200809207L



08120622

September 24, 2008

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

Dear **************

Thank you for your e-mail regarding the Texas franchise tax.  I apologize for 
the delay in responding to you.

You state that COMPANY is licensed as a sales finance company under Chapter 348 
of the Texas Finance Code and ask if they meet the definition of a “lending 
institution” so that they can deduct interest expense as a cost of goods sold.

Under Texas Tax Code Section 171.1012(k) a lending institution that offers 
loans to the public may subtract as a cost of goods sold an amount equal to 
interest expense.  A motor vehicle sales finance company that offers loans to 
the public and is licensed through the Office of Consumer Credit Commissioner, 
as provided for under Chapter 348 of the Texas Finance Code, meets the 
definition of a “lending institution” and may deduct interest expense as a cost 
of goods sold.

We have posted frequently asked questions and answers that might be helpful to 
you on our web site at 
http://window.state.tx.us/taxinfo/franchise/ft_revised.html. We regularly 
update this site. You will also find links to the franchise tax statute, 
adopted rules, publication 98-806, Revised Franchise Tax Overview and 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 questions, my e-mail address is teresa.bostick@cpa.state.tx.us 
or you may call me toll-free at (800) 531-5441, ext. 5-9952. 

Sincerely,


Teresa Bostick
Tax Policy Division




ACCESSION NUMBER: 200809207L
SUPERSEDED: N
DOCUMENT TYPE: L
DATE: 09/24/2008
TAX TYPE: FRANCHISE