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Ezel / Tax Rulings / TX
TX 9612846L Franchise Tax (PRIOR TO 01/01/2008) 1996-12-20

Did an out-of-state mortgage broker create Texas franchise-tax nexus by soliciting loans through mail and telephone?

Short answer: No, if mail and telephone solicitation of mortgage loans was the corporation's only Texas activity and it lacked a Texas certificate of authority. Texas surveys, inspections, or other activities related to the mortgaged properties performed on its behalf would create franchise-tax nexus. The letter did not decide licensing or sales-tax duties.

Apply this to your situation

This page answers the general question as of 1996. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1996
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is an official Texas Comptroller of Public Accounts letter published on the State Tax Automated Research (STAR) system. Letters on STAR can be the basis of a detrimental reliance claim only for the taxpayer to whom the letter was directly issued (see 34 Tex. Admin. Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded. This 1996 response assumes the corporation had no Texas certificate of authority and no Texas activity beyond mail and telephone solicitation. It expressly does not answer state-agency licensing requirements or sales-tax treatment. Confirm current law with the relevant agencies. Taxpayer-identifying details are redacted. This summary is informational only and is not legal or tax advice. Consult a licensed Texas tax professional about your specific situation.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page) is the authoritative source for any reliance.

Plain-English summary

Remote mortgage-loan solicitation alone did not create nexus, but in-state property work would.

The Florida mortgage brokerage planned to solicit Texas mortgage loans by mail and telemarketing from its out-of-state office. The letter assumed it was a corporation without a Texas certificate of authority.

If that solicitation was its only Texas activity, the corporation was not subject to the former franchise tax. If surveys, inspections, or other work relating to the mortgaged properties was performed in Texas on its behalf, the company would have nexus under Rules 3.546 and 3.554.

The Comptroller did not address licensing requirements imposed by other agencies, and sales-tax treatment was reserved for a separate response.

What this means for you

Out-of-state mortgage businesses

The historical no-nexus answer depended on keeping all substantive property work outside Texas.

Tax professionals

Review third-party surveys, inspections, appraisals, and similar work performed on the company's behalf, and separate tax nexus from licensing.

Common questions

Q: Did mail and phone solicitation alone create nexus?
A: No, on the stated assumptions.

Q: What activity would create nexus?
A: Texas surveys, inspections, or similar property-related work performed for the company.

Q: Did the letter decide licensing or sales tax?
A: No.

Citations and references

  • 34 Tex. Admin. Code Secs. 3.546 and 3.554

Source

Original ruling text

December 20, 1996

Dear **:

In your letter of December 13, you requested confirmation that COMPANY A does
not need to be licensed in the State of Texas. Al Van Allen will respond to
any sales tax requirements imposed on COMPANY A.

You state that COMPANY A is a Licensed Mortgage Brokerage firm located in
**, Florida. The firm wants to do a mail out and telemarket
solicitation of mortgage loans from the *** office.

For the purposes of my response, I presume that COMPANY A is a corporation
which does not have a certificate of authority issued by the Texas Secretary of
State.

If the company's only activity in Texas involves solicitation of mortgage loans
by mail and/or telephone, the corporation is not subject to franchise tax.
However, if there are activities related to the mortgaged properties (e.g.,
surveys, inspections, etc) undertaken in Texas on the company's behalf, the
company would be subject to franchise tax. I have enclosed Rule 3.546 and Rule
3.554 which address the nexus standards for the taxable capital and earned
surplus components of the franchise tax respectively.

Finally, I cannot address any licensing requirements imposed by other state
agencies.

This response is based on the facts presented and current law. If there are
different or additional facts, the response may change.

If you have any questions, contact Tax Policy Division. You may call toll free
1-800-531-5441, or our regular number is 512/463-4600. My extension is 3-4662.
You may write me at Tax Policy Division, Comptroller of Public Accounts.

Sincerely,

Bob Jeffcoat
Tax Policy Division

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