Receipts 2021
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Similarly, pretrial legal work might be part of the receipts- producing, end- product act of a trial. It can be argued the receipts- producing, end- product act of a tax return preparation service for a Texas taxpayer is the delivery of the return to the taxpayer, even though parts of the return may be prepared in multiple states. Taxpayers that perform certain types of services (e.g., tax preparation or legal services) may question whether their services have receipt- producing, end- product acts or whether the services are considered to be performed in more than one state so that fair- value analysis is required.
RECEIPTS 2021 HOW TO
However, beyond directing the taxpayer to consider all essential acts to determine the location where a service is performed (assuming there is no receipts- producing, end- product act), the rule provides no examples or guidance on how to measure those essential acts and make a conclusion as to the ultimate location where the service is performed. If there is no receipts- producing, end- product act associated with the service (and again, it is not clear in the rule when this would be the case), then the locations of all essential acts may be considered in determining where a service is performed. The revised rule provides scant guidance on how a taxpayer should determine the receipts- producing, end- product act associated with a service. This result is also consistent with Sirius XM, as the Appeals Court held that producing programming content for satellite radio stations was a non- receipt- producing act, albeit an essential one. Sirius XM is not yet final the taxpayer's petition for review before the Texas Supreme Court is pending.Īdditionally, if there is a receipts- producing, end- product act, the rule will not consider the location of other acts, even if those acts are essential to the performance of the receipts- producing, end- product act. This occurs where the customer's radio is located, which is likely in the customer's residence or car. In that case, the court held that the receipts- producing, end- product act associated with the provision of satellite radio service is the taxpayer's activating a customer's chip set in a satellite- enabled radio. This new test, so to speak, aligns with language adopted by the Texas Court of Appeals in Hegar v. Under the revised rule, a service will generally be performed at the location of the receipts- producing, end- product act or acts. The final regulation adds guidance on interpreting the location where a service is considered performed. If services are performed both inside and outside of Texas, then the receipts are attributed to Texas in proportion to the fair value of the services that are rendered in Texas. Texas law apportions receipts from providing services to the location where the services are performed. Perhaps the most significant change is the revised general rule for sourcing service receipts, which is applied if the service is not specifically addressed elsewhere (there are special rules for certain types of receipts, e.g., advertising services, internet hosting services, loan servicing activities). An example of this: The revised general rule for sourcing service receipts "is an exposition of the Comptroller's current interpretation of the sourcing statute, which has been endorsed in part by the Court of Appeals opinion in the Sirius XM Radio litigation." Because the rule is applied both prospectively and retroactively, taxpayers must reassess past plays and think about upcoming audits. The explanatory text in the register provides that many of the additions or revisions are expositions of existing comptroller policy. As amended, this regulation significantly revises the rules for sourcing receipts to Texas, and almost all taxpayers, particularly those engaged in service industries, will be affected by the rule changes. This is somewhat like what happened when the Texas Comptroller's Office published the final version of revised Administrative Rule Section 3.591, Margin: Apportionment, in the Texas Register.
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Preparing tax returns is not as fun as watching a good football game, but in neither situation do taxpayers expect the rules to change at halftime. At times, these calls can and do change the outcome of the game. From peewee to NFL games, Texans are well accustomed to seeing flags thrown and penalties called midgame.