The Texas Comptroller of Public Accounts recently ruled that the physical presence nexus standard continues to apply for the Texas Franchise Tax, even after South Dakota v. Wayfair, Inc., 585 U.S. ___ (2018). As a result, a California company whose only contacts with Texas were sales of digital products, software and e-commerce transaction processing and subscription management services to third parties did not have franchise tax nexus with the state. In the Comptroller’s view, retaining ongoing rights in software used in Texas, by itself, is not sufficient to create physical presence in the state. The Comptroller observed that although Texas has not yet moved away from the physical presence requirement, the agency will give “ample notice through various means” of any change to the current requirement.


Texas Private Letter Ruling No. No. 201809005L (09/07/2018).