(vii)An individual pays a fee to an Internet ride-sharing
service connecting the individual with a driver at a particular location.
The most reasonable customer location for consumption of the service
may be the physical address of rendezvous point for the ride.
(14)[(13)] Leases and subleases.
(A)Gross receipts [Revenues]
from the lease, [or] sublease, [(or
] rental, or subrental[)] of real property
are sourced [apportioned] to the location of
the property.
(B)Gross receipts [Revenues]
from the lease, [or] sublease, [(or
] rental, or subrental[)] of tangible
personal property are sourced [apportioned]
to the location of the property. If the property is used both inside
and outside Texas, then lease payments are sourced [apportioned]
based on the number of days that the tangible personal property was
used in Texas divided by the number of days that the tangible personal
property was used everywhere. If the amount [of revenue that
is] due under the lease is based on mileage, then the lease
payments are sourced [apportioned] based on
the number of miles in Texas divided by the number of miles everywhere.
(C)If a lump sum is charged for the lease, sublease,
rental, or subrental of more than one item of [leased or
subleased (or rented or subrented)] property, and the items
are [that is] located both inside and outside Texas,
the lump-sum is sourced to Texas [then the allocation of
such revenue is] based on a ratio of the fair rental
value of the items located in Texas[ each item of
property] to the fair value of the items located outside of
Texas.
(D)Gross receipts [Revenues]
from the lease, [or] sublease, [(or
] rental, or subrental[)] of a vessel
that engages in commerce are sourced [apportioned]
to Texas based on the number of days that the vessel is engaged in
commerce in Texas waters divided by the number of days that the vessel
is engaged in commerce everywhere.
(E)Gross receipts from [If]
a lease, sublease, rental, or subrental of real property or tangible
personal property that is treated as a sale for federal
income tax purposes[, then the receipts from the transaction]
are sourced [apportioned] in the same manner
as a sale. Any portion of the payments that the contracting parties
designate as interest is sourced as provided in paragraph (12)
of this subsection, concerning interest [receipts].
(15)[(14)] Litigation awards.
Litigation [Revenues that are realized from litigation]
awards are gross receipts that are sourced [apportioned]
to the location [legal domicile] of the payor
[of the proceeds]; however, if the litigation awards are
intended to replace receipts for which another [apportionment]
rule [is] provided in this section applies,
then the gross receipts are sourced [apportionment
must be made] in accordance with that rule. For example, if
a taxable entity sues a Delaware corporation to recover on a sale
of goods delivered to a Texas location, then a judgment for the amount
of that sale would not convert the receipts from Texas gross receipts
to Delaware receipts. See subsection (f) of this section, for the sourcing
[apportionment] of receipts from judgments, compromises,
or settlements that relate to natural gas production.
(16)[(15)] Loan servicing [of
real property].
(A)Gross receipts [Receipts]
from [the] servicing [of] loans secured by real
property are sourced [apportioned] to the location
of the collateral real property that secures the loan being serviced.
(B)Gross receipts from servicing
loans that are not secured by real property are sourced as provided
in paragraph (26) of this subsection, concerning services.
(17)[(16)] Loans and securities
treated as inventory of the seller.
(A)Gross proceeds from the sale of [If]
a loan or security [is] treated as inventory of the seller
for federal income tax purposes are included in gross receipts
even though the tax basis is not included in total revenue under §3.587(e)(4)
of this title. Securities and loans held for investment or risk management
purposes are not inventory. Gross receipts from the sale of a loan
or security treated as inventory of the seller are sourced to the
location of the payor as provided in paragraph (25) of this subsection,
concerning securities. See paragraph (2) of this subsection, concerning
capital assets and investments, or paragraph (10) of this subsection,
concerning financial derivatives, for the treatment of gains and losses
from sales of loans and securities not treated as inventory of the
seller. [, the gross proceeds of the sale of that loan
or security are considered gross receipts.]
(B)If [For reports originally due
on or after January 1, 2010, if] a lending institution categorizes
a loan or security as "Securities Available for Sale" or "Trading
Securities" under Financial Accounting Standard No. 115, the gross
proceeds of the sale of that loan or security are considered gross
receipts. In this subparagraph, "Financial Accounting Standard No.
115" means the Financial Accounting Standard No. 115 in effect as
of January 1, 2009, not including any changes made after that date.
