Texas margin tax withstands constitutional challenge in Nestle


On October 19, 2012, the Texas Supreme Court dismissed constitutional challenges to the Texas franchise tax (the current margin tax) by Nestle USA, Inc. Nestle alleged that the franchise tax bore no reasonable relationship to the value of the privilege of doing business in Texas and therefore it violated the Equal and Uniform Clause of the Texas Constitution as well as the Equal Protection and Due Process Clauses of the US Constitution. Further, Nestle argued that the franchise tax violated the Commerce Clause of the US Constitution because the higher manufacturing rate discriminated against interstate commerce.

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