Tex. Codes » Tax Code · TITLE 2. STATE TAXATION · SUBTITLE F. FRANCHISE TAX; CREDITS · CHAPTER 171. FRANCHISE TAX
Texas Codes

Tex. Tax Code § 171.101 (2026)

Determination Of Taxable Margin

✓ laws through the 89th Legislature (2025)
Find cases: SyfertCases citing this section TX-LEGstatutes.capitol.texas.gov Justiaon Justia CornellLII Search CasesGoogle Scholar

Sec. 171.101. DETERMINATION OF TAXABLE MARGIN. (a) The taxable margin of a taxable entity is computed by:

(1) determining the taxable entity's margin, which is the lesser of:

(A) the amount provided by this paragraph, which is the lesser of:

(i) 70 percent of the taxable entity's total revenue from its entire business, as determined under Section 171.1011; or

(ii) an amount equal to the taxable entity's total revenue from its entire business as determined under Section 171.1011 minus $1 million; or

(B) an amount computed by determining the taxable entity's total revenue from its entire business under Section 171.1011 and subtracting the greater of:

(i) $1 million; or

(ii) an amount equal to the sum of:

(a) at the election of the taxable entity, either:

(1) cost of goods sold, as determined under Section 171.1012; or

(2) compensation, as determined under Section 171.1013; and

(b) any compensation, as determined under Section 171.1013, paid to an individual during the period the individual is serving on active duty as a member of the armed forces of the United States if the individual is a resident of this state at the time the individual is ordered to active duty and the cost of training a replacement for the individual;

(2) apportioning the taxable entity's margin to this state as provided by Section 171.106 to determine the taxable entity's apportioned margin; and

(3) subtracting from the amount computed under Subdivision (2) any other allowable deductions to determine the taxable entity's taxable margin.

(b) Notwithstanding Subsection (a)(1)(B)(ii)(a), a professional employer organization may subtract only the greater of $1 million as provided by Subsection (a)(1)(B)(i) or compensation as determined under Section 171.1013.

(c) In making a computation under this section, an amount that is zero or less is computed as a zero.

(d) An election under Subsection (a)(1)(B)(ii) shall be made by the taxable entity on its annual report and is effective only for that annual report. A taxable entity shall notify the comptroller of its election not later than the due date of the annual report.

(e) For purposes of Subsection (f), "aerospace costs" means any costs not already subtracted under Subsection (a)(1)(B)(ii)(a) that are properly allocated and incurred under the Federal Acquisition Regulation (48 C.F.R. Chapter 1) and subject to the requirements of 48 C.F.R. Chapter 2 or Chapter 18 for contracts, or subcontracts supporting those contracts, for the sale of goods or services to the federal government by a taxable entity in the aerospace industry that is engaged in activities described by North American Industry Classification System code 334511, 3364, 3399, 5413, 5415, 5416, or 5419. For purposes of this subsection, a reference to a federal regulation includes a successor regulation.

(f) In computing the sum for purposes of Subsection (a)(1)(B)(ii), a taxable entity may add to other amounts described by that subparagraph:

(1) for a report originally due on or after January 1, 2020, and before January 1, 2021, 20 percent of aerospace costs;

(2) for a report originally due on or after January 1, 2021, and before January 1, 2022, 40 percent of aerospace costs;

(3) for a report originally due on or after January 1, 2022, and before January 1, 2023, 60 percent of aerospace costs;

(4) for a report originally due on or after January 1, 2023, and before January 1, 2024, 80 percent of aerospace costs; and

(5) for a report originally due on or after January 1, 2024, 100 percent of aerospace costs.

Acts 1981, 67th Leg., p. 1697, ch. 389, Sec. 1, eff. Jan. 1, 1982. Amended by Acts 1991, 72nd Leg., ch. 901, Sec. 53(b), eff. Aug. 26, 1991; Acts 1991, 72nd Leg., 1st C.S., ch. 5, Sec. 8.05, eff. Jan. 1, 1992.

Amended by:

Acts 2006, 79th Leg., 3rd C.S., Ch. 1 (H.B. 3), Sec. 5, eff. January 1, 2008.

Acts 2007, 80th Leg., R.S., Ch. 1282 (H.B. 3928), Sec. 11, eff. January 1, 2008.

Acts 2013, 83rd Leg., R.S., Ch. 117 (S.B. 1286), Sec. 24, eff. September 1, 2013.

Acts 2013, 83rd Leg., R.S., Ch. 1232 (H.B. 500), Sec. 6, eff. January 1, 2014.

Acts 2019, 86th Leg., R.S., Ch. 1073 (H.B. 1607), Sec. 2, eff. January 1, 2020.

