Susan Combs, Comptroller of Public Accounts of the State of Texas And Greg Abbott, Attorney General of the State of Texas v. Newpark Resources, Inc.
2013 Tex. App. LEXIS 15455
| Tex. App. | 2013Background
- Texas franchise tax dispute: Newpark Resources sought a refund after paying under protest for 2008–2009; NES handled waste disposal and subcontracted hauling, forming part of Newpark’s unitary group.
- Newpark and NES are affiliated under a combined-group filing; the group elects a single general deduction (COGS, 30%, or compensation).
- Comptroller challenged including NES’s expenses in COGS, arguing NES provides only services and not goods, and argued flow-through payments to subcontractors may not be excluded from total revenue.
- Newpark argued NES labor constitutes costs of selling real-property improvements under 171.1012(i), allowing NES expenses to be included in COGS, and that flow-through payments could be excluded from total revenue.
- Trial court ruled in Newpark’s favor, concluding NES expenses could be included in COGS; no findings of fact were issued. The issue was dispositive, so the court affirmed.
- Statutory framework: 171.1011 total revenue; 171.1012 COGS; 171.1014 rules for combined groups; 171.1012(i) labor/materials for real-property projects.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether NES expenses qualify for COGS within the combined group. | Newpark—NES furnishes labor to real-property projects; NES expenses should be COGS under 171.1012(i). | Comptroller—NES provides services, not goods; not eligible for COGS. | NES expenses may be included in COGS within the combined-group framework. |
| Whether NES’s flow-through payments to subcontractors can be excluded from total revenue. | Newpark—flow-through payments are excluded; otherwise costs may still be deductible. | Comptroller—payments do not meet exclusion criteria under 171.1011(g)(3). | Not necessary to decide; not reached on record. |
Key Cases Cited
- In re Nestle USA, Inc., 387 S.W.3d 610 (Tex. 2012) (franchise tax structure and revenue concepts cited as background)
- In re Allcat Claims Serv., L.P., 356 S.W.3d 455 (Tex. 2011) (context on franchise tax reform and allocations)
- City of Rockwall v. Hughes, 246 S.W.3d 621 (Tex. 2008) (statutory interpretation; read statute in context; whole statute)