Court Opinion

ID: 5066437
Source: CourtListenerOpinion
Date Created: 2021-10-01 09:57:38.785207+00
Date Added: 2024-06-11T14:17:26.074517
License: Public Domain

At all times relevant to this appeal, Tex.Tax Code §171.052 exempted from the corporate franchise tax those transportation companies that paid an annual tax based on their gross receipts. The apparent purpose of this exemption was to avoid "double taxation" of certain types of corporations, by relieving from the franchise tax those paying their gross receipts tax annually. There is little in the way of logic to support the argument that the burden of the gross receipts tax is any more onerous with regard to those who pay a dollar once a year than it is on those who pay a quarter four times a year. The quarterly basis of payment does not make the burden any less "annual" during the course of an entire year.
The granting of the privilege to transact business in this state confers economic benefit, including the opportunity to realize gross income and the right to invoke the protection of local law. The Texas franchise tax is a tax on the value of this privilege. Bullock v. National Bancshares Corp.,584 S.W.2d 268 (Tex. 1979), cert. denied, 444 U.S. 1016,100 S.Ct. 667, 62 L.Ed.2d 645 (1980); General Dynamics Corp. v. Bullock,547 S.W.2d 255 (Tex. 1976), cert. denied, 434 U.S. 1009,98 S.Ct. 717, 54 L.Ed.2d 751 (1978). The tax on the value of the privilege of transacting business is distinct from the tax imposed on the amount of gross receipts generated in a given period of time.
To deny the availability of an exemption from one tax (franchise) because another, effectively annual, tax (gross receipts) is paid in quarterly increments during the course of the year rather than in a single lump sum at the end of the year defies both equity and logic. A plausible argument even exists for the opposite course, i.e., that an entity permitted the added benefit of using throughout the year the funds attributable to the year-end tax liability should carry the greater burden.
In 1985, the Legislature removed all transportation companies from the list of entities exempt from the franchise tax under § 171.052, without regard to whether their respective gross receipts taxes were paid on an "annual" or "quarterly" basis. 1985 Tex.Sess. Law Serv., ch 30, § 1, at 95. The Legislature, apparently recognizing the inequity and illogic of the law as it existed at that time, has now made both "quarterly" and "annual" taxpayers subject to both forms of taxation.
Unfortunately, well-established rules of statutory construction prohibit us from reaching the equitable and logical result in this case.