The Texas Comptroller has filed a reply supporting its petition for review to the Texas Supreme Court in Titan Transp., LP v. Combs, 433 S.W.3d 625 (Tex. App. 3rd 2014). The taxpayer in Titan was in the business of hauling, delivering and depositing aggregate at construction sites, providing its services primarily through subcontractor drivers. For Texas franchise tax purposes, the taxpayer excluded certain flow-through payments to its subcontractors mandated by contract from its total revenue, claiming a substantial revenue exclusion. Alternatively, the taxpayer claimed it was entitled to deduct these flow-through payments as a cost of goods sold. The Court of Appeals determined the taxpayer was entitled to a tax refund based on the substantial revenue exclusion and thus did not address the taxpayer’s alternative claim. The Comptroller subsequently filed a petition for review to the Texas Supreme Court. In response, the taxpayer argued Titan did not merit review because the Court of Appeals properly applied the statutory exclusion. Moreover, although the Court of Appeals did not address the merits of the taxpayer’s cost-of-goods-sold deduction claim, the taxpayer contended its alternative claim provided a basis to affirm the Court of Appeals’ decision. Urging the Texas Supreme Court otherwise, the Comptroller subsequently argued that permitting the taxpayer to exclude such payments to subcontractors would allow businesses to exclude similar receipts by merely changing contract terms. In addition, with regard to the taxpayer’s cost-of-goods-sold deduction claim, the Comptroller argued that the case should be remanded to the Court of Appeals for consideration as it is a matter of first impression and is of great importance to the State. Reply Supporting Petition for Review, Combs v. Titan Transp., LP, No. 14-0307 (Tex. Aug. 13, 2014); Response to Petition for Review, Combs v. Titan Transp., LP, No. 14-0307 (Tex. Aug. 11, 2014).