United States

Texas: Compensation Paid to Employees Assigned to International Offices May be Deducted

Nov 09, 2015
From KPMG TaxWatch

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In a recent private letter ruling, the Texas Comptroller addressed whether wages and cash compensation paid to employees assigned to international offices may be subtracted in computing taxable margin. Although the Comptroller will issue private letter rulings only in limited circumstances, it opted to do so in this instance because it had not addressed this issue before and the existing authorities were not sufficiently clear to provide a definitive answer. The taxpayer requesting the ruling was a law firm with offices in Texas and in certain other countries. As a service provider, the taxpayer deducted compensation in computing its taxable margin.  Under Texas law, wages and compensation are defined as the amount entered in the Medicare wages and tips box of the IRS Form W2, or any subsequent form with a different number that provides the same information. The Comptroller concluded that it interprets this provision to include amounts paid to employees in foreign countries that are reported on the foreign county equivalent of an IRS Form W2. Please contact Doug Maziur at 713-319-3866 with questions on this private letter ruling.

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The following information is not intended to be "written advice concerning one or more federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.