Texas – Single Sales Factor Apportionment Formula

SALT Report 1721 – The Texas Comptroller rejected a Taxpayer’s tax refund claim because the Taxpayer did not properly apportion its taxable income.  The Taxpayer used the three-factor apportionment formula as required in the Multistate Tax Compact however, the Taxpayer should have used the single-factor apportionment method as is required by the Texas Franchise Tax Act and clearly defined in Texas Tax Code §171.106(a).

TTC §171.106(a) states that, “taxable entities are required to apportion franchise tax under the single-factor apportionment formula and may not elect to apportion the tax under a three-factor formula.” Furthermore, the Comptroller has addressed this matter in Decisions 104,752; 104,753; and 105, 941. In these cases the Comptroller states that the provisions set forth in Texas Tax Code 171.106(a) must be followed and more specifically that the three-factor formula may not be used.

Therefore, based on the regulation and the precedent set forth in the previous cases the Comptroller rejected the Taxpayer’s refund claims.

For Further Information:

Texas Comptroller of Public Accounts – Decision, Hearing No. 106,508

Decision, Hearing No. 104,752

Decision, Hearing No. 104,753

Decision, Hearing No. 105, 941