Ezel / Tax Rulings / TX
TX 8904L0934E13 Sales and/or Use Tax (State,Local,MTA) 1989-04-07

Did affiliated corporations have to file a consolidated federal return to keep Texas's intercorporate-service exemption?

Short answer: No. The group had to qualify for consolidated filing under federal law, but choosing not to file that way did not forfeit the exemption.

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This page answers the general question as of 1989. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1989
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is an official Texas Comptroller of Public Accounts letter published on the State Tax Automated Research (STAR) system. Letters on STAR can be the basis of a detrimental reliance claim only for the taxpayer to whom the letter was directly issued (see 34 Tex. Admin. Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded. Taxpayer-identifying details are redacted. This summary is informational only and is not legal or tax advice. Consult a licensed Texas tax professional about your specific situation.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page) is the authoritative source for any reliance.

Plain-English summary

The letter corrected an earlier statement that an affiliated corporate group had to both qualify for and actually file a consolidated federal income-tax return.

Texas concluded that the Tax Code section 151.346 intercorporate-service exemption remained available when the group qualified for consolidated filing under federal law but chose not to use that filing method.

Common questions

Did the group have to qualify for consolidated filing? Yes.

Did it have to actually file a consolidated return? No.

Source

Original ruling text

April 7, 1989

Dear ****:

Recently we spoke concerning the inter-corporate exemption for newly
taxable services.

I indicated to you that in order to qualify for the exemption the
corporate group must meet all requirements of the Internal Revenue Code for
reporting it's income on a consolidated federal income tax return and must
actually file a consolidated return.

The Taxability Section of our Legal Services Division has determined that
so long as the corporate group qualifies to file on a consolidated basis under
the IRS code but chooses not to use that filing method, that the exemption
authorized by Tax Code Section 151.346 will not be lost.

This opinion is based on the facts presented. If there are additional or
different facts, the opinion may change.

If you have any questions or need more information, please call our
toll-free number
1-800-531-5441. The regular number is 512/463-4684. You may write me at
the Tax Correspondence Division.

Sincerely,

Curt Swanson
Tax Correspondence Division

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