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March 20, 2003
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Westcott Communications, Inc. v. Strayhorn.-- Franchises/capital stock taxes-- Basis of tax-- Apportionment of taxable capital-- Training services delivered via satellite
P 402-494. Court of Appeals of Texas, Third District, Austin, No. 03-02-00351-CV, 104 S.W.3d 141 , .
On appeal from the District Court of Travis County, No. 98-14049. Affirmed.
Franchises/capital stock taxes --Basis of tax --Apportionment of taxable capital --Training services delivered via satellite --
Receipts from training programs produced in Texas and subsequently delivered via satellite to subscribers located outside the state were subject to Texas franchise tax because the training services were performed within the state. Receipts from the services should have been apportioned to Texas because the taxpayer produced, filmed, edited, and broadcast the training programs in and from Texas. The services were not analogous to cable television transmission services, which are taxed based on the recipient's location, because the taxpayer was paid to provide training to its customers, not to broadcast or produce television programming. Furthermore, apportioning the subscription revenues to Texas did not violate the U.S. Constitution or the Texas Constitution. A state may tax only that portion of the revenues from an interstate activity that reasonably reflects the in-state component of the activity. In this case, there was no attempt to impermissibly tax beyond what took place in the state because all aspects of the training services took place in Texas.
See P 10-520 .
In this case, we are asked to decide whether revenues from training programs produced in Texas and subsequently delivered to subscribers throughout the nation via satellite can be taxed under the franchise tax statute as "services performed within the state." Westcott Communications, Inc., Law Enforcement Television Network, Inc., Westcott ECI, Inc., and Ti-In Acquisition Corporation (collectively, "Westcott") appeal a summary judgment granted by the district court in favor of Carole Keeton Strayhorn, Comptroller of Public Accounts, and Greg Abbott, Attorney General (collectively, "Comptroller"). 1Westcott contends that the services it provides are performed outside the state, specifically, at the point of reception, and therefore the receipts from those services should be apportioned to the states where its subscribers reside. Westcott also contends that apportioning the receipts for services that take place in the stream of interstate commerce to the state of performance imposes an impermissible burden on interstate commerce and subjects it to multiple taxation in violation of the Commerce Clause of the United States Constitution and to unequal treatment in violation of both the United States and Texas Constitutions. Because we view the services provided by Westcott as being performed within the state and do not view the imposition of the franchise tax as violating any constitutional provisions, we will affirm the district court's judgment.
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TX St. Tax. Rep. (CCH) P 402-494
P 402-494, Westcott Communications, Inc. v. Strayhorn.
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