Texas Political News

Texas Lobbyist News: Texas Supreme Court Upholds Franchise Tax

The Texas Supreme Court has upheld the state’s franchise tax, which has been greatly contested and is the second largest source of general revenue for the state. The challenge came from Nestle USA, Inc. and has been closely watched by political and business organizations in anticipation of the ruling. Nestle’s position has been that the law violates a Texas constitutional mandate that taxes be applied equally to all citizens.

Nestle paid over $8 million under this tax law this year.

“Since first imposing a franchise tax in 1893, the Legislature has restructured it several times, drawing various distinctions among taxpayers with adjustments, deductions, and exemptions that have become elaborate. Petitioner in this original proceeding contends that the franchise tax now in place bears no reasonable relationship to its object, the value of the privilege of doing business in Texas, and therefore violates the Texas Constitution’s mandate that “[t]axation shall be equal and uniform…”

From the opinion.

The high court has rejected the challenge in a six to two decision and upheld the Texas Franchise Tax as it stands.

The majority opinion by Justice Hecht can be found here.

The dissenting opinion can be found here.