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Ezel / Tax Rulings / TX
TX 9905592L Franchise Tax (PRIOR TO 01/01/2008) 1999-05-13

Did Company A's activities, including use of its name at Texas mall kiosks, remain protected from the former franchise tax by Public Law 86-272?

Short answer: No. The Comptroller concluded that Company A was subject to both taxable capital and earned surplus because its activities—including use of the Company A name at kiosks in Texas malls—were not protected by Public Law 86-272. The letter does not describe the other activities or explain the protection analysis further, so the holding cannot be narrowed beyond the facts stated.

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This page answers the general question as of 1999. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1999
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 Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded. The body identifies branded Texas mall kiosks but does not describe the taxpayer's other activities or give a detailed Public Law 86-272 analysis. It applies the pre-2008 taxable-capital and earned-surplus tax, replaced by the margin tax effective January 1, 2008; 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

Company A was subject to both components of the former franchise tax because its activities, including branded kiosks in Texas malls, were not protected by Public Law 86-272.

The taxpayer argued that Company A was not subject to Texas franchise tax. The Comptroller invoked Section 171.001(c), which required taxation to constitutional limits, and rejected the claimed federal protection.

The response specifically mentions use of the Company A name at Texas mall kiosks but refers generally to additional activities and information gathered by the agency without describing them. This page does not invent those missing facts.

Currency note: The ruling applies the pre-2008 taxable-capital and earned-surplus franchise tax. Texas replaced that system with the margin tax effective January 1, 2008.

What this means for you

Businesses using branded retail kiosks

The Comptroller did not treat the described Texas kiosk presence as protected solicitation under Public Law 86-272.

Tax professionals

The letter is too fact-thin to establish a general kiosk rule. Review the taxpayer's complete in-state activities and current tax structure.

Common questions

Q: Which former tax components applied?
A: Both taxable capital and earned surplus.

Q: What Texas activity did the letter identify?
A: Use of the Company A name at kiosks in Texas malls.

Q: Did the letter explain every activity considered?
A: No.

Citations and references

  • Texas Tax Code Sec. 171.001(c)
  • Public Law 86-272

Source

Original ruling text

May 13, 1999

Dear Ms. **:

Thank you for your corporation's letter stating you believe that **
(COMPANY A) is not subject to Texas franchise tax. I apologize for the delay
in this response.

Texas Tax Code 171.001(c) requires our agency to tax to the limits of the
United States Constitution. It is our agency's position that COMPANY A is
subject to both components of the Texas franchise tax, because we believe
COMPANY A's activities, including using the COMPANY A name at kiosks in malls
in Texas, are not protected by Public Law 86-272.

This response is based on the facts presented in your letter and other
information our agency has gathered. If the facts change or if there are
additional relevant facts, the response may change.

If you have any questions, please do not hesitate to write me or call me toll
free at 1-800-531-5441, extension 34662.

Sincerely,

Jerry Oxford
Tax Policy Division

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