Working in conjunction with Attorney Jimmy Martens of Martens, Todd & Leonard, Titan Transportation won a substantial victory in the Texas Court of Appeals on a franchise tax issue that has plagued many companies, thanks in part to expert testimony given by Howard Klein of Akin, Doherty, Klein & Feuge, P.C. (ADKF). In Titan’s case, the Texas Court of Appeals ruled that a provider of “aggregate” at real property construction sites can exclude from total revenue sub-contractor payments. Titan Transportation is in the business of hauling, delivering, and depositing aggregate at real-property construction sites, primarily through the use of sub-contractors. In Titan’s case the difference when determining the Texas Franchise-Tax burden was significant. In this case, the exclusion applies because the taxpayer paid sub-contractors to provide services that were connected with the construction of improvements on real property and were directly related to the construction of such improvements. The service of picking up and transporting the aggregate to the construction sites was necessary and integral to the construction of improvements on real property. The aggregate hauled to the construction sites had to be placed in a particular location on the site to be useful, and the sub-contractors deposited the material in a manner that saved the construction companies (i.e., the taxpayer’s customers) time, labor, and money. As a result, the Court of Appeals ruled that Titan has the right to exclude, from total revenue, flow-through funds that Titan is contracted to pay its sub-contractors. (Titan Transportation, LP v. Combs, et al., No. 03-13-00034-CV, slip op. (Tex. Ct. App.—Austin, 03/14/2014)). The Texas Court of Appeals decision is likely to be substantial for many companies and industries and we believe this ruling could have farther reaching impacts for Texas businesses. The professionals at ADKF look forward to the opportunity to bring our expertise to you and see how this ruling might benefit your business just as it has for Titan Transportation. When choosing to evaluate the impact of this ruling for your business be sure to come to the firm who participated in bringing this opportunity to Texas business.
