Texas ~ Corporate Income Tax: Comptroller Addresses Apportionment of Sale of Assets

CCH Tax Day Report

The Texas Comptroller issued a private letter ruling regarding the proper apportionment of gross receipts from the sale of substantially all of an entity’s assets. The selling entity was located in Texas and provided services for the oil and gas industry. The purchasing entity is incorporated under the laws of Delaware.

The Comptroller found that the sale of the tangible personal property located in Texas, resulted in Texas receipts. The tangible personal property not located in Texas that at the time of the sale was deployed for use in a foreign jurisdiction did not result in Texas receipts.

The gross receipts from the sale of intangibles are apportioned based on the location of purchaser. Therefore, the sale of the contract rights is the sale of an intangible asset and the gross receipts from the sale of the contact rights should be apportioned to Delaware.

The Comptroller determined that none of the intangible assets sold were created or purchased for investment purposes. There was no evidence that the assets addressed in this ruling are capital assets or investments. The Comptroller noted that it will be amending Rule 3.291 to clarify the definition of “investment.”

Letter No. 201607948L, Texas Comptroller of Public Accounts, July 22, 2016, released October 2016, ¶404-205

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