You may remember In re Nestle USA, Inc., No. 11-0855 (DB), one of this term’s cases challenging the Texas business-margins tax.
The first of those cases was In re Allcat Claims Services, No. 11-0589 (DB), which argued that the tax was actually an income tax and thus was invalid under the Texas Constitution without an additional public vote. The Court rejected the substance of that challenge last November. Along the way, the Court split 7-2 about how to interpret a statute that granted the Court authority to resolve these questions — but set an unusual 120-day deadline on its consideration of them. The majority held that, although the Legislature lacked power to confer jurisdiction beyond the boundaries set in the Texas Constitution, this could still qualify under the Court’s more general mandamus jurisdiction. (( The Court issued its opinion within 120 days and thus the majority did not have to resolve whether the Legislature’s attempt to impose a time limit on these challenges was also valid. ))
A few months later, the Court resolved In re Nestle, which was brought under the same legislative grant. This case challenged the legality of how the Texas margins tax is calculated (rather than how the statute was enacted). The Court ruled that it lacked jurisdiction to consider Nestle’s claim because the taxpayer had not paid the tax under protest, as the statute requires in a typical tax case.
Now, Nestle is back. It paid the tax under protest and, on June 25, 2012, filed a new mandamus proceeding styled In re Nestle USA, Inc., No. 12-0518 (DB). The Court is proceeding on an accelerated schedule similar to before. It requested a response from the Comptroller, which was filed on July 3, 2012. The Court requested full briefing on the merits on July 5, 2012.
The thrust of Nestle’s argument is that the margins tax violates the requirement that taxes be “equal and uniform,” in particular by varying which expenses a taxpayer can deduct based on its line of business. The petition also argues that setting a 0.5% rate for retailers and wholesalers is unconstitutional when other taxpayers are subjected to a 1.0% rate. You can read the mandamus petition and response.
The Court has not yet selected this petition for oral argument. If chosen, its argument date is likely to be in September, so that the Court can once again beat the Legislature’s 120-day clock.