Texas Comptroller of Public Accounts STAR System
200910694H
SOAH DOCKET NO. 304-08-0714.26
CPA HEARING NO. 44,896
RE: *************
TAXPAYER NO.: *************
AUDIT OFFICE: *************
AUDIT PERIOD: November 1, 1998 THROUGH March 31, 1999
Limited Sales, Excise, And Use Tax/RFD
BEFORE THE COMPTROLLER
OF PUBLIC ACCOUNTS
OF THE STATE OF TEXAS
SUSAN COMBS
TREVOR MOORE
Representing Tax Division
*************
Representing Claimant
SOAH DOCKET NO. 304-08-0715.26
CPA HEARING NO. 47,235
RE: *************
TAXPAYER NO.: *************
AUDIT OFFICE: *************
AUDIT PERIOD: April 1, 1999 THROUGH March 31, 2003
Limited Sales, Excise, And Use Tax/RDT
BEFORE THE COMPTROLLER
OF PUBLIC ACCOUNTS
OF THE STATE OF TEXAS
SUSAN COMBS
TREVOR MOORE
Representing Tax Division
*************
Representing Petitioner
COMPTROLLER’S DECISION
*************(Petitioner) [ENDNOTE: (1)] filed a tax refund claim with the
(Comptroller) for the period November 1,
1998 through March 31, 1999. The refund claim was reviewed by a Comptroller
auditor and denied. Petitioner’s request for a refund hearing was docketed as
Hearing No. 44,896. Petitioner also was the subject of a managed audit for
sales and use tax compliance for the period April 1, 1999 through March 31,
2003. The audit resulted in a credit due to Petitioner. Petitioner’s request
for a redetermination hearing was docketed as Hearing No. 47,235. The two
cases were joined for hearing by agreement of the parties. In his Proposal for
Decision (PFD), the Administrative Law Judge (ALJ) recommends that refunds or
credits be allowed for the purchase transactions in the Summary of
Recommendations in this PFD. The remaining claims for additional credits or
refunds should be denied.
I. PROCEDURAL HISTORY, NOTICE & JURISDICTION
A hearing was held on December 5, 2007. Petitioner was represented by
INDIVIDUAL A and INDIVIDUAL B. The Comptroller was represented by Trevor
Moore. The record closed on January 16, 2008.
There are no contested issues of notice or jurisdiction, and those matters are
set out in the Findings of Fact and Conclusions of Law without further
discussion here.
A Proposal for Decision was issued on January 30, 2008. On February 15, 2008,
Petitioner filed Exceptions to Proposal for Decision, to which Staff filed a
Response. This Decision represents the decision on the Exceptions and the
Response.
II. REASONS FOR DECISION
A. Petitioner’s Contentions
1. Purchases of improvements to real property belonging to an exempt entity
were exempt.
2. Purchases of tangible personal property and services on behalf of an exempt
entity were exempt.
3. Items exclusively used for aircraft repair, remodeling, or maintenance were
exempt.
4. Toiletry items necessary for normal operation of aircraft were exempt.
5. Purchases made before audit and refund periods were not barred by the
statute of limitations because Petitioner accrued tax during the audit and
refund periods.
6. A refund item should be scheduled in a sample and projection refund exam
rather than in a detailed audit exam.
B. Evidence Presented
Staff submitted the administrative record, including the refund claim and
refund denial, a Texas Notification of Audit Results, the audit schedules, and
an audit plan. Staff called Comptroller auditor Robert Rue as a witness.
Petitioner submitted copies of airport terminal leases, the invoices for the
disputed transactions, and several photographs. Petitioner called as witnesses
INDIVIDUAL C, its manager for facilities and maintenance, INDIVIDUAL D,
supervisor of materials services, and INDIVIDUAL E, a vice president in charge
of aircraft maintenance. The parties also submitted an Agreed Stipulations of
Fact.
C. Analysis and Recommendations
1. Improvements to Real Property
Petitioner, a certified and licensed air carrier of persons and property,
occupies facilities at publicly owned airports in Texas under long-term leases.
During the refund and audit periods, Petitioner entered into contracts with
private contractors to make improvements to real property that Petitioner
states belonged to the exempt entities. The first disputed transaction is a
lump-sum charge for labor and materials to repair a public restroom in a
terminal facility at AIRPORT A in CITY A, Texas. Water damaged materials in
the wall and floor were replaced. At the time of the restroom repairs,
Petitioner provided commercial air travel services at AIRPORT A. Petitioner
operated a terminal facility that was open to the public and that contained a
ticketing area, restrooms, a break room, an administrative area, a screen area,
and a conveyor for baggage.
The second disputed transaction is a lump-sum charge for labor and materials to
install lockers and benches in the men’s and women’s locker rooms in Hangar E
at AIRPORT B in CITY A, Texas. The lockers and benches were bolted to the
floor, and the parties agree that the work was an improvement to real property.
