The legislature of the State of Texas has adopted a series of laws which impose a charge on business entities operating within the State. They say this is not an income tax because the taxpayer can use several different bases for calculating the amount of money due the State. Because of the federal system under which we operate, each state has legal jurisdiction over the entities operating within the bounds of the state. The legal reach of the state does not extend beyond the borders of the state for tax purposes. The legislature of the State of Texas has recognized that it is inappropriate to levy a tax on the sales value of items being shipped outside the State of Texas for consumption. The authorities will tell you that the Franchise Tax is a charge because the state has given a business the privilege of operating within the bounds of the state. The law in Texas provides for an allocation of sales revenue between Texas and other jurisdictions. Please prepare a short memo explaining the revenue allocation process.