THERE IS NEITHER CORPORATE NOR PERSONAL INCOME TAX IN TEXAS

Sales and Use Taxes

State Sales Tax	6.25%
Municipal - City of El Paso	1.00%
County - El Paso County	0.50%
Municipal Transit - Sun City Area Transit Tax	0.50%
Total El Paso Sales and Use Tax	8.25%
State Motor Fuels Tax	$0.20/gallon
State & City Hotel/Motel Tax	15.5%
State Motor Vehicle Tax	6.25%
(Includes sales tax, rental tax and interstate motor carriers tax.) Source: Texas Comptroller's Office, 2007 Updated: January 2008

The Texas Margin Tax

As a general statement, any legal entity that does business in Texas and is organized to have some form of limited liability protection must pay the Texas Margin Tax.  The first taxable period begins on January 1, 2007 with the first returns due in May of 2008.  The Texas Margin Tax Rate is one-half percent for taxable entities primarily engaged in retail or wholesale trade, and one percent for all other taxable entities.  The Texas Margin Tax is based on a percentage of the "taxable margin".  The margin is the lesser of:

• Total revenue minus cost of goods sold
• Total revenue minus employee compensation and benefits
• 70% of total revenue

The "taxable margin" is then apportioned by the percentage of the entity's business conducted in the State of Texas.  This percentage is calculated by dividing gross receipts from business conducted in the State of Texas by gross receipts from total business conducted.  The Margin Tax Rate is then applied to the apportioned taxable margin.  Please click on the following link for the Texas Margin Tax Calculator: http://www.window.state.tx.us/taxinfo/taxforms/HB3Calc.pdf.

With the adoption of the Margin Tax in 2006, the Texas legislature did not include language that provides for any type of credits against margin tax liability.  As a result, the jobs, investment and R&D credits that existed with the previous Texas franchise tax law, were sunsetted effective January 1, 2007.  As the state legislature convenes from January through May of this year, the leading business groups in the state of Texas have developed a legislative agenda that places adoption of a Margin Tax Credit program as one of their top priorities.  We are hopeful that the state legislature will adopt credits that are similar in nature to those that were provided under the previous franchise tax law, and that those credits will be in effect before the close of calendar year 2007.