Court Opinion

ID: 4075396
Source: CourtListenerOpinion
Date Created: 2016-09-30 06:01:02.634233+00
Date Added: 2024-06-11T14:32:27.816103
License: Public Domain

ACCEPTED
                                                                      03-14-00713-CV
                                                                              7869726
                                                           THIRD COURT OF APPEALS
                                                                      AUSTIN, TEXAS
                                                                11/17/2015 3:27:02 PM
                                                                    JEFFREY D. KYLE
                                                                               CLERK
                    NO. 03-14-00713-CV
    __________________________________________________
                                                     FILED IN
                                              3rd COURT OF APPEALS
                IN THE COURT OF APPEALS            AUSTIN, TEXAS
           THIRD JUDICIAL DISTRICT OF TEXAS11/17/2015 3:27:02 PM
                        AT AUSTIN                 JEFFREY D. KYLE
     ________________________________________________Clerk

  GLENN HEGAR, COMPTROLLER OF PUBLIC ACCOUNTS
             OF THE STATE OF TEXAS; AND
KEN PAXTON, ATTORNEY GENERAL OF THE STATE OF TEXAS,
                       Appellant

                             v.

           CGG VERITAS SERVICES (U.S.), INC.,
                      Appellee.

             APPELLEE’S ORAL ARGUMENT
              DEMONSTRATIVE EXHIBIT

                             1
                   Did CGG properly calculate its margin using the
                 COGS subtraction for franchise tax report year 2008?

                          Is CGG an “owner of goods” as defined by § 171.1012(i)?

           Is CGG a “DEEMED” owner                                     Is CGG an “ACTUAL” owner
           per sub-(i), third sentence?                                 per sub-(i), first sentence?

                                                                       Does CGG own the property
           Does CGG furnish “labor”?                                    (seismic data in MCDL)?
       Newpark (“‘Labor’ is a broad term that
                                                                   § 171.1012(i) (“based on all of the facts and
  encompasses a wide range of activities, including
                                                                circumstances, including the various benefits and
  expenditure of physical or mental effort especially
                                                               burdens of ownership vested in the taxable entity”)
      when fatiguing, difficult, or compulsory.”)

                         OR                                                 Yes                   No
        Does CGG furnish “materials”?
        Merriam’s (“Materials” are “elements,                       Does CGG sell that property in the
  constituents, or substances of which something is                   ordinary course of business?
   composed or can be made; something (as data)
   that can be worked into a more finished form.”)            Comptroller does not dispute that licensing of seismic
                                                              data through MCDL is a “sale.” See also, TGS-NOPEC
                                                                    (“transaction constitutes a ‘limited sale’”)

              No                   Yes                                     Yes                   No

   Are the labor / materials furnished “to a                      Is that property a “good” for purposes
        project” for the construction,                                    of the COGS deduction?
     improvement, etc. of real property?
                                                                 § 171.1012(a)(1) (“Goods” are “real or tangible
    Newpark (considered (1) essential and direct                 personal property” (TPP)); § 171.1012(a)(3)(A)
    component of drilling process, (2) Legislature              (TPP is: (1) personal property that can be “seen,
   allowed deduction of similar costs, and (3) real           weighed, measured, felt, or touched”); (2) “artificial”
   property activity could not proceed without the             TPP, intellectual property for mass-distribution; or
             labor/materials furnished)                              (3) “artificial” TPP, computer programs)

               No                  Yes                                     Yes                   No

 CGG is                        CGG is a deemed                   CGG is an actual                           CGG is
  not a                            owner.                           owner.                                  not an
deemed                                                                                                      actual
owner.                                                                                                      owner.

                         Taxpayers who qualify as “owners” under § 171.1012(i)
                        “may make a subtraction under this section in relation to
Consider                the cost of goods sold.” Deemed owners specifically “may                           Consider
 actual                    include the costs, as allowed by this section, in the                           deemed
 owner                                  computation of [COGS].”                                             owner
 status.                                                                                                    status.
                               “This section” means the entirety of § 171.1012,
                              including all allowable costs under (c), (d), and (f).
                       CERTIFICATE OF SERVICE

       I hereby certify that a true and correct copy of the foregoing has been
electronically filed and served on all counsel below on November 17, 2015.

     Joseph D. Hughes
     Assistant Solicitor General
     OFFICE OF THE ATTORNEY GENERAL
     P.O. Box 12548 (MC 059)
     Austin, Texas 78711-2548
     (512) 936-1729
     (512) 474-2697 [fax]
     jody.hughes@texasattorneygeneral.gov

     Charles Eldred
     Assistant Attorney General
     OFFICE OF THE ATTORNEY GENERAL,
     FINANCIAL AND TAX LITIGATION DIVISION
     P.O. Box 12548
     Austin, Texas 78711
     (512) 463-1745
     (512) 477-2348 [fax]
     charles.eldred@texasattorneygeneral.gov

                                   /s/ Amanda G. Taylor
                                   Amanda G. Taylor

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