The locker rooms, although primarily used by Petitioner’s employees, are
sometimes used by employees of the airport authority or of other carriers that
are allowed to use the hangar. An annual public relations event, referred to
as “airport appreciation day,” has been held at the hangar. Representatives of
the airport authority enter Hangar E periodically to perform inspections
pursuant to the CITY A’s right under the lease to confirm that the
facility is in good repair and working order.
The hangars and other airport facilities were the subject of a Non-Terminal
Lease Agreement between Petitioner and the CITY A. Although the lease
contains multiple provisions regarding duration, it can fairly be described as
a 30-year lease with automatic annual renewals for an additional five years.
The city financed the projects by issuing special facilities revenue bonds.
The city acquired title to the project facilities at the time of construction,
acquisition, or installation.
The two disputed transactions are generally subject to tax as the repair,
remodeling, or modification of real property. [ENDNOTE: (2)] Petitioner as the
purchaser of taxable items owes sales tax unless it is established by clear and
convincing evidence that an exemption applies. [ENDNOTE: (3)] The ground for
exemption asserted by Petitioner and discussed by both parties is stated in Tax
Code Section 151.311. [ENDNOTE: (4)] That section exempts certain tangible
personal property and taxable services purchased for use in the performance of
a contract for an improvement to realty for organizations exempted under
Sections 151.309 and 151.310. That the leased airport facilities were owned by
political subdivisions of the State of Texas that are exempt under Section
151.309 is not disputed. Section 151.311, however, by its explicit terms,
applies to purchases for use in the performance of a contract for an
improvement to real property. For sales tax purposes, a person who makes
improvements to real property is defined as a contractor. [ENDNOTE: (5)] That
term includes persons who perform real property repair and remodeling services.
[ENDNOTE: (6)] The taxable items at issue were purchased by Petitioner, who is
not a contractor. The Section 151.311 exemption therefore is not available to
Petitioner. [ENDNOTE: (7)]
A more applicable exemption is stated in Section 151.309. That section exempts
a taxable item sold, leased, or rented to, or stored, used or consumed by, any
of the designated governmental entities, including any political subdivision of
the State of Texas. [ENDNOTE: (8)] Petitioner, of course, is not a political
subdivision of the state. However, a contract for the improvement of real
property of an exempt entity may be exempt, even though the contract is with a
nonexempt entity, if the contract is “for the primary use and benefit” of the
exempt entity, and the improvements “relate to the exempt purpose” of the
exempt entity. [ENDNOTE: (9)] Therefore, even though the contracts at issue
were between the contractors and Petitioner, a commercial airline, they may be
considered exempt if they were contracts to improve the real property of an
exempt entity for its primary use and benefit and relating to its exempt
purpose.
Petitioner cites the Texas Transportation Code provisions regarding county and
municipal airports in support of its contention that the improvements to the
airport terminal and locker rooms were for the primary use and benefit of the
exempt entity and related to the exempt purpose of the airport. [ENDNOTE: (10)]
Those provisions grant local governments the power to construct and operate
airports and air transportation facilities, and state that the “planning,
acquisition, establishment, construction, improvement, equipping, maintenance,
operations, regulation, protection and policy of an airport or air navigation
facility” is a public and governmental function exercised for a public purpose
and necessity. [ENDNOTE: (11)] In Comptroller’s Decision No. 31,770 (1999),
the Comptroller determined that improvements to an airport hanger that was
leased to a nonexempt airline were for the primary use and benefit of the
airport because they related to the public function of operating an airport.
Although that decision primarily dealt with Section 151.311, it is relevant
here because the same principles of primary use and benefit are involved.
[ENDNOTE: (12)] The hangars were found necessary to safe and efficient
operation by permitting maintenance and repairs for the planes of the air
carriers that used the airport. The decision cites prior Comptroller’s
Decision No. 17,245 (1988), which stated that “certainly the airport terminal,
runways, hangars, and other support buildings serve the general public purpose
of operating an air transportation system.”
Staff relies on Attorney General’s Opinion No. MW-94 (1979), which ruled that
airplane hangars constructed by a private party at a municipal airport did not
inure to the substantial benefit of the exempt entity. The facts stated in
that opinion are sparse, and it is not clear that the hangars were a part of
the airport facilities used by other airlines. Moreover, that opinion was not
deemed controlling in Comptroller’s Decision Nos. 17,245 and 31,770, in which
airport hangars and terminals were determined to serve a public function under
the facts of those cases. As the facts here are similar, Petitioner’s
contention that the Comptroller considers airport hangars and terminals to
serve a public and governmental function appears well founded. [ENDNOTE: (13)]
With regard to the improvements in the hangar locker room, Staff argues that
exemption must be denied because the areas were not accessible to the general
public. However, as discussed in Comptroller’s Decision Nos. 17,245 and
31,770, hangars facilities have been found to serve a public function relating
to air travel even though such facilities are not open to the public. It is
not apparent why the locker rooms should be treated differently than the rest
of the hangar. Staff cites Comptroller’s Decision No. 41,946 (2003), in which
remodeling a café at an airport terminal was for the primary benefit of the
food concessionaire and not the airport. That result appears to be based on a
finding that the operation of a food concession, unlike an airport hangar, is
not a public or governmental function. It was not based on considerations
regarding public access, as airport cafés are open to the general public.
