| (iv) Royalties from an affiliated taxable entity that
does not transact a substantial portion of its business or regularly
maintain a substantial portion of its assets in the United States
are excluded from Texas gross receipts and gross receipts from an
entity's entire business.
(B) Gross receipts from the sale of intangible assets.
Except as otherwise provided in this section, gross receipts from
the sale of intangible assets are sourced to the location of payor.
(C) Examples.
(i) Example 1. The owner of seismic data grants a license
to an oil company to access the seismic data. Even though a license
is part of this transaction, the receipts are from the use of the
underlying intangible property, the seismic data (which cannot be
copyrighted), not from the use of a license. Accordingly, the receipts
are sourced under subparagraph (B) of this paragraph to the location
of the payor.
(ii) Example 2. An inventor licenses a patent to a
manufacturer. When the manufacturer licensee thereafter produces the
patented item, it uses the patent, and its payments to the inventor,
owner of the patent, are receipts from the use of a patent under subparagraph
(A) of this paragraph. The receipts that the inventor receives are
included in Texas receipts to the extent that the patent is used in
production, fabrication, manufacturing, or other processing in Texas.
(iii) Example 3. The owner of copyrighted material
grants a license to a publisher to publish the copyrighted material.
When the publisher publishes the copyrighted material, it uses the
copyright, and its payments to the owner are receipts from the use
of a copyright under subparagraph (A) of this paragraph. The receipts
that the copyright owner receives from the use of its copyright is
included in Texas receipts to the extent the copyright is used in
Texas.
(22) Qualified stock purchase under IRC, §338(h)(10)
(Certain stock purchases treated as asset acquisitions). Receipts
that are treated as receipts from the sale of assets by the target
taxable entity under IRC, §338(h)(10) are sourced according to
the rules that apply to sales of such assets. For the purposes of
this paragraph, the purchaser of the target's stock is considered
the purchaser of the assets.
(23) Real property. Gross receipts from the sale, lease,
rental, sublease, or subrental of real property, including mineral
interests, are sourced to the location of the property. Royalties
from mineral interests are considered revenue from real property.
(24) Sales taxes. State or local sales taxes that are
imposed on the customer, but are collected by a seller are not included
in the seller's gross receipts. However, discounts that a seller is
allowed to take in remittance of the collected sales tax are gross
receipts to the seller.
(25) Securities. Gross receipts from the sale of securities
are sourced to the location of the payor. If securities are sold through
an exchange, and the payor cannot be identified, then 8.7% of the
revenue is a Texas gross receipt. For reports originally due prior
to January 1, 2021, a taxable entity may use 7.9% instead of 8.7%.
(26) Services. Except as otherwise provided in this
section, gross receipts from a service are sourced to the location
where the service is performed.
(A) Location of performance. Except as provided in
other subparagraphs, a service is performed at the location or locations
where the taxable entity's personnel or property are doing the work
that the customer hired the taxable entity to perform. Activities
that are not directly used to provide a service are not relevant when
determining the location where a taxable entity performs a service.
(B) If services are performed both inside and outside
Texas for a single charge, then receipts from the services are Texas
gross receipts on the basis of the fair value of the services that
are performed in Texas. In determining fair value, the relative value
of each service provided on a stand-alone basis may be considered.
Units of service, such as hours worked, may also be considered. The
cost of performing a service does not necessarily represent its value.
If costs are considered, costs should be limited to the direct costs
of doing the work that the customer hired the taxable entity to perform
and should not include any costs that are not directly used to provide
a service to the customer.
(i) Example 1. A law firm with offices in Texas and
Louisiana charges a client by the hour. Hours billed for work conducted
in Texas are Texas gross receipts.
(ii) Example 2. A law firm with offices in Texas and
Louisiana charges a client a lump sum fee of $5,000 to draft a document.
Attorneys in the Texas office recorded 20 hours on the project, and
attorneys in the Louisiana office recorded 5 hours on the project
at the same billing rate. Texas gross receipts are $4,000. If the
law firm does not record hours worked on a project, other measures
of direct cost may be considered.
(iii) Example 3. A Texas-based landscaper provides
grounds maintenance services at its client's four offices in Texas,
and one office in Oklahoma, for an annual fee of $50,000. The landscape
services at each of the locations are substantially the same. Texas
gross receipts are $40,000. Although the cost of performing the landscaping
maintenance service at the Oklahoma office is higher than the cost
of performing the service at the other locations because of the additional
travel cost, the additional cost is not considered.
(C) Taxable entities that have margin that is derived,
directly or indirectly, from the sale of services to or on behalf
of a regulated investment company should refer to subsection (c)(1)
of this section for information on apportionment of such margin.
(D) Taxable entities that have margin that is derived,
directly or indirectly, from the sale of management, administration,
or investment services to an employee retirement plan should refer
to subsection (c)(2) of this section for information on apportionment
of such margin.
(E) Receipts from services that a defense readjustment
project performs in a defense economic readjustment zone are not Texas
gross receipts.
(27) Single member limited liability company (SMLLC).
For purposes of this section, the sale of a SMLLC by its sole owner
is the sale of a membership interest in the SMLLC. The membership
interest is an intangible asset, and receipts from the sale of a SMLLC
are sourced to the location of payor.
(28) Subsidies or grants. Proceeds of subsidies or
grants that a taxable entity receives from a governmental agency are
gross receipts, except when the funds are required to be expended
dollar-for-dollar (i.e., passed through) to third parties on behalf
of the agency. Receipts from a governmental subsidy or grant are sourced
in the same manner as the item to which the subsidy or grant was attributed.
For example, receipts from a grant to conduct research for the government
are receipts from a service and are sourced to the location where
the research is performed.
(29) Tangible personal property. Examples of transactions
that involve the sale of tangible personal property and result in
Texas gross receipts include, but are not limited to, the following:
(A) the sale of tangible personal property that is
delivered in Texas to a purchaser. Delivery is complete upon transfer
of possession or control of the property to the purchaser, an employee
of the purchaser, or transportation vehicles that the purchaser leases
or owns. FOB point, location of title passage, and other conditions
of the sale are not relevant to the determination of Texas gross receipts;
(B) the sale of tangible personal property that is
delivered in Texas to an employee or transportation agent of an out-of-state
purchaser. A carrier is an employee or agent of the purchaser if the
carrier is under the supervision and control of the purchaser with
respect to the manner in which goods are transported;
(C) the sale and delivery in Texas of tangible personal
property that is loaded into a barge, truck, airplane, vessel, tanker,
or any other means of conveyance that the purchaser of the property
leases and controls or owns. The sale of tangible personal property
that is delivered in Texas to an independent contract carrier, common
carrier, or freight forwarder that a purchaser of the property hires
results only in gross receipts everywhere if the carrier transports
or forwards the property to the purchaser outside this state;
(D) the sale of tangible personal property with delivery
to a common carrier outside Texas, and shipment by that common carrier
to a purchaser in Texas;
(E) the sale of oil or gas to an interstate pipeline
company, with delivery in Texas;
(F) the sale of tangible personal property that is
delivered in Texas to a warehouse or other storage facility that the
purchaser owns or leases;
Cont'd... |
