Opinion ID: 1751011
Heading Depth: 1
Heading Rank: 4

Heading: Income and Franchise Taxes Compared

Text: For franchise tax purposes, Chevron claimed it can determine its receipts from the company records, which directly account for those receipts, and that the receipts are nonunitary, that is, separable. The Commission argued that a formula should be used because the company cannot directly account for downstream receipts. Chevron admitted that it cannot directly account for receipts for income tax purposes because such calculations include expenses which are unknown in marketing and are also a significant facet of downstream operations. Chevron claimed that in franchise taxes, expenses are not a part of the equation, and therefore, since all figures are known, no formula is needed. Chevron claimed that its records are maintained on a destination and origin basis so that it can determine actual receipts for Mississippi. As mentioned, a sale has a number of descriptors such as origin, destination, and customer. Chevron recognizes intercompany transactions as sales, but the company only attributes a sale as being in Mississippi when the customer physically comes to the state or the product is consumed in the state. This does not reflect the volume of business that Chevron conducts within this State, the basis on which franchise tax liability is now determined. The Commission's position was that the receipts from the downstream operations cannot be directly allocated for franchise tax purposes and that the term unitary receipts in the franchise tax statute refers to all receipts derived from Chevron's unitary business which would include all receipts from its downstream operations. The franchise tax statute does not contemplate using simply Mississippi receipts as identified by a company in calculating income taxes owed to the state, rather, the State legislature developed its own formula for identifying receipts for franchise taxes.