Did a Virginia corporation create Texas franchise-tax nexus by selling merchandise from a trailer at one Texas NASCAR event?

Plain-English summary

One Texas NASCAR event was enough to subject the out-of-state corporation to both components of the former Texas franchise tax.

The company sold merchandise from a trailer at NASCAR events around the United States. It was legally domiciled in Virginia, had no fixed Texas location, and attended one Texas event in 1998.

Assuming the business was a corporation without a Texas certificate of authority, the Comptroller concluded that its 1998 Texas activity was sufficient for both the taxable-capital and earned-surplus components under Rules 3.546 and 3.554.

The letter gives no sales amount, duration, employee count, or other event details. Its conclusion should be kept to the facts it states.

Currency note: Texas replaced the two-component franchise tax with the margin tax effective January 1, 2008. Confirm current nexus standards before applying this historical response.

What this means for you

Traveling retailers and event vendors

A temporary physical sales presence could create filing exposure even without a permanent Texas store or office under the former rules.

Tax professionals

The response expressly assumes corporate status and no certificate of authority. Do not extend it to a different entity type or to current margin-tax nexus without checking current law.

Common questions

Q: Did the company have a permanent Texas location?
A: No. It sold from a trailer and had no fixed Texas location.

Q: How many Texas events did it attend?
A: One event in 1998.

Q: Which former tax components applied?
A: Both taxable capital and earned surplus.

Citations and references

• 34 Tex. Admin. Code Sec. 3.546 - taxable-capital nexus
• 34 Tex. Admin. Code Sec. 3.554 - earned-surplus nexus

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=FIT
• Opinion: https://star.comptroller.texas.gov/view/9911328L

Original ruling text

November 19, 1999

Dear **:

You ask whether a company that is not a Texas corporation is subject to the
franchise tax in the following described circumstances.

The company sells merchandise from a trailer at NASCAR events throughout the
United States. The company, whose legal domicile is in Virginia, has no fixed
location in Texas and it was in Texas for one event in 1998.

The following response presumes the company is a corporation that does not have
a certificate of authority to do business in Texas.

The company's activities in Texas during 1998 are sufficient to subject it to
both the taxable capital and the earned surplus components of the franchise
tax. Franchise Tax Rules Section 3.546 and Section 3.554.

You may access the franchise tax statutes and rules through this agency's
website at www.window.state.tx.us. At that site, click on Texas Taxes, the
fourth item in the middle column of information. On the ensuing screen, the
fourth major item is The Texas Franchise Tax which provides access to the
statutes, the rules, report forms, and certain other information.

Chapter 171 of the Tax Code contains the franchise tax statutes.

Title 34, Part 1, Chapter 3, Subchapter V of the Texas Administrative Code
(TAC) contains the franchise tax rules. As cited in this response, the first
number, 3, represents the chapter number with the last three digits being the
rule number.

The information provided by you and current franchise tax law form the basis
for this response. Different or additional information may result in a
different response.

If you have any questions, please call me toll free at 1-800-531-5441,
extension 3-4931, or directly at 512/463-4931.

Sincerely yours,

William E. York
Tax Policy Division