In the continuing franchise tax controversy over who can deduct cost of goods sold and what can be deducted, one taxpayer was successful in challenging the Comptroller’s audit report in court and received a complete refund of taxes paid under protest. Newpark Resources, Inc., a fully-integrated oil field services company, objected to the Comptroller’s dis-allowance of certain cost of good sold deductions related to oil field waste disposal.
Newpark’s suit raised several different grounds challenging the assessment. They include:
- Whether Newpark may deduct the costs of the waste disposal segment as a cost of goods sold because the waste disposal segment is an integrated part of Newpark’s unitary business;
- Whether the waste removal segment of Newpark’s business independently qualifies for the cost of goods sold deduction because it furnishes labor and materials to real property construction projects;
- Whether Newpark is entitled to exclude from revenue its payments to barge companies for transporting the scrap mud to the disposal sites; and
- Whether Newpark may calculate its 4% limitation for indirect costs based upon the total indirect administrative costs incurred by all members of Newpark’s combined group.