There are several nuances specific to the Texas franchise tax computation, most notably: Total revenue minus cost of goods sold, or.Taxable entities that are part of an affiliated group engaged in a unitary business are required to file a combined group report computing their franchise tax as if they were a single taxable entity.īeginning with the 2014 tax year, an entity's taxable margin is the lowest of four amounts: The tax is imposed on C corporations, S corporations, limited liability companies, partnerships, and other legal entities. Texas imposes a GRT in the form of a franchise tax based on a taxpayer's margin. However, a few states do impose GRTs in addition to CITs ( e.g., Delaware and New Mexico both have GRTs that function similar to sales taxes). Currently, Texas, Ohio and Washington are the only states that impose a GRT instead of a CIT. While there was a rise in states adopting GRTs in the early 2000s, they are not a new concept as GRTs were first adopted by states in the early 1920s. Typically, it is imposed on all business sales and allows few or no deductions. What is a GRT?Īs the name suggests, a GRT is a tax on business receipts rather than business income. Herein we provide a general overview of GRTs, a brief description of the taxing schemes in Texas, Ohio and Washington, and some key distinctions that multistate taxpayers should be aware of concerning GRTs. Given the differences between GRTs and CITs, it should come as no surprise that multistate businesses, especially those based outside of those three states, are often confused as to how GRTs work. In fact, Texas, Ohio and Washington, three of the largest states, currently impose a gross receipts tax (GRT) instead of a CIT. Although CITs can be complex, most businesses are familiar with how they work since most state CITs are derived from the federal income tax. The vast majority of states impose some form of a corporate income tax (CIT) to raise revenue from business entities. Technology & Life Sciences | National Practice.Professional Services | National Practice.Private Client Services | National Practice.Manufacturing & Distribution | National Practice.Commercial Real Estate | National Practice.Banking & Financial Services | National Practice.Private Client Services for Insurance & HR.Defined Contribution Administration Services.Defined Benefit Administration Services.Private Client Services for Accounting & Tax.Insurance Appraisals & Tangible Asset Valuation.Cybersecurity & Privacy Resource Library.Litigation Support, Economic Damages & Expert Testimony.COVID-19 Loan & Capital Assistance Services.Accounting, Bookkeeping and Business Process Outsourcing.Private Client Tax & Accounting Services.Frequently Asked Questions About Cost Segregation.Section 382: Use of Net Operating Losses.
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