| 1 | 1 | | 81R10300 BEF-F |
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| 2 | 2 | | By: Howard of Fort Bend H.B. No. 4267 |
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| 3 | 3 | | |
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| 4 | 4 | | |
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| 5 | 5 | | A BILL TO BE ENTITLED |
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| 6 | 6 | | AN ACT |
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| 7 | 7 | | relating to the determination of ownership of goods for the purpose |
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| 8 | 8 | | of deducting the cost of goods sold under the franchise tax. |
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| 9 | 9 | | BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: |
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| 10 | 10 | | SECTION 1. Section 171.1012(i), Tax Code, is amended to |
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| 11 | 11 | | read as follows: |
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| 12 | 12 | | (i) A taxable entity may make a subtraction under this |
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| 13 | 13 | | section in relation to the cost of goods sold only if that entity |
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| 14 | 14 | | owns the goods. The determination of whether a taxable entity is |
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| 15 | 15 | | an owner is based on all of the facts and circumstances, including |
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| 16 | 16 | | the various benefits and burdens of ownership vested with the |
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| 17 | 17 | | taxable entity. A taxable entity furnishing labor or materials to |
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| 18 | 18 | | a project for the construction, improvement, remodeling, repair, or |
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| 19 | 19 | | industrial maintenance (as the term "maintenance" is defined in 34 |
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| 20 | 20 | | T.A.C. Section 3.357) of real property is considered to be an owner |
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| 21 | 21 | | of that labor or materials and may include the costs, as allowed by |
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| 22 | 22 | | this section, in the computation of cost of goods sold. Solely for |
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| 23 | 23 | | purposes of this section, a taxable entity shall be treated as the |
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| 24 | 24 | | owner of goods being manufactured or produced by the entity under a |
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| 25 | 25 | | contract with the federal government, including any subcontracts |
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| 26 | 26 | | that support a contract with the federal government, |
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| 27 | 27 | | notwithstanding that the Federal Acquisition Regulation may |
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| 28 | 28 | | require that title or risk of loss with respect to those goods be |
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| 29 | 29 | | transferred to the federal government before the manufacture or |
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| 30 | 30 | | production of those goods is complete. A taxable entity is |
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| 31 | 31 | | considered the owner of goods sold for purposes of this section if |
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| 32 | 32 | | as a result of selling the goods the entity reports gross revenue |
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| 33 | 33 | | and a separate cost of sales on the entity's financial statements, |
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| 34 | 34 | | regardless of whether the entity at any point has legal title to the |
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| 35 | 35 | | goods. |
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| 36 | 36 | | SECTION 2. This Act applies only to a report originally due |
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| 37 | 37 | | on or after the effective date of this Act. |
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| 38 | 38 | | SECTION 3. This Act takes effect January 1, 2010. |
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