Titan Transportation, LP v. Glenn Hegar, Comptroller of Public Accounts of the State of Texas And Ken Paxton, Attorney General of the State of Texas
2014 Tex. App. LEXIS 2864
Tex. App.2014Background
- Titan Transportation, LP appeals a 2008 Texas franchise-tax refund dispute after paying under protest; seeks (g)(3) revenue exclusion or a COGS deduction for subcontractor payments.
- Tax protest arises from Titan’s 2008 report, which excluded flow-through payments to subcontractors under former §171.1011(g)(3) but the Comptroller denied the exclusion.
- Comptroller desk-audited Titan, determined Titan was not a construction company, denied (g)(3) exclusion, defaulted Titan to a 30% deduction, and recalculated tax with a 1% rate, creating a deficiency Titan paid under protest.
- Titan’s contracts with subcontractors required Titan to pay 84% of gross receipts to subcontractors; disputes centered on whether these payments constitute flow-through funds connected to construction activities.
- Trial court denied (g)(3) exclusion and COGS deduction but found a 20.18% apportionment factor; Titan was ultimately entitled to the (g)(3) revenue exclusion as a matter of law and the case was remanded to determine the refund amount.
- The issue presented concerns statutory construction of former §171.1011(g)(3) and whether Titan’s subcontractor payments qualify as flow-through funds in connection with real-property construction.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Proper construction of (g)(3) revenue exclusion | Titan argues payments to subcontractors meet (g)(3) nexus | State argues exclusion requires construction company and tripartite contract flow-through | Titan entitled to exclusion; nexus satisfied; remand for refund amount |
Key Cases Cited
- Nestle USA v. Tex. Comptroller, 387 S.W.3d 610 (Tex. 2012) (discussed flow-through funds and franchise-tax scheme)
- Perry Homes v. Cull, 258 S.W.3d 580 (Tex. 2008) (standards for statutory construction in tax cases)
- First American Title Ins. Co. v. Combs, 258 S.W.3d 627 (Tex. 2008) (interpretation of tax statutes and plain-language approach)
- Texas Lottery Comm’n v. First State Bank of DeQueen, 325 S.W.3d 628 (Tex. 2010) (interpretation of tax statutory language; plain-meaning rule)