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Texas Gross Margins Tax Challenged Again

by Foy Mitchell, Dallas, April 2012

The Texas Supreme Court dismissed another legal challenge against the state's Gross Margins Tax. This time, the case was thrown out because taxpayers failed to comply with statutory prerequisites required to file their suit. It's the second time that justices sidestepped ruling on the constitutionality of the tax itself.


Plaintiffs charged that the Margins Tax violates the Equal and Uniform Clause of the Texas Constitution, as well as the Equal Protection, Due Process, and Commerce Clauses of the U.S. Constitution.


The Supreme Court decided it did not have legal authority to hear the case because petitioners failed to pay their taxes under protest or request a refund as required by Chapter 112 of the Texas Tax Code.


As Justice Nathan Hecht explained:


"If a taxpayer were not required to lodge its complaints first by protest or a refund claim, the Comptroller would lack notice of the assertion of illegality, perhaps — as this case illustrates — for years. Were taxpayers permitted to delay in suing for a refund, the monetary burden of a loss on the state could be greatly increased."


To read the full opinion of the Court, click here.