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