Ezel / Tax Rulings / TX
TX 9003L1040D13 Corporation Franchise Tax 1990-03-05

Did the net gains from selling two business divisions count as gross receipts, and were those receipts allocated to Texas?

Short answer: Yes. The net gain from each division's tangible-asset sale was a gross receipt computed under GAAP pursuant to § 171.112, and the receipts were allocated to Texas because the assets were delivered to Texas locations.

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This page answers the general question as of 1990. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1990
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 Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded.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

A business sold two identifiable divisions consisting of tangible assets, with the assets delivered to locations in Texas.

The Comptroller said the net gain from each asset sale counted as gross receipts. Section 171.112 required the gain to be computed under generally accepted accounting principles.

Because the assets were delivered in Texas, the resulting receipts were allocated to Texas. The letter cited Hearing Decision 22,207 for that conclusion.

Common questions

Did the full selling price count as gross receipts? The letter specifically used the net gain from each sale, computed under generally accepted accounting principles.

Why were the receipts Texas receipts? The tangible assets were delivered to Texas locations.

What authority did the letter cite? Tax Code § 171.112 and Hearing Decision 22,207.

Citations and references

  • Tex. Tax Code § 171.112 (gain computed under generally accepted accounting principles)
  • Hearing Decision 22,207

Source

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, TEXAS 78774

BOB BULLOCK
Comptroller

March 5, 1990

Dear *:

This is in response to your inquiry concerning the sale of two
identifiable segments of a business.

You have indicated that the two divisions sold were comprised
of tangible assets, and in both instances the assets were de-
livered to Texas locations.

The net gain from the sale of the divisions' assets would con-
stitute gross receipts. Pursuant to Section 171.112 of the
Texas Tax Code, the computation of the gain from each sale
should be in accordance with generally accepted accounting
principles.

Because the assets were delivered in Texas, the receipts would
be allocated to Texas. See attached Hearing Decision 22,207.

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

If you have any questions, please call 1-800-531-5441 (toll-
free) or my direct number (512)463-4996. Our FAX number is
(512)474-1643.

Sincerely,
Jerry Bobbitt
Legal Services Division, Taxability Section

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