Blogs

Search Blogs
Search by date
Choose From Date
Choose To Date
SearchClear

Texas Comptroller Gets Rocked: Geophysical Data Taxpayer Wins Apportionment Factor Sourcing Dispute

The Texas Supreme Court held that receipts from licensing data to customers were properly characterized as the sale of an intangible asset and were sourced to the customer’s legal domicile under Texas’s location of the payor sourcing rule.

The Texas Supreme Court held that receipts from licensing data to customers were properly characterized as the sale of an intangible asset and were sourced to the customer’s legal domicile under Texas’s location of the payor sourcing rule. TGS-NOPEC Geophysical Co. v. Combs, 2011 WL 2112763 (May 27, 2011).

TGS collects and stores seismic and geophysical data on subsurface terrains around the world and then, pursuant to a license agreement, licenses the data to its customers. TGS delivers the data to customers in tangible mediums—tapes, printed materials, or film. The Texas Comptroller argued that TGS’s receipts from licensing this data to customers in Texas were “licenses used in Texas” as set forth in Tex. Tax Code § 171.103(a)(4) because the revenue was derived from license agreements, and therefore, the receipts should be sourced to Texas (where the licenses were used). While the lower courts agreed with the Comptroller and upheld her assessment against TGS, the Texas Supreme Court reversed and held that TGS had correctly characterized its receipts as those from the sale of an intangible asset and sourced them to the licensee’s legal domicile. The Texas Supreme Court determined that TSG sold, not licensed, its data despite the fact that TSG termed its customer agreements “license agreements.”

Our Story

Sutherland Asbill & Brennan LLP is an international law firm helping the Fortune 100, industry leaders, sector innovators and business entrepreneurs solve their biggest challenges and reach their business goals. Dedicated to unfaltering excellence in client service, we are known for our business savvy and industry intelligence, providing creative and custom solutions for each of our clients. Industry and business experience makes the difference for our clients.

click to watch Videocast: Sutherland SALT Scoreboard – 2nd Quarter Highlights
Videocast: Sutherland SALT Scoreboard – 2nd Quarter Highlights
Washington, DC
Elizabeth S. Cha, Associate
Washington, DC
© 2016 Sutherland Asbill & Brennan LLP / Sutherland (Europe) LLP
MYBRIEFCASE
Add this page to MYBRIEFCASE
Add Page to MYBRIEFCASE
News/Commentary - Texas Comptroller Gets Rocked: Geophysical Data Taxpayer Wins Apportionment Factor Sourcing Dispute
Current MYBRIEFCASE Pages
Save ChangesDownload MYBRIEFCASEClear All