The Texas business margin tax was implemented for franchise reports due after January 1, 2008 and thereafter. This tax regime replaced the prior Texas franchise tax, which was based on the earned surplus and taxable capital of a taxable business. The more recent business margin tax is calculated as the lesser of the taxpayer company’s total revenue times 70%, total revenue less a deduction for costs of goods sold, or total revenue less certain payroll costs. These calculations can differ, depending on the type of industry. Most service-providing companies are prohibited from using the costs of goods sold deduction and utilize either the payroll deduction or the 70 percent calculation to determine their taxable gross margin. This can be detrimental to service-providing companies with high volume and low margins/profits.
However, there are certain items that may be excluded from gross revenue prior to the deductions discussed above. These exclusions are typically for very narrowly defined industries/activities. Effective January 1, 2012, an exclusion from gross receipts is available for a taxable entity that is a “Qualified Courier and Logistics Company.” A qualified company may exclude from its gross revenue subcontracting payments made by the taxable entity to non-employee agents for the performance of delivery services on behalf of the taxable entity. To be considered a “Qualified Courier and Logistics Company,” the company must satisfy several requirements defined under Section 171 of the Texas Tax Code.
If you would like to know if your company could benefit from this new exclusion or have any questions, please contact Dan Phillips or your Schneider Downs representative.
© 2012 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.
This advice is not intended or written to be used for, and it cannot be used for, the purpose of avoiding any federal tax penalties that may be imposed, or for promoting, marketing or recommending to another person, any tax related matter.