Texas Supreme Court hears disputed test for sourcing sales tax receipts in NuStar case

The Supreme Court of Texas on Wednesday heard argument in NuStar Energy v. Hancock, a dispute over how Texas—s franchise tax sources receipts from sales of tangible personal property. Petitioner NuStar urged the court to adopt an "ultimate destination" or market-based test for sourcing sales receipts; the Texas Comptroller defended a decades-old place-of-delivery rule. Petitioner counsel argued the statute—s text and structure require looking to the buyer's ultimate destination and use of the goods rather than the location where title or possession momentarily changes hands. "This is a Texas franchise tax apportionment case," counsel said. "The question presented is whether the comptroller's rule, sourcing receipts from the sales of tangible personal property, presents a valid construction of the apportionment statute." The petitioner's lawyer told the bench the court could adopt a uniform test that looks to where goods "come to rest in the buyer's possession" and to the seller's market rather than transactional conditions such as FOB points or temporary pickup at a Texas port. The Comptroller's lawyer responded that the statute's plain language governs and that prior state decisions and longstanding administrative practice support treating property "delivered or shipped to a buyer in this state" as Texas receipts. "The statute is stick straightforward, and NuStar's approach is fundamentally atextual," the Comptroller's counsel told the court. Justices repeatedly questioned both sides about hypothetical fact patterns—fuel picked up at a Texas port and burned in international waters; goods briefly stored in Texas before immediate export; sales split into multiple transactions to avoid taxation—probing how either test would work in practice. Counsel for NuStar said the legislature's market-based approach for receipts (as applied in services cases such as SiriusXM) supports reading the tangible property provision to focus on the market and ultimate destination, while the Comptroller emphasized that the statutory phrase "delivered or shipped to a buyer in this state" is unambiguous and that the agency's long-used rule promotes administrative certainty. Several precedents and statutes were discussed at length, including this court's Lockheed Martin decision, SiriusXM, and out-of-state authorities such as the Utah Hercules case; the Comptroller also relied on the agency rule that has been applied for decades. The parties noted the dispute centered on a refund claim for tax years described in the record as covering 2011 through early 2013. No final decision was announced from the bench; the case was submitted after argument. The court will issue an opinion resolving whether the statute and comptroller rule allow the state to treat the in-state point of delivery as the taxable event or whether the marketplace/ultimate destination test proposed by NuStar should control.