Supreme Court Hears Franchise Tax Case

Today the Supreme Court heard Nestle’s arguments that the franchise tax is unconstitutional because it ignores the state constitution’s requirement that taxes be “equal and uniform.” One of the main controversies is the two different tax rates; .5% for retailers and wholesalers and 1% for everyone else. The state argues that it is exactly this difference that makes the tax equal and uniform. Nestle has only retail and wholesale operations in Texas but is taxed as a manufacturer because it has manufacturing operations in other states. This is Nestle’s second try at the Supreme Court. The first was dismissed on a technicality. For more read Texas High Court Hears Franchise Tax Challenge. The court could rule before the beginning of the January legislative session. A ruling in favor of Nestle would have significant implications for state revenues as the tax is expected to raise $5.5 billion in revenues this year.

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