Graphic Packaging Corp. v. Hegar
| Decision Date | 22 December 2017 |
| Docket Number | No. 15-0669,15-0669 |
| Parties | GRAPHIC PACKAGING CORPORATION, Petitioner, v. Glenn HEGAR, Comptroller of Public Accounts of the State of Texas and Ken Paxton, Attorney General of the State of Texas, Respondents |
| Court | Texas Supreme Court |
Amanda Garrett Taylor, Beck Redden LLP, Dana Livingston, Rachel A. Ekery, Wallace B. Jefferson, Alexander Dubose Jefferson & Townsend LLP, Danielle V. Ahlrich, Martens Todd Leonard & Ahlrich, James F. Martens, Lacy L. Leonard, Martens Todd Leonard Taylor & Ahlrich, Austin, TX, Amy L. Silverstein, Edwin P. Antolin, Silverstein & Pomerantz, LLP, San Francisco, CA, for Petitioner.
Rance L. Craft, Office of the Attorney General, Cynthia Ann Morales, Office of the Attorney General, Fin. Litigation, Tax & Charitable Trusts Div., Jeffrey C. Mateer, First Assistant Attorney General, Kevin D. Van Oort, Deputy Chief-Financial & Tax Litigation Div., Scott A. Keller, Office of the Attorney General, Solicitor General, W. Kenneth Paxton Jr., Attorney General of Texas Office of the Attorney General, Warren Kenneth Paxton Jr., Austin, TX, for Respondents.
David Edward Cowling, Thomas Fenton Allen Jr., Jones Day, Dallas, TX, for Amicus Curiae Council on State Taxation.
Doug Sigel, Jeremy Gove, Mark W. Eidman, Ryan Law Firm LLP, Austin, TX, for Amicus Curiae EMC Corporation.
Don W. Cruse Jr., Law Office of Don Cruse, Austin, TX, Sheldon H. Laskin, Multistate Tax Commission, Washington, DC, for Amicus Curiae Multistate Tax Commission.
Darren Weirnick, Senior Assistant Attorney, Benjamin Gutman, Oregon Solicitor General, Oregon Dept. of Justice, Salem, OR, Jahna Lindemuth, Attorney General of Alaska, Anchorage, AK, for Amicus Curiae State of Alaska.
Darren Weirnick, Senior Assistant Attorney, Benjamin Gutman, Oregon Solicitor General, Oregon Dept. of Justice, Salem, OR, Xavier Becerra, Attorney General of California, San Francisco, CA, for Amicus Curiae State of California.
Darren Weirnick, Senior Assistant Attorney, Benjamin Gutman, Oregon Solicitor General, Oregon Dept. of Justice, Salem, OR, Cynthia Coffman, Attorney General of Colorado, Denver, CO, for Amicus Curiae State of Colorado.
Darren Weirnick, Senior Assistant Attorney, Benjamin Gutman, Oregon Solicitor General, Oregon Dept. of Justice, Salem, OR, Douglas S. Chin, Attorney General of Hawaii, Honolulu, HI, for Amicus Curiae State of Hawaii.
Darren Weirnick, Senior Assistant Attorney, Benjamin Gutman, Oregon Solicitor General, Oregon Dept. of Justice, Salem, OR, Lawrence G. Wasden, Attorney General of Idaho, Boise, ID, for Amicus Curiae State of Idaho.
Darren Weirnick, Senior Assistant Attorney, Benjamin Gutman, Oregon Solicitor General, Oregon Dept. of Justice, Salem, OR, Lori Swanson, Attorney General of Minnesota, St. Paul, MN, for Amicus Curiae State of Minnesota.
Darren Weirnick, Senior Assistant Attorney, Benjamin Gutman, Oregon Solicitor General, Oregon Dept. of Justice, Salem, OR, Timothy C. Fox, Attorney General of Montana, Helena, MT, for Amicus Curiae State of Montana.
Darren Weirnick, Senior Assistant Attorney, Benjamin Gutman, Oregon Solicitor General, Oregon Dept. of Justice, Salem, OR, Hector Balderas, Attorney General of New Mexico, Santa Fe, NM, for Amicus Curiae State of New Mexico.
Darren Weirnick, Senior Assistant Attorney, Benjamin Gutman, Oregon Solicitor General, Oregon Dept. of Justice, Salem, OR, Wayne Stenehjem, Attorney General of North Dakota, Bismarck, ND, for Amicus Curiae State of North Dakota.
Darren Weirnick, Senior Assistant Attorney, Benjamin Gutman, Oregon Solicitor General, Oregon Dept. of Justice, Salem, OR, Mike Hunter, Attorney General of Oklahoma, Oklahoma City, OK, for Amicus Curiae State of Oklahoma.
Darren Weirnick, Senior Assistant Attorney, Benjamin Gutman, Oregon Solicitor General, Oregon Dept. of Justice, Ellen F. Rosenblum, Attorney General of Oregon, Salem, OR, Ramon G. Viada III, Viada & Strayer, The Woodlands, TX, for Amicus Curiae State of Oregon.
Darren Weirnick, Senior Assistant Attorney, Benjamin Gutman, Oregon Solicitor General, Oregon Dept. of Justice, Salem, OR, Sean D. Reyes, Attorney General of Utah, Salt Lake City, UT, for Amicus Curiae State of Utah.
Darren Weirnick, Senior Assistant Attorney, Benjamin Gutman, Oregon Solicitor General, Oregon Dept. of Justice, Salem, OR, Robert W. Ferguson, Attorney General of Washington, Olympia, WA, for Amicus Curiae State of Washington.
Darren Weirnick, Senior Assistant Attorney, Benjamin Gutman, Oregon Solicitor General, Oregon Dept. of Justice, Salem, OR, Karl A. Racine, Attorney General for the District of Columbia, Washington, DC, for Amicus Curiae The District of Columbia.
