Briggs & Veselka is pleased to announce that our client, Taylor & Hill, Inc. has won the first ever Texas franchise tax case tried under the revised Texas franchise tax, also known as the “margin tax”. Judge Covington, visiting judge for the 53rd District Court, ruled that Taylor & Hill, the plaintiff, was entitled to a revenue exclusion for its on-site engineers which are considered leased employees and to claim the compensation deduction for wages and benefits paid to its in-house engineers and corporate staff.

Brian Jordan, Senior Tax Manager at Briggs & Veselka and manager on the Taylor & Hill account, reached out to attorneys at Martens, Seay & Todd, located in Austin, Texas. Working with attorneys Jimmy Martens and Lacy Leonard, Brian assisted them during the process. His testimony in front of the judge during the trial proved to be pivotal in the ultimate decision handed down.

Taylor & Hill provides engineers to refineries and chemical plants. It also provides in-house engineering services. Taylor & Hill’s franchise tax report had originally reported based upon Cost of Goods Sold method.

The Texas Comptroller audited Taylor & Hill and denied its eligibility for the Cost of Goods sold deduction. The Comptroller disputed that Taylor & Hill could not amend its Texas franchise tax report to claim the compensation deduction. Instead, the Comptroller attempted to force Taylor & Hill to report its Texas margin tax based upon the statutory minimum deduction equal to thirty percent (30%) of revenue, but was unsuccessful in their efforts.

The Texas Attorney General recently stated that they will not be appealing the judge’s order in the case. The state has been ordered to refund the money from the tax that was assessed in the audit.

For more information refer to Taylor & Hill, Inc. v. Susan Combs, Travis County District Court Cause No. D-1-GN-10-004429, or contact Brian Jordan at bjordan@bvccpa.com or 713.353.1980.