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Supreme Court of Texas
September 18, 2012, Argued; October 19, 2012, Opinion Delivered
[*611] On Petition for Writ of Mandamus
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 [*612] elaborate. Petitioner in this original proceeding contends that the franchise tax now in [**2] 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",1 the Fourteenth Amendment's Equal Protection and Due Process guarantees,2 and the U.S. Constitution's Commerce Clause.3 We conclude that petitioner's challenges are without merit.
Texas' first franchise tax, enacted in 1893, was $10 annually for "each and every private domestic corporation heretofore chartered or that may be hereafter chartered under the laws of this State, and each and every foreign corporation that has received or may hereafter receive a permit to do business under the laws of this State, in this State . . . ."4 In 1897, the Legislature adopted a graduated rate that increased in steps with the [**3] amount of a corporation's capital stock.5 The rate was significantly higher for foreign corporations.6 In 1905, the Legislature changed to a graduated rate that decreased in steps with the amount of a corporation's capital stock.7 As before, the rate for foreign corporations was similar but higher.8 Extensive amendments in 1907 kept the graduated rate for foreign corporations but adopted a mostly flat rate for domestic [*613] corporations, one based not only on authorized capital stock but in some instances on surplus and undivided profits as well.9 And for the first time, the Legislature created exemptions — for
corporations organized for the purpose of religious worship; or for providing places of burial not for private profit; or corporations organized for the purpose of holding agricultural fairs and encouraging agricultural pursuits, or for strictly educational purposes, or for purely public charity.10
Full case includes Shepard's, Headnotes, Legal Analytics from Lex Machina, and more.
387 S.W.3d 610 *; 2012 Tex. LEXIS 895 **; 56 Tex. Sup. J. 36
IN RE NESTLE USA, INC., RELATOR
Subsequent History: Released for Publication December 14, 2012.
Rehearing denied by In re Nestle USA, Inc., 2012 Tex. LEXIS 1067 (Tex., Dec. 14, 2012)
Prior History: In re Nestle USA, Inc., 2012 Tex. LEXIS 788 (Tex., Sept. 11, 2012)
franchise tax, classifications, exemptions, deductions, taxpayer, manufacturing, challenges, taxes, taxation, retail, occupation tax, wholesale, provisions, privilege of doing business, do business, occupation, entities, argues, energy, total revenue, discriminate, as-applied, mandamus, foreign corporation, interstate commerce, reasonably related, property taxes, agricultural, expenses, costs
Tax Law, State & Local Taxes, Franchise Taxes, Imposition of Tax, Civil Procedure, Subject Matter Jurisdiction, Jurisdiction Over Actions, Exclusive Jurisdiction, Constitutional Law, Case or Controversy, Constitutionality of Legislation, General Overview, Congressional Duties & Powers, Spending & Taxation, State Constitutional Operation, Limitations, Inferences & Presumptions, Equal Protection, Nature & Scope of Protection, Substantive Due Process, Deprivation of Economic Interests, Commerce Clause, Dormant Commerce Clause