| (C) New entities. When a taxable entity acquires another entity, a presumption exists for finding a unitary relationship during the first reporting period. Any party may rebut such presumption by proving that the taxable entities were not unitary. If such presumption is rebutted, then the taxable entities shall not be considered unitary as of the date of acquisition. When a taxable entity forms another taxable entity, a unitary relationship exists as of the date of formation unless the business is not unitary on a longer term basis. An acquired entity is required to file a report for the period prior to acquisition. (D) Non-arm's-length prices. Goods or services or both are supplied at non-arm's length prices between or among entities. Existence of arm's-length pricing between entities, however, does not indicate lack of unity. (E) Existence of benefits from joint, shared or common activity. A discount, cost-saving or other benefit can be shown to result from joint purchases, leaseholds, or other forms of joint, shared or common activities between or among entities. (F) Relationships of joint, shared or common activity to income-producing operations. In determining whether a joint, shared, or common activity is indicative of a unitary relationship, consideration shall be given to the nature and character of the basic operations of each entity. Such consideration shall include, but not be limited to, the entity's sources of supply, its goods or services produced or sold, its labor force, and market to determine whether the joint, shared, or common activity is directly beneficial to, related to, or reasonably necessary to the income-producing activities of the unitary business. (G) Holding entities. The tests for a unitary business established by this section apply in determining whether a holding entity is included or excluded from a unitary business. (7) United States--The 50 states and the District of Columbia. It also includes the territorial waters of the United States and the seabed and subsoil of those submarine areas that are adjacent to the territorial waters of the United States and over which the United States has exclusive rights, in accordance with international law, with respect to the exploration for or exploitation of natural resources. It also includes the possessions and territories of the United States and the Commonwealth of Puerto Rico. (c) Mandatory combined reporting. A combined group shall file a combined group report. A taxable entity that is not included in a combined report must file a separate report if it is doing business in Texas or is chartered or organized in Texas. (d) Determination of combined taxable margin and apportionment. (1) Combined total revenue. A combined group shall determine its total revenue by: (A) determining the total revenue of each of its members as provided by Tax Code, §171.1011 (including §171.1011(h)) and §3.587 of this title (relating to Margin: Total Revenue) as if the member were an individual taxable entity without regard to the no tax due limitation provided by Tax Code, §171.002(d)(2); (B) adding the total revenues of the members determined under subparagraph (A) of this paragraph, together; and (C) subtracting, to the extent included under Tax Code, §§171.1011(c)(1)(A), (c)(2)(A), or (c)(3), items of total revenue received from a member of the combined group. (2) Combined cost of goods sold. (A) A combined group that elects to subtract costs of goods sold shall determine that amount by: (i) determining the cost of goods sold for each of its members as provided by Tax Code, §171.1012 and §3.588 of this title (relating to Margin: Cost of Goods Sold) as if the member were an individual taxable entity; (ii) adding the amounts of cost of goods sold determined under clause (i) of this subparagraph, together; and (iii) subtracting from the amount determined under clause (ii) of this subparagraph, any cost of goods sold amounts paid from one member of the combined group to another member of the combined group, but only to the extent the corresponding item of total revenue was subtracted under paragraph (1)(C) of this subsection. (B) A member of a combined group may claim as cost of goods sold those costs that qualify under Tax Code, §171.1012, if the goods for which the costs are incurred are owned by another member of the combined group. (3) Combined compensation. The combined group may not subtract in relation to a person, more than the wages and cash compensation limitation provided in §3.589(c)(1) of this title (relating to Margin: Compensation), per 12-month period on which margin is based. A combined group that elects to subtract compensation shall determine that amount by: (A) determining the compensation for each of its members as provided by Tax Code, §171.1013 and §3.589 of this title, as if each member were an individual taxable entity; (B) adding the amounts of compensation determined under subparagraph (A) of this paragraph, together; and (C) subtracting from the amount determined under subparagraph (B) of this paragraph, any compensation amounts paid from one member of the combined group to another member of the combined group, but only to the extent the corresponding item of total revenue was subtracted under paragraph (1)(C) of this subsection. (4) Combined groups are eligible to use the 70% of revenue calculation pursuant to Tax Code, §171.101 or, if qualified, the E-Z Computation pursuant to Tax Code, §171.1016. See §3.584 of this title (relating to Margin: Reports and Payments). (5) Combined apportionment. (A) The combined margin is generally apportioned in accordance with §3.591 of this title (relating to Margin: Apportionment). (B) Except as provided in subparagraph (D) of this paragraph, gross receipts from business done in this state of taxable entities without nexus individually in Texas are excluded from the numerator. For example, sales of tangible personal property shipped into Texas by a member that does not have nexus individually are excluded from the numerator but are included in the denominator. (C) For each member of the combined group that does not have nexus individually with this state for purpose of taxation, a combined group must, for information purposes only, include in a report filed under Tax Code, §171.201 or §171.202: (i) the member's gross receipts from business done in this state; and (ii) the member's gross receipts from business done in this state that are subject to taxation in another state under a throwback law or regulation. (D) Receipts derived from transactions between members of a combined group that are excluded under Tax Code, §171.1014(c)(3), may not be included in the numerator or denominator of the apportionment factor. However, the numerator of the apportionment factor will include certain sales of tangible personal property made to third party purchasers if the tangible personal property is ultimately delivered to a purchaser in Texas without substantial modification. See Tax Code, §171.1055(b). For example, drop shipments made from a Texas location to a Texas purchaser would be included in Texas receipts based on the amount billed to the third party purchaser if the seller is a member of the combined group and the seller does not have nexus. (6) Disregarded entities. When reporting revenue, cost of goods sold, compensation and gross receipts for a disregarded entity, that information may be included with the parent; in that event, both entities are presumed to have nexus. (e) Reporting entity. (1) Responsibilities of the reporting entity. (A) Access to records. In addition to the information required to be included in the combined group report, upon request of the comptroller, the reporting entity shall provide access to the tax, financial, and nonfinancial records of entities that do and do not have Texas nexus. (B) Filing. The reporting entity shall file a combined group report on behalf of the combined group together with all reports and schedules required by the comptroller. Any elections required by the combined group are binding on all members of the group. (C) Payment. The reporting entity shall timely remit to the comptroller the Texas franchise tax imposed on the combined group. (D) Authority. The reporting entity may file refund claims, give waivers and execute agreements on behalf of the combined group. Any refund claim, waiver given, agreement or any document executed, shall be considered as having also been given or executed by each combined group member. (2) Notices. Notices mailed to the reporting entity shall be deemed to have been mailed to each of the taxable entities in the combined group. Cont'd... |
