200810197L



October 29, 2008

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

Thank you for your letter concerning COMPANY A and its affiliates (“COMPANY B”) 
and the cost of goods sold deduction.

You state that COMPANY B is a diversified financial services company that 
operates throughout the United States primarily offering automotive, real 
estate and commercial financing.  COMPANY B’s products and services include 
three primary lines of business:  automotive financing and leasing, real estate 
financing and insurance products.  COMPANY B leases motor vehicles to its 
customers and claims a depreciation deduction on these leased motor vehicles on 
its federal tax return.  COMPANY B does not remit a tax on gross receipts 
imposed under Tax Code Section 152.026.  You request written verification that 
COMPANY B (as a motor vehicle leasing company) is eligible to claim 
depreciation on its leased motor vehicles as part of its Texas cost of goods 
sold calculation.

Texas Tax Code Section 171.1012(k-1) provides that a motor vehicle rental or 
leasing company that remits a tax on gross receipts imposed under Tax Code 
Section 152.026 is eligible for a cost of goods sold deduction.  Comptroller’s 
Rule 3.588(c)(8)(A) further clarifies that a motor vehicle rental company that 
remits a tax on gross receipts imposed under Tax Code Sec. 152.026 or a motor 
vehicle leasing company is eligible for a cost of goods sold deduction.  
Therefore, COMPANY B (as a motor vehicle leasing company) may include 
depreciation on its leased motor vehicles, as reported on its federal tax 
return, in its cost of goods sold calculation.

If you need any additional information, please call our toll free line at (800) 248-4093.

Sincerely,


William Hamner
Director of Tax Administration




ACCESSION NUMBER: 200810197L
SUPERSEDED: N
DOCUMENT TYPE: L
DATE: 10/29/2008
TAX TYPE: FRANCHISE