Notes of Decisions
Cited in 55 cases (11 in the last 5 years), 1996–2026 · leading case: Hegar v. Gulf Copper & Mfg. Corp., 535 S.W.3d 1 (Tex. App.—Austin 2017).
Sort: Relevance Newest Treatment
Hegar v. Gulf Copper & Mfg. Corp., 535 S.W.3d 1 (Tex. App.—Austin 2017). · cites it 3× “Thé burden on Gulf Copper of calculating the proper amount of that deduction may be'an indication that one of the different methods of determining it's taxable margin is the better choice.”
Centerpoint Builders Gp, LLC v. Trussway, Ltd., 496 S.W.3d 33 (Tex. 2016). “001(4) (defining “Recycling business” as a "business primarily engaged” in specific activities (emphasis added)); Tex Tax Code §§ 171.101 l(g-8), (g-10), (g-11), (w-1) (imposing unique tax obligations on taxable entities that are “primarily engaged in” particular businesses…”
Graphic Packaging Corp. v. Hegar, 538 S.W.3d 89 (Tex. 2017). “(comparing TEX. TAX CODE § 171.101 and id. § 141.001, art.”
Upjohn Co. v. Rylander, 38 S.W.3d 600 (Tex. App.—Austin 2000). “See Tex.Tax Code Ann. § 171.101(a)(1) (West 1992).”
Sergeant Enter., Inc. v. Strayhorn, 112 S.W.3d 241 (Tex. App.—Austin 2003). “See Tex. Tax Code Ann. § 171.101 (West 2002) (referring to business corporation act for definition of “stated capital”); id.”
Gen. Dynamics Corp. v. Sharp, 919 S.W.2d 861 (Tex. App.—Austin 1996). “Tex.Tax Code Ann. § 171.101(a)(1) (West 1992).”
Titan Transp., LP v. Glenn Hegar, 433 S.W.3d 625 (Tex. App.—Austin 2014). “Laws 1 , 8 (amended 2013) (current version at Tex. Tax Code § 171.101(a)) (allowing taxpayer to elect to deduct COGS from total revenue); Act of May 19, 2006, 79th Leg.”
Ivan I. Smith v. Kimberly L. Robinson, 265 So. 3d 740 (La. 2018). · cites it 4× “Secondly, the Texas tax code allows for additions or deductions to arrive at a "total revenue" figure.”
Rylander v. 3 Beall Bros. 3, 2 S.W.3d 562 (Tex. App.—Austin 1999). “See Tex. Tax Code Ann. § 171.101 (a)(1) (West 1992).”
INOVA Diagnostics, Inc. v. Strayhorn, 166 S.W.3d 394 (Tex. App.—Austin 2005). “Tex. Tax Code Ann. § 171.101 (a)(1) (West 2002).”
Rylander v. B & a Mktg. Co. ex rel. Atl. Richfield Co., 997 S.W.2d 326 (Tex. App.—Austin 1999). “See Tex. Tax Code Ann. § 171.101 (a)(1) (West 1992).”
Hegar v. Autohaus LP, 514 S.W.3d 897 (Tex. App.—Austin 2017). “See Tex. Tax Code §§ 171.101(a)(l)(B)(ii)(a)(l) (allowing taxable entity to subtract cost of goods sold from total revenues to determine taxable margin for franchise tax calculation), .”
Show all 55 citing cases →
Tex. Tax Code § 171.101(B)(i): 2 cases
Graphic Packaging Corp. v. Glenn Hegar, No. 03-14-00197-CV (Tex. App.—Austin Jan. 27, 2015).
EMC Corp. v. Glenn Hegar, No. 03-15-00113-CV (Tex. App.—Austin July 8, 2015).
Tex. Tax Code § 171.101(a): 8 cases
Hegar v. Gulf Copper & Mfg. Corp., 535 S.W.3d 1 (Tex. App.—Austin 2017). “Thé burden on Gulf Copper of calculating the proper amount of that deduction may be'an indication that one of the different methods of determining it's taxable margin is the better choice.”
Titan Transp., LP v. Glenn Hegar, 433 S.W.3d 625 (Tex. App.—Austin 2014). “Laws 1 , 8 (amended 2013) (current version at Tex. Tax Code § 171.101(a)) (allowing taxpayer to elect to deduct COGS from total revenue); Act of May 19, 2006, 79th Leg.”
Glenn Hegar v. Gulf Copper & Mfg. Corp., No. 17-0894 (Tex. Dec. 20, 2017).