A taxpayer that conducts business in multiple states must apportion its business revenue among the states in which it does business. For the Texas franchise tax, section 171.106 of the Tax Code provides for such apportionment under a single-factor formula, which compares the taxpayer's gross receipts derived from its Texas business to its gross receipts everywhere. Another provision of the Tax Code, section 141.001, adopts the Multistate Tax Compact. This Compact sets out a three-factor formula for apportioning "business income" for an "income tax" and provides that a taxpayer subject to a state income tax may elect to apportion its income "in the manner provided by the laws of such state" or may elect to apportion using the Compact's three-factor formula. TEX. TAX CODE § 141.001, arts. III.1, IV.9.
At issue here is whether the franchise tax is an "income tax" to which the Compact applies, thus invoking the Compact's election and apportionment provisions. If it is an income tax, additional issues include (1) whether Tax Code section 171.106 nevertheless precludes a taxpayer from using the Compact's three-factor formula, or (2) whether Texas' membership in the Compact prevents the Texas Legislature from requiring a taxpayer to use only the single-factor formula when apportioning its tax base to Texas.
The court of appeals did not consider the latter two issues. 471 S.W.3d 138, 147 (Tex. App.—Austin 2015). It concluded instead that the Compact's election, and therefore its three-factor apportionment formula, did not apply because the franchise tax was not an income tax within the Compact's meaning. Id. The court accordingly affirmed the trial court's summary judgment, holding that apportionment of the Texas franchise tax is exclusively the province of chapter 171. Id. We agree and affirm.
Graphic Packaging Corporation sells consumer product packaging throughout the United States, including Texas. Because Graphic does business in Texas, it must pay a franchise tax. This tax applies to every for-profit entity doing business or chartered in Texas that is distinct from its owners. In re Nestle USA, Inc. , 387 S.W.3d 610, 614 (Tex. 2012). And because Graphic conducts business in multiple states it must also determine the portion of its total business that is taxable in Texas. For the Texas franchise tax, Tax Code section 171.106 provides that the taxpayer apportion its tax base (labeled in the statute as the taxpayer's "margin") to Texas by multiplying its total margin by a single factor: the fraction of its total gross receipts that are derived from its Texas business. See TEX. TAX CODE § 171.006(a) (); see also id. §§ 171.002, .103 (describing calculation of gross receipts from taxpayer's Texas business), .105 (describing calculation of gross receipts from taxpayer's total business); and see id. §§ .101, .1011-.1013 (addressing determination of taxpayer's margin).
For tax years 2008-2009, Graphic initially used section 171.106's gross-receipts fraction to apportion its margin.1 Graphic later amended those franchise tax reports and calculated its 2010 tax, using the apportionment formula provided in chapter 141 of the Tax Code—Texas' codification of the Multistate Tax Compact.2 Graphic argued that the franchise tax was essentially an income tax to which chapter 141's alternative apportionment scheme could be applied at the taxpayer's election.
The Texas Comptroller disagreed. He denied the refunds and assessed a deficiency for 2010, concluding that section 171.106's gross-receipts fraction was the exclusive method to determine the franchise tax. Graphic subsequently paid the assessed 2010 taxes under protest after unsuccessfully pursuing administrative relief.
After exhausting its administrative remedy, Graphic filed suit in district court, seeking $821,961 for tax years 2008-2010 on the ground that it was entitled to apportion its margin using chapter 141's three-factor apportionment formula.3 The parties filed cross-motions for partial summary judgment on the apportionment issue. The court granted the Comptroller's motion, denied Graphic's motion, and, after Graphic non-suited its other claims, rendered a final judgment for the Comptroller. Graphic appealed, and the court of appeals affirmed, holding that chapter 141's income-apportionment provisions do not apply to the franchise tax because it is not an "income tax." 471 S.W.3d at 147.
TEX. TAX CODE § 141.001, art. II.4. Graphic contends that its taxable "margin" for franchise tax purposes under chapter 171 is essentially the same thing as its "net income" under chapter 141. According to Graphic, both are determined by "deducting expenses from gross income," one or more of which "are not specifically and directly...
To continue reading
Request your trial
-
Health Net, Inc. v. Dep't of Revenue
...court that has considered those claims has found that enacting the MTC gave rise to contractual obligations. See Graphic Packaging Corp. v. Hegar , 538 S.W.3d 89 (Tex. 2017) ; Kimberly-Clark Corp. v. Commissioner of Revenue , 880 N.W.2d 844 (Minn.), cert. den., ––– U.S. ––––, 137 S.Ct. 598,......
-
Brazos River Auth. v. City of Hous.
...an earlier statute is generally limited only by federal or state constitutional provisions or federal law." Graphic Packaging Corp. v. Hegar , 538 S.W.3d 89, 104 (Tex. 2017). "When statutes irreconcilably conflict, traditional rules of statutory construction dictate that the later enacted a......
-
Smith v. Robinson, 2018-CA-0728
...brief to this Court, the Department relies on Graphic Packaging Corp. v. Hegar, 471 S.W.3d 138, 147 (Tex. App. Austin 2015), 538 S.W.3d 89 (Tex. 2017), wherein a Texas appellate court held "that the [Texas] franchise tax is not ‘a tax imposed or measured by net income’ and, therefore, that ......
-
S.C. v. M.B.
...the general partition remedy, could we find that the specific enactment has displaced the general. See, e.g., Graphic Packaging Corp. v. Hegar , 538 S.W.3d 89, 97–98 (Tex. 2017) ; In re Mem'l Hermann Hosp. Sys. , 464 S.W.3d 686, 716 (Tex. 2015). These statutes are not irreconcilable either ......