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)