Bill Text: TX SB142 | 2017-2018 | 85th Legislature | Introduced
Bill Title: Relating to the determination of cost of goods sold for purposes of computing the franchise tax.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Introduced - Dead) 2017-02-28 - Left pending in committee [SB142 Detail]
Download: Texas-2017-SB142-Introduced.html
85R32 ADM-D | ||
By: Taylor of Collin | S.B. No. 142 |
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relating to the determination of cost of goods sold for purposes of | ||
computing the franchise tax. | ||
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: | ||
SECTION 1. Section 171.101(a), Tax Code, is amended to read | ||
as follows: | ||
(a) The taxable margin of a taxable entity is computed by: | ||
(1) determining the taxable entity's margin, which is | ||
the lesser of: | ||
(A) the amount provided by this paragraph, which | ||
is the lesser of: | ||
(i) 70 percent of the taxable entity's total | ||
revenue from its entire business, as determined under Section | ||
171.1011; or | ||
(ii) an amount equal to the taxable entity's | ||
total revenue from its entire business as determined under Section | ||
171.1011 minus $1 million; or | ||
(B) an amount computed by determining the taxable | ||
entity's total revenue from its entire business under Section | ||
171.1011 and subtracting the greater of: | ||
(i) $1 million; or | ||
(ii) an amount equal to the sum of: | ||
(a) at the election of the taxable | ||
entity, either: | ||
(1) cost of goods sold, as | ||
determined under Section 171.1012 or 171.10121; or | ||
(2) compensation, as determined | ||
under Section 171.1013; and | ||
(b) any compensation, as determined | ||
under Section 171.1013, paid to an individual during the period the | ||
individual is serving on active duty as a member of the armed forces | ||
of the United States if the individual is a resident of this state | ||
at the time the individual is ordered to active duty and the cost of | ||
training a replacement for the individual; | ||
(2) apportioning the taxable entity's margin to this | ||
state as provided by Section 171.106 to determine the taxable | ||
entity's apportioned margin; and | ||
(3) subtracting from the amount computed under | ||
Subdivision (2) any other allowable deductions to determine the | ||
taxable entity's taxable margin. | ||
SECTION 2. Section 171.1011(v), Tax Code, is amended to | ||
read as follows: | ||
(v) A taxable entity primarily engaged in the business of | ||
transporting goods by waterways that does not subtract cost of | ||
goods sold in computing its taxable margin shall exclude from its | ||
total revenue direct costs of providing transportation services by | ||
intrastate or interstate waterways to the same extent that a | ||
taxable entity that sells in the ordinary course of business real or | ||
tangible personal property would be authorized by Section 171.1012 | ||
or 171.10121 to subtract those costs as costs of goods sold in | ||
computing its taxable margin, notwithstanding Section | ||
171.1012(e)(3). | ||
SECTION 3. Subchapter C, Chapter 171, Tax Code, is amended | ||
by adding Section 171.10121 to read as follows: | ||
Sec. 171.10121. ALTERNATIVE DETERMINATION OF COST OF GOODS | ||
SOLD. In lieu of determining cost of goods sold as provided by | ||
Section 171.1012 and subject to Section 171.1014, a taxable entity | ||
that elects to subtract cost of goods sold for the purpose of | ||
computing its taxable margin may determine the amount of that cost | ||
of goods sold as follows: | ||
(1) for a taxable entity treated for federal income | ||
tax purposes as a corporation, the cost of goods sold is the amount | ||
reportable as cost of goods sold on line 2, Internal Revenue Service | ||
Form 1120; | ||
(2) for a taxable entity treated for federal income | ||
tax purposes as a partnership, the cost of goods sold is the amount | ||
reportable as cost of goods sold on line 2, Internal Revenue Service | ||
Form 1065; | ||
(3) for a taxable entity treated for federal income | ||
tax purposes as an S corporation, the cost of goods sold is the | ||
amount reportable as cost of goods sold on line 2, Internal Revenue | ||
Service Form 1120S; or | ||
(4) for any other taxable entity, the cost of goods | ||
sold is an amount determined in a manner substantially equivalent | ||
to the amount for Subdivision (1), (2), or (3) determined by rules | ||
the comptroller shall adopt. | ||
SECTION 4. Section 171.1014, Tax Code, is amended by | ||
amending Subsection (e) and adding Subsection (e-1) to read as | ||
follows: | ||
(e) For purposes of Section 171.101, a combined group that | ||
elects to subtract costs of goods sold shall determine that amount | ||
by: | ||
(1) determining the cost of goods sold for each of its | ||
members as provided by Section 171.1012 or 171.10121 as if the | ||
member were an individual taxable entity; | ||
(2) adding the amounts of cost of goods sold | ||
determined under Subdivision (1) together; and | ||
(3) subtracting from the amount determined under | ||
Subdivision (2) any cost of goods sold amounts paid from one member | ||
of the combined group to another member of the combined group, but | ||
only to the extent the corresponding item of total revenue was | ||
subtracted under Subsection (c)(3). | ||
(e-1) For purposes of Subsection (e), each member of a | ||
combined group may elect to determine its cost of goods sold under | ||
either Section 171.1012 or 171.10121. | ||
SECTION 5. This Act applies only to a report originally due | ||
on or after the effective date of this Act. | ||
SECTION 6. This Act takes effect January 1, 2018. |