Texas Comptroller of Public Accounts    STAR System



Accession No.(s): 200612854R

Document superseded on: 08/15/2013 


Section 3.546  Taxable Capital: Nexus

(a) A foreign corporation is liable for the franchise tax if it is doing 
business in this state. 

(b) A corporation is doing business in this state, for the taxable capital 
component of the franchise tax, when it has sufficient contact with this state 
to be taxed without violating the United States Constitution. A corporation may 
be subject to the taxable capital component, but not subject to the earned 
surplus component because of Public Law 86-272. See sec. 3.554 of this title 
(relating to Earned Surplus: Nexus) for the nexus standards for the earned 
surplus component of the franchise tax. 

(c) Some specific activities which constitute doing business in Texas are: 

(1) contracting: performance of a contract in Texas regardless of whether the 
corporation brings its own employees into the state, hires local labor, or 
subcontracts with another; 

(2) providing services: 

(A) providing any service in Texas, regardless of whether the employees, 
independent contractors, agents, or other representatives performing the 
services reside in Texas; 

(B) maintaining or repairing property located in Texas whether under warranty 
or by separate contract; or 

(C) installing, erecting, or modifying property in Texas; 

(3) inventory in the state: having an inventory in Texas or having spot 
inventory for the convenient delivery to customers, even if the bulk of orders 
are filled from out of state; 

(4) solicitation: having employees, independent contractors, agents, or other 
representatives in Texas, regardless of whether they reside in Texas, to 
promote or induce sales of the foreign corporation's goods or services; 

(5) dealings in real estate: holding, acquiring, leasing, or disposing of any 
property located in Texas; 

(6) shows and performances: the staging of shows, theatrical performances, or 
other events within Texas; 

(7) transportation: 

(A) carrying passengers or freight (any personal property including oil and gas 
transmitted by pipeline) from one point in Texas to another point within the 
state, if pickup and delivery, regardless of origination or ultimate 
destination, occurs within Texas; or 

(B) having facilities and/or employees, independent contractors, agents, or 
other representatives in Texas, regardless of whether they reside in Texas: 

(i) for storage, delivery, or shipment of goods; 

(ii) for servicing, maintaining, or repair of vehicles, trailers, containers, 
and other equipment; 

(iii) for coordinating and directing the transportation of passengers or 
freight; or 

(iv) for doing any other business of the corporation; 

(8) franchisors: entering into one or more contracts with persons, 
corporations, or other business entities located in Texas, by which: 

(A) the franchisee is granted the right to engage in the business of offering, 
selling, or distributing goods or services under a marketing plan or system 
prescribed in substantial part by the franchisor; and 

(B) the operation of a franchisee's business pursuant to such plan is 
substantially associated with the franchisor's trademark, service mark, trade 
name, logotype, advertising, or other commercial symbol designating the 
franchisor or its affiliate; 

(9) processing: assembling, processing, manufacturing, or storing goods in 

(10) advertising: entering Texas to purchase, place, or display advertising 
when the advertising is for the benefit of another and in the ordinary course 
of business (e.g., the foreign corporation makes signs and brings them into 
Texas, sets them up, and maintains them); 

(11) contracting for processing and shipment: sending materials to a Texas 
manufacturer, processor, repairer, or printer to be processed and stored in 
completed form awaiting orders for their shipment; 

(12) foreign corporations as partners: 

(A) acting as a general partner in a general partnership which is doing 
business in Texas; 

(B) acting as a general partner in a limited partnership which is doing 
business in Texas. (A foreign corporation which is a limited partner in a 
limited partnership is not doing business in Texas); 

(13) loan production activities: soliciting sales contracts or loans, gathering 
financial data, making credit checks, or performing other financial activities 
in Texas through employees, independent contractors, or agents, regardless of 
whether they reside in Texas; 

(14) holding companies: maintaining a place of business in Texas or managing, 
directing, and/or performing services in Texas for subsidiaries or investee 

(15) place of business: maintaining a place of business in Texas; 

(16) federal enclaves: doing business in any area within Texas, even if the 
area is leased by, owned by, ceded to, or under the control of the federal 

(17) consignments: having consigned goods in Texas; 

(18) delivering: delivering into Texas items it has sold; and

(19) leasing: leasing tangible personal property which is used in Texas. 

(d) See sec. 3.541(j) of this title (relating to Exemptions) for information 
concerning the trade show exemption under Tax Code, sec. 171.084.

Effective Date:  December 28, 2006.
Filed with Secretary of State:  December 8, 2006.

DATE: 12/28/2006