(18)[(17)] Membership or enrollment
fees paid for access to benefits. Membership or enrollment fees paid
for access to benefits are [should be considered]
gross receipts from the sale of an intangible asset and are sourced [
apportioned] to the location [legal domicile]
of the payor.
(19)[(18)] Mixed transactions.
If a transaction involves elements of both a sale of tangible personal
property and a service, but no documentation exists to show separate
charges for the tangible personal property [sale]
and service elements, then the comptroller may determine the amounts
that are allocable to each element based on fair values or on any
available evidence.
(20)[(19)] Net distributive
income. The net distributive income or loss from a passive entity
that is included in total revenue is sourced [apportioned
] to the principal place of business of the passive entity.
[(20)Newspapers or magazines. All
advertising revenues of a newspaper or magazine, including those revenues
derived from out-of-state advertisements, are apportioned to Texas
based on the number of newspapers or magazines distributed in Texas.
All other receipts must be apportioned in accordance with the apportionment
rules otherwise set out in this section. For example, receipts from
sales of newspapers or magazines are to be apportioned based on paragraph
(29) of this subsection.]
(21)Patents, copyrights, and other intangible assets
[rights].
(A)Gross receipts [Receipts ]from
the use of intangible assets [intangibles].
(i)Revenues from a patent royalty are included in
Texas receipts to the extent that the patent is utilized in production,
fabrication, manufacturing, or other processing in Texas.
(ii)Revenues from a copyright royalty are included
in Texas receipts to the extent that the copyright is utilized in
printing or other publication in Texas.
(iii)Gross receipts [Revenues]
that the owner of a patent, copyrighted material, trademark,
franchise, or license receives from licensing the use of the
patent, copyrighted material, trademark, franchise, or license are
sourced to [included as] Texas [receipts]
to the extent the patent, copyrighted material, trademark,
franchise or license is used in Texas.
(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 [everywhere].
(B)Gross receipts from the sale of intangible
assets. Except as otherwise provided in this section, gross receipts
from the sale of intangible assets [Sales. Sales of intangibles
] are sourced to the [apportioned based on 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. [Radio/television. All advertising
revenues of a radio or television station that broadcasts or transmits
from a location in Texas constitute Texas receipts, even though some
of the listening or viewing audiences are located outside Texas. All
other receipts must be apportioned in accordance with the apportionment
rules otherwise set out in this section.]
(23)Real property. Gross receipts [Revenues
] from the sale, lease, rental, sublease, or subrental of real
property, including mineral interests, are sourced [apportioned
] 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 [of the seller]. 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 [Receipts]
from the sale of securities are sourced to [apportioned
based on] the location of the payor. If securities are sold
through an exchange, and the payor [buyer] cannot
be identified, then 8.7% [7.9%] of the revenue
is a Texas gross receipt.
(26)Services. Except as otherwise provided in
this section, gross receipts [Receipts] from a service
are sourced [apportioned] to the location where
the service is performed. [If services are performed both inside
and outside Texas, then such receipts are Texas receipts on the basis
of the fair value of the services that are rendered in Texas.]
(A) Location of performance. Except as provided
in other subparagraphs, a service is performed at the location of
the receipts-producing, end-product act or acts. If there is a receipts-producing,
end-product act, the location of other acts will not be considered
even if they are essential to the performance of the receipts-producing
acts. If there is not a receipts-producing, end-product act, then
the locations of all essential acts may be considered. Examples: [
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 Tax Code, §171.106(b), for information
on apportionment of such margin.]
(i)Admission fees, subscription fees,
or other charges for an audience to observe live or pre-recorded performances
are sourced to the locations where the recipients observe the performance.
The location where the live performance was rehearsed, the location
where the pre-recorded performance was recorded, and the location
where the admission fee or other charge was paid are not determinative.
(ii)Gross receipts from the architectural
design of a structure, are sourced to the location or locations where
the architect performed the work. The delivery location of any tangible
work product, such as a blueprint, is not determinative. However,
if the tangible work product of the architect is considered to be
the sale of tangible personal property rather than the sale of a service,
such as the sale of house plan books, the gross receipts are sourced
as provided in paragraph (29) of this subsection, concerning tangible
personal property.
(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 costs directly
related to the service and not overhead costs. Examples: [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 as defined in subsection (b)(3) of
this section, should refer to the Tax Code, §171.106(c), for
information on apportionment of such margin.]
(i)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)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)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 [
Receipts from services that a defense readjustment project performs
in a defense economic readjustment zone are not Texas receipts].
(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.
Cont'd...
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