200806205L




AWM 08066223

June 3, 2008

To: ************** 
**************

Dear **************:

Thank you for your March 5, 2008 email regarding the revised Texas franchise 
tax with the margin calculation. I apologize for the delay in responding to 
your inquiry.

You asked in your message if a professional association (PA) owns inventory 
that is physically located at a vendor’s location in Texas is subject to the 
franchise tax.

The Texas franchise tax is imposed on each taxable entity that does business in 
Texas or is chartered or organized in Texas.  [Texas Tax Code (TTC) 171.001]  
The term “taxable entity” includes corporations, limited liability companies, 
professional associations, partnerships (general, limited and limited 
liability), etc. [TTC 171.0002].  A laundry list of items that are considered 
“doing business” in Texas can be found in franchise tax rule 3.586, Margin: 
Nexus.  Having inventory in Texas is considered “doing business.” 

Based on these statutory provisions, a PA became subject to the franchise tax 
on January 1, 2008.  Prior to that date, a PA was not considered a taxable 
entity.  The PA will be required to file an annual franchise tax report on May 
15, 2008, however, the Comptroller has provided additional time to file until 
June 16, 2006 without being subject to the 5% late filing penalty.  See Section 
22 of House Bill 3 for additional information on the reporting requirements of 
a newly taxable entity at 
http://www.capitol.state.tx.us/tlodocs/793/billtext/html/HB00003F.htm.

Additional information about the franchise tax calculation can be found on our 
website.  You will find links to the franchise tax statute, adopted rules, 
frequently asked questions (FAQs), tax forms and publication 98-806, Revised 
Franchise Tax Overview, on our web site at 
http://window.state.tx.us/taxinfo/franchise/.  You will also find a link on 
this site to a calculator that may be used to estimate a taxable entity's 
potential tax liability based on the margin calculation.

This response is based on current law and the facts and information presented.  
If there are different or additional facts, the response may change.  

If you have any additional questions, please email us at 
tax.help@cpa.state.tx.us.

Sincerely,


Janet Spies
Franchise Tax Policy
Texas Comptroller of Public Accounts




ACCESSION NUMBER: 200806205L
SUPERSEDED: N
DOCUMENT TYPE: L
DATE: 06/03/2008
TAX TYPE: FRANCHISE