The Comptroller of Public Accounts adopts amendments to §3.586, concerning margin: nexus, in response to the United States Supreme Court decision in South Dakota v. Wayfair, Inc., 139 S. Ct. 2080 (2018), with a change to the proposed text as published in the December 4, 2020, issue of the Texas Register (45 TexReg 8757). The change adds reference to a Texas Administrative Code section. The rule will be republished.

The comptroller amends subsection (d)(12)(B) to improve readability and replace the phrase "is not doing business" with "does not have physical presence". The amendment is necessary because although we do not consider a limited partner to have physical presence in Texas when its limited partnership is doing business in Texas, the limited partner may be doing business in Texas under our economic nexus provision in subsection (f).

The comptroller amends subsection (e) to add guidance concerning the beginning date of a foreign taxable entity that overcomes the nexus presumption.

The comptroller reorganizes subsection (f) into two paragraphs. The comptroller moves the current language of subsection (f) to paragraph (1) and amends the reference to §3.591, concerning margin: apportionment, to more specifically reference the sourcing information provided in subsections (e) and (f) of that section. The comptroller adds paragraph (2) to include a definition of gross receipts, derived from Texas Tax Code §171.1121 (Gross Receipts For Margin).

The comptroller reorganizes and adds language to subsection (g) relating to the beginning date for nexus. Paragraph (1) adds language outlining the beginning date for nexus of a foreign taxable entity prior to January 1, 2019. The comptroller corrects the reference to the physical presence subsection from subsection (c) to (d). The comptroller amends paragraph (2) to provide more guidance relating to the beginning date of a foreign taxable entity on or after January 1, 2019. Paragraph (3) becomes the new subparagraph (C). In subparagraphs (A)-(C) a foreign taxable entity's beginning date is the earliest of: the date the foreign taxable entity has physical presence, the date when the foreign taxable entity obtains a Texas use tax permit, or the date the foreign taxable entity had gross receipts from business done in Texas of $500,000 or more.

The comptroller did not receive any comments regarding adoption of the amendment.

This amendment is adopted under Tax Code, §111.002 (Comptroller's Rules; Compliance; Forfeiture), which provides the comptroller with the authority to prescribe adopt, and enforce rules relating to the administration and enforcement of the provision of Tax Code, Title 2.

This amendment implements the United States Supreme Court decision in South Dakota v. Wayfair, Inc., 138 S.Ct. 2080 (2018).