The follwing story is from the Texas society of CPAs:
The Texas court of appeals presiding in Austin has held that the expenses of a waste transportation and disposal company are included in the cost of goods sold deduction under the Texas franchise tax (margin tax). Under the Texas franchise tax, related companies file as a single taxpayer. The Texas Comptroller, however, took the position that it could treat the related companies as separate businesses and tax them accordingly. The appeals court rejected that position as inconsistent with the plain language of the statute and held for the taxpayer. The decision is also significant because it rejects the Texas Comptroller’s policy that no business that provides services is eligible for the COGS deduction. The decision is not yet final. Due to its potential impact, the Texas Comptroller has indicated that it will seek review by the Texas Supreme Court.