Texas Supreme Court Says the Margin Tax is Constitutional, again

In its second ruling on the Texas margin tax, the Supreme Court of Texas has once again ruled the tax constitutional. The case was brought by Nestle USA, Inc.

In this case one of the main controversies was the two different tax rates — .5% for retailers and wholesalers and 1% for everyone else. Nestle argued that the two rates meant the tax was not applied in an equal and uniform manner. The state argued that it is exactly this difference that makes the tax equal and uniform. The court agreed with the state.

The plaintiff further argued that the tax was applied unfairly because Nestle has only retail and wholesale operations in Texas but is taxed as a manufacturer because it has manufacturing operations in other states. The court also rejected this argument saying Nestle’s Texas operations benefited from the company’s manufacturing.

There was a minority opinion that the court should not hear the case but rather send it to a lower court. Read the court’s opinion.

With the legislative session fast approaching, legislators can heave a collective sigh of relief since they won’t be forced to readdress the franchise tax issue.

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