The World Health Organization has officially declared the coronavirus outbreak to be a pandemic. In addition to the cost on human life, the rapid spread of COVID-19 has left a trail of economic damage affecting business revenues. COVID-19 has caused complete or partial shutdown of factories, supply chain disruptions, and labor shortages, and has impacted demand in certain industries. This impact will also be felt by U.S. state, and local governments.
The Texas Supreme Court recently granted a petition for review in ETC Marketing, Ltd v. Harris County Appraisal District, 467 S.W.3d 501 (Tex. App.—Houston [1st Dist.] 2015, pet. granted). The question before the high court in ETC Marketing, Ltd is whether an operator of an intrastate natural gas pipeline in Texas is required to pay ad valorem taxes on the value of 33 billion cubic feet of gas stored in a Harris County reservoir. The stakes are high as the 33 billion cubic feet of gas could give rise to a $162 million ad valorem tax bill.
The Texas Comptroller has traditionally taken a broad view of what constitutes a taxable “data processing service.” However, one recent Texas Court of Appeals decision rebuked this interpretation with a ruling that presents wide-ranging implications in Texas. This decision, Hegar v. CheckFree Services Corp., No. 14-15-00027-CV (Tex. App.—Houston [14th Dist.], Apr. 19, 2016, no pet. h.), narrows the breadth of what constitutes taxable “data processing services” for Texas sales tax purposes.