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Ezel / Tax Rulings / TX
TX 9710259L Franchise Tax (PRIOR TO 01/01/2008) 1997-10-22

Did a corporation become subject to former Texas franchise tax by providing consulting services in Texas during 1994 and 1995?

Short answer: Yes. Providing consulting services in Texas meant the corporation was doing business in the state under Section 171.001. If its Texas activity occurred only during 1994 and 1995, the letter said it would owe tax only for the period it was there.

Apply this to your situation

This page answers the general question as of 1997. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1997
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 Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded.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 brief 1997 response applies former franchise-tax law to consulting services performed in Texas during 1994 and 1995. It does not describe the services or decide any separate seminar issue. Confirm current nexus law. 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

Providing consulting services in Texas made the corporation subject to the former Texas franchise tax.

Section 171.001 imposed the tax on a corporation doing business in Texas. Because the corporation performed consultation services in the state, the Comptroller found franchise-tax liability.

The letter also limited the period: if the corporation was in Texas only during 1994 and 1995, it owed tax only for the time it was there.

What this means for you

Out-of-state consultants

Performing services physically in Texas can create tax obligations even if the Texas activity lasts only part of the business's life.

Tax professionals

Identify the precise period of in-state service activity when determining historical filing exposure.

Common questions

Q: What created liability?
A: Providing consultation services in Texas.

Q: Did the letter impose tax outside the Texas activity period?
A: No; it tied tax to the period the corporation was in Texas.

Citations and references

  • Texas Tax Code Sec. 171.001

Source

Original ruling text

October 22, 1997

Dear Ms. **:

Thank you for your letter concerning your corporation's liability for Texas
franchise tax.

Section 171.001 of the Texas Tax Code imposes a franchise tax on "each
corporation that does business in this state or that is chartered or authorized
to do business in this state." Because your company did provide consultation
services in Texas, it is subject to the franchise tax. If you were only in
Texas during 1994 and 1995, then you will only owe tax for the period of time
that you were here.

I have enclosed copies of our nexus rules for your review.

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

If you have any questions about this or any other franchise tax matter, please
call me at 1-800-531-5441, extension 34612. My direct number is (512)
463-4612. You may write me at Tax Policy Division, Comptroller of Public
Accounts, Austin, Texas 78774.

Sincerely,

Janet Spies
Tax Policy Division

cc: Delia Gaona, Austin Audit Office

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