CCH Tax Day Report
A Texas Court of Appeals has issued a substituted opinion in a case holding that a taxpayer in the movie theater business, which primarily exhibits films and other content, could deduct its costs associated with exhibiting films in its cost of goods sold (COGS) deduction when determining its Texas franchise tax liability. In the original opinion, the court had allowed the COGS deduction because a subsection of the relevant law section makes it clear that for purposes of the COGS calculation, the term “tangible personal property” includes films without regard to the means or methods of distribution or the medium in which the property is embodied. The substituted opinion reached the same conclusions, but removed the portion of the original opinion that stated that the Texas legislature defined “tangible personal property” to include personal property that can be seen or that is perceptible to the senses in any other manner.
American Multi-Cinema, Inc. v. Hegar, Comptroller of Public Accounts, Court of Appeals of Texas, Third District, Austin, No. 03-14-00397-CV, January 6, 2017, ¶404-215