Texas Tax Roundup | Feb 2022 (RECOVERED!)

Share this Article
Facebook Icon LinkedIn Icon Twitter Icon

TL Fahring focuses on helping individuals and businesses with a wide variety of matters involving state, federal, and international taxation. He has represented clients in all stages of federal and state tax disputes, including audits, administrative appeals, litigation, and collection matters. Mr. Fahring also has used his tax knowledge to assist clients in planning complex domestic and international transactions, including advising as to potential reporting and withholding requirements.

Mr. Fahring received his J.D. from the University of Texas School of Law, where he graduated with high honors and was inducted into the Order of the Coif and Chancellors honors societies. After clerking for a year at the Texas Eleventh Court of Appeals, he attended New York University School of Law, where he received an LL.M. (Master of Laws) in Taxation and served as a student editor on the Tax Law Review.

[In this very special “throwback” edition of the Texas Tax Round Up, newly reemerged from out the Super-Saragossa Sea of the Internet, we travel back to a much simpler time—February 2022.]

Howdy y’all!  Has it been a month already?  We’ve got another action-packed month of Comptroller-related news.  Here we go!

Court Cases

Courts of Appeals

Hegar v. Black, Mann, and Graham, L.L.P., No. 03-20-00391-CV (Tex. App.—Austin Feb. 25, 2022)

Proposed Rules

Franchise Tax

34 Tex. Admin. Code 3.589 (Margin: Compensation)—Proposing an update to the rule on the compensation deduction by incorporating changes:

See 47 Tex. Reg. 715, 753 (Feb. 18, 2022).

Notable Additions to the State Tax Automated Research (STAR) System


Successor Liability

Comptroller’s Decision No. 111,061 (2022)—The ALJ found that an operator that acquired natural gas leases was liable for the natural gas severance tax owed by the preceding operator.

Personal Liability

Comptroller’s Decision No. 117,194 (2022)—The ALJ found that the Comptroller did not prove by clear and convincing evidence that a company’s president was personally liable for sales and use taxes that the company had failed to pay.  The Comptroller did not provide evidence showing that the president was involved in the company’s sales and use tax reporting for the periods in question. To the contrary, evidence showed that the president did not work at the company, did not supervise or train employees, and did not hold or attend meetings during the years in question.

Franchise Tax

Flow-through Funds

Comptroller’s Decision No. 117,091 (2021)—The ALJ found that a taxpayer that provided audiovisual equipment to hotels for use by the hotels’ customers in events could not exclude from gross revenue certain “sales commissions” that the taxpayer paid to the hotels. The taxpayer did not show that the hotels were licensed as real estate brokers or sales agents under Texas Occupations Code chapter 1101 nor that the taxpayer issued Forms 1099-MISC to the hotels as purportedly required by Tex. Tax Code § 171.1011(k)(1).


Comptroller’s Decision No. 117,904 (2022)—The ALJ found that the sole member and officer of a company whose corporate privileges were forfeited for a period of approximately seven months due to failure to file a franchise tax report before being reinstated was liable for the assessment of sales tax made against the company for this period and could not challenge the underlying liability.

Sales and Use Tax

Amusement Services

Comptroller’s Decision No. 117,180 (2021)—The ALJ found that a taxpayer that purchased and resold tickets to sporting events, concerts, and theatrical performances was providing a taxable amusement service.

Comptroller’s Decision No. 117,326 (2021)—The ALJ determined that an entry fee charged for access to riding trails for use by all-terrain vehicles was subject to sales and use tax as an amusement service.

Debt Collection Services

Comptroller’s Decision No. 117,422 (2022)—The ALJ found that a taxpayer was providing taxable debt collection services when it provided “legal services, transport services, truck and semi-truck recovery, aircraft recovery, skip tracing, filing court orders in Texas and nationwide, locating property for litigation, and property recovery services.”

Real Property Services

Comptroller’s Decision No. 115,679 (2022)—The ALJ found that a taxpayer’s vent hood maintenance and cleaning services were taxable real property services and that the taxpayer did not provide evidence that the services were exempt from tax under Tex. Tax Code § 151.1011 because the vent hoods were used in the manufacturing of food.

Manufacturing Exemption

Comptroller’s Decision No. 116,783 (2022)—The ALJ determined that a taxpayer that provided threading services on oilfield casing was providing processing services and thus could purchase certain items tax-free under the manufacturing exemption. In making this determination, the ALJ found that threading casing causes it to operate in a new or different manner, that the casing could not be installed downhole without being threaded, and that the fact that the taxpayer did not own the casing was irrelevant for purposes of the manufacturing exemption.

Nontaxable Services/Taxable Data Processing Services

STAR Accession No. 202201017L (Jan. 7, 2022)—In this private letter ruling, the Comptroller determined that a taxpayer’s fees to reimburse itself for charges by medical service providers for providing copies of medical records and preparing requests for medical records were not subject to sales and use tax. However, taxpayer’s copy fees for optical character recognition, electronic Bates labeling, bookmarking records, duplicating film, and copying CDs were found to be taxable data processing services.


Also in February, the Texas Supreme Court heard oral arguments in Hegar v. Health Care Service Corp., No. 21-0080, relating to insurance taxes.  So, maybe we’ll have an opinion to mull over soon!


State and Local Tax Services

Freeman Law works with tax clients across all industries, including manufacturing, services, technology, oil and gas, financial services, and real estate. State and local tax laws and rules are complex and vary from state to state. As states confront budgetary deficits due to declining tax revenues and increased government spending, tax authorities aggressively enforce state tax laws to recapture lost revenues. 

At Freeman Law, our experienced attorneys regularly guide our clients through complex state and local tax issues—issues that are frequently changing as states seek to keep pace with technology and the evolution of business. Staying ahead requires sophisticated legal counsel dedicated to understanding the complex state tax issues that confront businesses and individuals. Schedule a consultation or call (214) 984-3000 to discuss your local & state tax concerns and questions.