three franchise tax “cost of goods sold” cases. In the wake of this guidance, we work with clients to calculate the proper cost of goods sold subtraction for their businesses and to identify refunds for years in which they overpaid tax due to lack of clarity.
Sales Tax: Taxable Data Processing
The Comptroller is aggressively subjecting 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 are litigating data processing audit assessments on behalf of clients and identifying refund opportunities where electronic service providers may have been unnecessarily charging tax.
Sales Tax: Construction
The construction rules are a tricky area of Texas sales and use tax, and auditors know how to quickly generate 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.
Sales Tax: Taxable Amusement Services
Amusement services are subject to the Texas sales and use tax, so tickets to Texas entertainment events have long been taxed. But, what about ticket sales between brokers? Is this the provision of a taxable amusement service or the non-taxable sale of an intangible license? We represent a ticket broker who says it is the latter.
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.
