Texas Supreme Court Upholds Franchise Tax

AUSTIN (October 19, 2012)--The Texas Supreme Court Friday upheld the state's much-maligned franchise tax, which could be getting a makeover from lawmakers next year.

The state's high court Friday rejected a challenge to the law by Nestle USA Inc. that had been closely watched by business groups and political observers.

The company argued that the tax runs afoul of the Texas Constitution since being modified in 2006 in the aftermath of changes to public school funding.

Also known as the margins tax, the franchise tax is levied on a company's revenue, which can sometimes result in unprofitable companies still having to pay the tax.

The Legislature could overhaul the tax next year.

Democrats have complained the tax never raised as much money as projected while Republicans say it hurts business.

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