- Costs of Goods Sold (COGS)
- 30% of Total Revenue
A taxable entity shall exclude from its total revenue, to the extent [reported to the federal IRS as income] only the following flow-through funds that are mandated by contract or subcontract to be distributed to other entities….
(3) subcontracting payments made under a contract or subcontract entered into by the taxable entity to provide services, labor, or materials in connection with the actual or proposed design, construction, remodeling, remediation, or repair of improvements on real property or the location of the boundaries of real property.The state of Texas initially denied the exclusion, stating, as a transportation company, Titan Transportation did not contribute any improvements to real property. Titan successfully countered that argument by proving the material they carry, aggregates and concrete materials, is essential to construction and impacts the real property as well as changes the topography of the property. Titan Transportation brought in experts, including a CPA from ADKF, who supported these claims. The State’s initial denial of the exclusion was reversed and Titan Transportation won the case for themselves and the industry. As a result of the success of this appeal, there will be a benefit for the entire Transportation Industry. Likewise, the Texas Margin Tax will no longer punish the transportation companies that choose to hire sub-contractors for hauling. Transportation companies need to revisit their franchise tax filings and determine if they need to amend any forms to take advantage of the recent changes. Remember, the statute of limitations for filing amended forms within Texas is four years, so, double check and see if you are leaving any money on the table! If we can help assist you with this project please feel free to contact your CPAs at ADKF, at 210-829-1300. READ MORE