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Texas Amends its Service Revenue Sourcing Rules

Texas Amends its Service Revenue Sourcing Rules

by Scott Lawrence

By March 4, 2021September 20th, 2023Insights

On January 15, 2021, the state of Texas published new regulations that alter its means of sourcing service revenue for the state’s margin tax. As detailed below, these changes affect sourcing various types of services revenue, including internet hosting, advertising, digital property, capital assets and investments, single-member LLC interests and financial derivatives.

Despite the recent publishing of these regulations, the Texas Comptroller may apply these changes retroactively to report years dating back to 2008, unless otherwise noted.

Overview of Texas’ New Sourcing Rules

Texas has historically sourced service revenue to the location where the service was performed (i.e., the cost of performance method). To the extent a service was rendered both inside and outside the state, Texas would historically have sourced the service revenue to Texas based on the portion of the “fair value” of the services that were performed in the state.

Read the full article here.

We’re Here to Help

If you would like to discuss how your business may be impacted by these changes, contact Bennett Thrasher’s state and local tax experts by calling 770.396.2200.