Sirius XM Radio, Inc. v. Texas Comptroller (March 25, 2022) Texas Supreme Court Addresses Texas Franchise Tax Apportionment

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Cory D. Halliburton

Cory D. Halliburton



Cory Halliburton serves as general counsel and business adviser to a nationwide nonprofit / tax-exempt client base, as well as for multi-state professional service companies. He is a results-oriented attorney, with executive-level strategy and an understanding of the intersection of law and business judgment. With a practical upbringing, he pushes for process-driven results in internal governance, strategy and compliance with employment law, and complex or unique contracts and business relationships.

He dedicated the first ten years of his practice to mainly commercial litigation matters in West Texas and the Dallas-Fort Worth Metroplex. During that experience, Mr. Halliburton transitioned his practice to a more general counsel role, with an emphasis on nonprofit and tax-exempt organizations, advising those organizations through formation, dissolution, litigation, governance, leadership succession, employment law, contracts, intellectual property, tax exemption issues, policy creation, mergers and other. He has served as borrower’s counsel for tax-exempt bond and loan transactions near $100 million aggregate; some with complex pre-issue construction, debt payoff and other debt financing challenges.

Mr. Halliburton also serves as outside legal and business advisor for executive professionals in multi-state engineering firms, with a focus on drafting and counsel on significant service agreements, employment law matters, and protection of trade secrets.

Sirius XM Radio, Inv. v. Hegar (Texas Comptroller of Public Accounts), No. 20-0462, __S.W.3D__ (Tex. March 25, 2022)

Issue: Under Texas law, are Sirius XM’s monthly subscription fees from Texas users are receipts from a “service performed in this state”?

Holding: No. Sirius XM’s “service” is “performed in this state” if the labor for the benefit of another is done in Texas. Even though Sirius XM’s subscribers reside in Texas, the “services” performed by Sirius XM are performed outside the Texas border. Thus, the Comptroller’s assessment of state franchise tax on subscription fees paid to Sirius XM by all Texas residents was in error.

Summary of Facts: Sirius broadcasts more than 150 satellite-radio channels. The content is produced in studios mainly located outside of Texas, although Sirius ran a small radio show in Texas for a time. Content is broadcast by transmitting it to satellites from facilities in states other than Texas. The satellites are launched from outside the U.S. The satellites transmit signals back down to Earth, where they either reach radio sets or terrestrial repeaters (twenty-two of which are in Texas) that supplement the coverage. The satellites are controlled by Sirius’s facilities located outside of Texas. Once the signal reaches a customer’s radio, a circuit or “chip” decrypts the radio signal, allowing the listener to hear the programming. Customers can access Sirius’s content by paying a subscription fee.

For 2010 and 2011 tax years, Sirius filed what it believed was an appropriate franchise tax reporting for its “services performed in” Texas. However, the Texas Comptroller claimed Sirius underpaid by $878,364.39 for the 2010 tax year and $1,674,907.38 for the 2011 tax year.  The Comptroller believed that the “service performed in this state” by Sirius was the service of “unscrambling” the radio signal to Texas-based consumers. The Comptroller believed that services must be apportioned to the state in which the “receipt-producing, end-product act” takes place.

Sirius argued that it performs little or no services in Texas. Sirius argued that the phrase “service performed in this state” means that the personnel or equipment performing the service must be physically located in Texas. Sirius contends that the service it performs is not the decryption of radio signals but the production and broadcasting of radio content, which happens outside Texas.

Key Points of Law:

We see no reason to depart from these straightforward understandings of the everyday words the statute uses. A “service” is “performed in this state” if the labor for the benefit of another is done in Texas. Generally, all it takes to know where a taxable entity’s “useful labor” is “done” is to ask where the employees do their work, since businesses act only through their agents. When technology rather than personnel performs the useful act, we look to the location of that equipment, as the Comptroller and courts of appeals have done. . . . Sirius XM, slip opin. at 10

Insights: This Sirius XM opinion provides sound guidance on how a taxable entity–especially an out-of-state technology-focused business– must apportion gross receipts for business done in Texas. Sirius XM succeeded in the case mainly because Sirius XM—by its technology-focused business model—performed very little services in Texas. Labor and facilities were located outside the Texas border. Thus, pursuant to the Texas Tax Code and the Texas Administrative Code, Sirius XM was required to apportion to Texas the fair value of the services that are performed in Texas, but all subscriber fees paid by Texas residents were not necessarily subject to taxable apportionment because the fees were not for services performed in Texas. Sirius XM may be an outlier in the realm of technology-focused businesses doing business in Texas. Each such taxable entity must evaluate its business operations, revenue streams, labor force location, facilities locations, and services provided “in Texas” when apportioning applicable taxable margin under Chapter 171 of the Texas Tax Code.


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