News and Insights

Empty Miles Cannot Be Used to Reduce Texas Franchise Tax

Tax Development Sep 21, 2016

In a September 8, 2016 memo, the Texas Comptroller of Public Accounts (“Comptroller”) advised its auditors that a transportation company must include (or exclude) empty miles when calculating Texas receipts. However, Texas franchise tax Rule 3.591, effective December 31, 2009, provides that a transportation company may use either of the following to determine its Texas receipts:

  • The revenues from the transportation of goods or passengers in intrastate commerce within Texas; or
  • The total of its transportation receipts multiplied by the number of miles it transports goods and passengers in intrastate commerce in Texas divided by the total number of miles driven everywhere.

A literal reading of Rule 3.591 results in the inclusion of empty miles in miles driven everywhere, and excludes empty miles from Texas intrastate-commerce miles [i.e., the transportation of goods and passengers (not miles driven empty)].

The September memo advises Texas auditors that a transportation company must be consistent in its treatment of empty miles. A taxpayer is not allowed to exclude empty miles when determining its Texas miles and also include its empty miles in its calculation of everywhere miles. The Comptroller considers this policy to be a clarification, and the policy applies to all open tax report years. 


Adina Christian