A company that sells reserved airport parking spaces will be liable for Texas franchise tax if it moves its headquarters to Texas. When calculating its tax, the company must apportion receipts from its services based on the location of the parking lot.
Headquarters is Sufficient Contact for Franchise Tax
Texas imposes its franchise tax on each entity that has sufficient contact with the state. Having headquarters in the state is sufficient contact to subject an entity to the franchise tax.
Apportionment of Receipts from Parking Reservations
The franchise tax applies to the portion of an entity’s receipts attributable to business done in Texas. Sourcing of the receipts from services depends on the end-product act for which the customer contracts.
Location of Parking Spaces
Here, customers pay a company to reserve parking spaces. Thus, the company must apportion receipts from those services based on the location of the parking spaces.
Location of Web Servers
Although the company processes online reservations as part of its service, this is a support activity. It is not the service for which the customers contract. Therefore, the location of the web hosting servers does not determine the sourcing of the company’s receipts.
Letter No. 201808030L, Texas Comptroller of Public Accounts, August 13, 2018, January 2019, ¶404-414