Lockheed Martin Wins Franchise Tax Case at the Texas Supreme Court
May 6, 2020
In a landmark victory, Lockheed Martin and Ryan Law Firm, PLLC win their franchise tax case. On May 1, 2020, the Supreme Court of Texas reversed and remanded its opinion in favor of Lockheed Martin. Lockheed Martin Corp. v. Hegar (18-0566). The issue being addressed was whether Lockheed Martin’s sales of F-16 fighter jets to foreign governments under the Foreign Military Sales (FMS) program were considered Texas sales for Texas franchise tax purposes.
The Texas Supreme Court’s opinion held that Lockheed Martin’s “sale” of each F-16 fighter jet was to the respective foreign-government “buyer” for whom the aircraft was specifically manufactured and to whom it was ultimately delivered. The U.S. government’s involvement in each transaction was a “condition of the sale” that had no bearing on apportioning the receipts from that sale to Texas. Consequently, the receipts from the sales of the aircrafts are not sourced to Texas, and as a result, Lockheed Martin is entitled to a refund of franchise taxes.
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