Graphic Packaging Corp. v. Glenn Hegar, No. 03-14-00197-CV (Tex. App.—Austin May 7, 2015).
Glenn Hegar v. Xerox Corp., 633 S.W.3d 298 (Tex. App.—Houston [14th Dist.] 2021).
Tex. Tax Code § 171.101(a)(1): 13 cases
Upjohn Co. v. Rylander, 38 S.W.3d 600 (Tex. App.—Austin 2000). “See Tex.Tax Code Ann. § 171.101(a)(1) (West 1992).”
Gen. Dynamics Corp. v. Sharp, 919 S.W.2d 861 (Tex. App.—Austin 1996). “Tex.Tax Code Ann. § 171.101(a)(1) (West 1992).”
Hegar v. Gulf Copper & Mfg. Corp., 535 S.W.3d 1 (Tex. App.—Austin 2017). “Thé burden on Gulf Copper of calculating the proper amount of that deduction may be'an indication that one of the different methods of determining it's taxable margin is the better choice.”
Rent-A-Ctr., Inc. v. Glenn Hegar, 579 S.W.3d 493 (Tex. App.—Austin 2019).
Glenn Hegar v. Am. Airlines, Inc., No. 15-24-00113-CV (Tex. App.—15th Dist. Feb. 5, 2025).
Tex. Tax Code § 171.101(a)(1)(A): 4 cases
Graphic Packaging Corp. v. Glenn Hegar, No. 03-14-00197-CV (Tex. App.—Austin Jan. 27, 2015).
EMC Corp. v. Glenn Hegar, No. 03-15-00113-CV (Tex. App.—Austin July 8, 2015).
Glenn Hegar v. Am. Airlines, Inc., No. 15-24-00113-CV (Tex. App.—15th Dist. Feb. 5, 2025).
Glenn Hegar v. Am. Airlines, Inc., No. 15-24-00113-CV (Tex. App.—15th Dist. May 12, 2025).
Tex. Tax Code § 171.101(a)(1)(A)(ii): 1 case
Sunstate Equip. Co. v. Glenn Hegar, 601 S.W.3d 685 (Tex. 2020).
Tex. Tax Code § 171.101(a)(1)(B): 3 cases
U.S. Concrete, Inc. v. Glenn Hegar, 578 S.W.3d 559 (Tex. App.—Austin 2019).
Glenn Hegar v. Sirius XM Radio, 604 S.W.3d 125 (Tex. App.—Austin 2020).
Glenn Hegar v. Am. Airlines, Inc., No. 15-24-00113-CV (Tex. App.—15th Dist. Feb. 5, 2025).
Tex. Tax Code § 171.101(a)(1)(B)(ii): 5 cases
Glenn Hegar v. CGG Veritas Servs. (U.S.), Inc., No. 03-14-00713-CV (Tex. App.—Austin Apr. 20, 2015).
Glenn Hegar v. Sirius XM Radio, 604 S.W.3d 125 (Tex. App.—Austin 2020).
Graphic Packaging Corp. v. Glenn Hegar, No. 03-14-00197-CV (Tex. App.—Austin Jan. 27, 2015).
EMC Corp. v. Glenn Hegar, No. 03-15-00113-CV (Tex. App.—Austin July 8, 2015).
Glenn Hegar v. Autohaus LP, LLP, No. 03-15-00427-CV (Tex. App.—Austin Dec. 14, 2015).
Tex. Tax Code § 171.101(a)(2): 5 cases
U.S. Concrete, Inc. v. Glenn Hegar, 578 S.W.3d 559 (Tex. App.—Austin 2019).
Glenn Hegar v. Am. Airlines, Inc., No. 15-24-00113-CV (Tex. App.—15th Dist. Feb. 5, 2025).
Glenn Hegar v. Sirius XM Radio, 660 S.W.3d 277 (Tex. App.—Austin 2022).
Graphic Packaging Corp. v. Glenn Hegar, No. 03-14-00197-CV (Tex. App.—Austin Jan. 27, 2015).
EMC Corp. v. Glenn Hegar, No. 03-15-00113-CV (Tex. App.—Austin July 8, 2015).
Tex. Tax Code § 171.101(a)(3): 3 cases
Glenn Hegar v. Am. Airlines, Inc., No. 15-24-00113-CV (Tex. App.—15th Dist. Feb. 5, 2025).
Graphic Packaging Corp. v. Glenn Hegar, No. 03-14-00197-CV (Tex. App.—Austin Jan. 27, 2015).
EMC Corp. v. Glenn Hegar, No. 03-15-00113-CV (Tex. App.—Austin July 8, 2015).
Tex. Tax Code § 171.101(a)(l)(B)(ii): 1 case
Hegar v. Autohaus LP, 514 S.W.3d 897 (Tex. App.—Austin 2017). “See Tex. Tax Code §§ 171.101(a)(l)(B)(ii)(a)(l) (allowing taxable entity to subtract cost of goods sold from total revenues to determine taxable margin for franchise tax calculation), .”
Annotations are extracted automatically from the opinions in the Syfert caselaw corpus and ranked by authority, recency, and treatment. Dots show Syfertize treatment of the citing case itself.