| (6) A taxable entity that uses a 52 - 53 week accounting
year end and that has an accounting year that ends during the first
four days of January of the year in which the report is originally
due may use the preceding December 31 as the date through which margin
is computed.
(7) Any item of allocated revenue excluded under §3.587(c)(9)
of this title is excluded from Texas gross receipts and gross receipts
from an entity's entire business.
(e) Computation and sourcing of gross receipts.
(1) Advertising services. Gross receipts from the dissemination
of advertising are sourced to the locations of the advertising audience.
The locations of the advertising audience should be determined in
good faith using the most reasonable method under the circumstances,
considering the information reasonably available. The method should
be consistently applied from year to year and supported by records
retained by the service provider. Locations that may be reasonable
include the physical locations of the advertising, advertising audience
locations recorded in the books and records of the service provider,
and locations listed in published rating statistics. If the locations
of nationwide advertising audiences cannot otherwise be reasonably
determined, then 8.7% of the gross receipts are sourced to Texas.
For reports originally due prior to January 1, 2021, advertising receipts
attributable to a radio or television station transmitter in Texas
may be sourced to Texas.
(2) Capital assets and investments.
(A) Except as provided in subparagraph (C) of this
paragraph, only the net gain from the sale of a capital asset or investment
is included in gross receipts. A net loss from the sale of a capital
asset or investment is not included in gross receipts.
(B) The net gain or net loss from the sale of a capital
asset or investment is the amount realized from the sale less the
adjusted basis for federal income tax purposes.
(C) For reports originally due prior to January 1,
2021, a taxable entity may add the net gains and losses from sales
of investments and capital assets to determine the total gross receipts
from such transactions. If both Texas and out-of-state sales have
occurred, then a separate calculation of net gains and losses on Texas
sales must be made. If the combination of net gains and losses results
in a loss, the taxable entity may not net the loss against other receipts.
(D) The net gain from the sale of a capital asset or
investments is sourced based on the type of asset or investment sold.
The net gain from the sale of an intangible asset is sourced to the
location of the payor as provided in paragraph (21)(B) of this subsection,
concerning gross receipts from the sale of intangible assets, and
paragraph (25) of this subsection, concerning securities, of this
subsection Examples of intangible assets include, but are not limited
to, stocks, bonds, commodity contracts, futures contracts, patents,
copyrights, licenses, trademarks, franchises, goodwill, and general
receivable rights. The net gain from the sale of real property is
sourced as provided in paragraph (23) of this subsection, concerning
real property. The net gain from the sale of tangible personal property
is sourced as provided in paragraph (29) of this subsection, concerning
tangible personal property.
(E) Examples.
(i) Example 1. During a report year, a real estate
investment company sells two Texas investment properties, reporting
a gain on sale of one property and a loss on the sale of the other
property. The company should include the net gain on the profitable
sale in gross receipts from its entire business but should not include
the net loss on the unprofitable sale. The company should not offset
the net loss against the net gain. To determine Texas gross receipts,
the asset should be sourced based on its nature. Receipts from the
sale of real property are sourced to the location of the property,
as provided in paragraph (23) of this subsection. The company should
include only the net gain on the sale of the Texas investment property
in Texas gross receipts and should not include the net loss on the
sale of the other Texas investment property.
(ii) Example 2. The facts are the same as in Example
1, except the real estate investment company also had net gains and
net losses from the sale of out-of-state properties. For reports originally
due prior to January 1, 2021, the real estate investment company may
offset all of the net losses from these sales against all of the net
gains. If the result is a net gain, the net gain is included in gross
receipts from its entire business. If the result is a net loss, the
net loss may not be not included in gross receipts from its entire
business. To determine Texas gross receipts, the company may offset
the net loss from the sale of the one Texas property against the net
gain from the sale of the other Texas property. If the result is a
net gain, the net gain is included in Texas gross receipts. If the
result is a net loss, the net loss may not be included in Texas gross
receipts.
(3) Computer hardware and digital property.
(A) Gross receipts from the sale of computer hardware
together with any software installed on the hardware are sourced as
the sale or lease of tangible personal property under paragraph (29)
of this subsection.
(B) Gross receipts from the lease of computer hardware
together with any software installed on the hardware are sourced as
the leasing of tangible personal property under paragraph (14)(B)
of this subsection.
(C) Gross receipts from the sale of digital property
(computer programs and any content in digital format that is either
protected by copyright law or no longer protected by copyright law
solely due to the passage of time) that is transferred by fixed physical
media are sourced as the sale of tangible personal property under
paragraph (29) of this subsection.
(D) Gross receipts from lease of digital property that
is transferred by fixed physical media are sourced as the leasing
of tangible personal property under paragraph (14)(B) of this subsection.
(E) Gross receipts from the sale or lease of digital
property that is transferred by means other than by fixed physical
media are sourced as the sale of intangible property under paragraph
(21)(B) of this subsection.
(F) Gross receipts from the delivery of digital property
as a service are sourced under paragraph (26) of this subsection,
unless otherwise provided in this subsection.
(G) Gross receipts from the delivery of digital property
as part of an internet hosting service are sourced as internet hosting
receipts under paragraph (13) of this subsection. See paragraph (13)(D)
of this subsection for factors distinguishing the purchase of access
over the internet to computer services from the purchase or lease
of digital property.
(H) Gross receipts from the use (as opposed to the
sale or licensing) of digital property are sourced under paragraph
(21)(A) of this subsection.
(I) Examples.
(i) Example 1. Movie Studio produces a copyrighted
movie in digital format and successively sells the theatrical rights
to Movie Theater Chain Company, the broadcast rights to Cable Company,
the internet streaming rights to Internet Company A, the internet
rental rights to Internet Company B, the digital versatile disc (DVD)
sale rights to DVD Company, DVD rental rights to Kiosk Company, and
the permanent download sale rights to Download Company. In each instance,
Movie Studio's receipts are from the right to use its copyrighted
digital property and sourced to where the copyright is used under
paragraph (21)(A) of this subsection. Movie Theater Chain Company
receipts from ticket sales are from the sale of a service and sourced
under paragraph (26) of this subsection. Cable Company subscription
receipts from broadcasting the movie are from the sale of a service
and sourced under paragraph (26) of this subsection. Internet Company
A's subscription receipts for its streaming service using its website
are from an internet hosting service and sourced to the location of
the customer under paragraph (13) of this subsection. Internet Company
B's receipts from the rental (access for a limited time) of the movie
using the company's website are from an internet hosting service and
sourced to the location of the customer under paragraph (13) of this
subsection. DVD Company's receipts from the sale of DVDs are from
the sale of tangible personal property and sourced under paragraph
(29) of this subsection. Kiosk Company's receipts from the rental
of DVDs are from the rental of property and sourced to the location
of the property under paragraph (14) of this subsection. Download
Company's receipts from the sale of permanent downloads of the movie
are from the sale intangibles and sourced to the location of payor
under paragraph (21)(B) of this subsection.
Cont'd... |