Staff distinguishes Comptroller’s Decision No. 31,770 on the grounds that there
the construction of the hangars was financed by tax-free bonds. However, the
materials at issue in that decision were purchased and paid for by a private
contractor. Similarly, the improvements to the locker rooms in this case were
paid for by Petitioner. [ENDNOTE: (14)] How the airport authority ultimately
financed the project should not be a controlling consideration, when it is
undisputed that the improvements were made to real property owned by the exempt
entity, and that title to the improvements passed to the exempt entity.
[ENDNOTE: (15)] Staff also points out that in Comptroller’s Decision No.
31,770 the airport exercised “significant control” over the hangar construction.
In this case, the locker room improvements, although made after Petitioner had
occupied the hangar, were made while construction was still ongoing, and the
airport authorities reviewed, inspected, and approved the hangar facilities.
[ENDNOTE: (16)] In both cases, the airport authorities exercised some degree
of control or supervision.
The hangar facilities, including the locker room, were available for use by
employees of other airlines, who sometimes use the hangar for aircraft repair
and maintenance. Petitioner’s employees on occasion use the hangar to provide
repair and maintenance to the aircraft of other carriers. Under prior
Comptroller’s decisions, similar improvements to an airport hangar were found
to relate to the exempt purpose of the exempt entity and were for its primary
use and benefit by serving the public function of operating an airport. While
it is obvious that the hangar maintenance facilities benefit Petitioner in
operating its airline carrier business, the facilities at the same time serve
the public purpose of operating an air transportation system. Petitioner has
established that improvements to the hangar qualify for exemption under the
criteria set forth in Comptroller’s Decision No. 31,770. Staff does not argue
that the decision should be overturned, and as discussed above, the attempts to
distinguish it are found unpersuasive. The transaction should therefore be
treated as exempt.
With regard to the repair of the public restroom at the AIRPORT A terminal,
Staff states that the “restroom is not integral to the operation of the airport
or used by the general public in connection with air travel.” [ENDNOTE: (17)]
This objection is unconvincing, as restrooms in airport terminals appear to be
used by the general public for precisely that purpose. The particular restroom
at issue was located in the terminal and was used by the general public.
[ENDNOTE: (18)] Airport terminals in general serve the public or governmental
function of operating air transportation system, and public restrooms at the
terminal should not be treated any differently.
Petitioner’s claim for exemption, however, is objectionable on other grounds.
Petitioner has not demonstrated that the improvement was made to real property
that was owned by, or that title passed to, the CITY A. Under the
Airport Lease Agreement, the city is described as the owner of land on which
the airport is located. [ENDNOTE: (19)] The lease refers to
“lessee-constructed temporary terminal facilities” to be placed on the leased
land for conducting Petitioner’s air transportation business, title to which
was to remain vested in Petitioner as lessee. Petitioner’s witnesses at the
hearing provided no basis for concluding that improvements belonged to the
exempt entity. The improvements were made to facilities that Petitioner
temporarily occupied. Although under the lease agreement Petitioner was
obligated to maintain the facility in good repair, the improvements were paid
for by Petitioner and were not subject to approval by the airport. [ENDNOTE:
(20)] Having reviewed the record, the ALJ concludes the Petitioner has not
provided proof that the improvements were made to terminal facilities owned by
an exempt entity, and the claim for exemption should be denied for that reason.
2. Tangible Personal Property and Taxable Services
Petitioner claims exemption under Tax Code Section 151.309 for purchases of
tangible personal property such as scrubbers used to clean airport surfaces,
temporary jetways used as walkways to gates, security badges, security
supplies, and gas and electricity for airport terminals and hangars.
Petitioner also claims exemption for purchases of services that are taxable as
real property services, such as janitorial and cleaning services at the
terminal. [ENDNOTE: (21)] Section 151.309 exempts a taxable item sold, leased,
or rented to, or stored, used or consumed by, certain governmental entities,
including any political subdivision of the State of Texas. [ENDNOTE: (22)]
Petitioner contends that under its leases with the airport authorities it was
obligated to purchase the goods and services, and that the purchases were
necessary to the operation of an air transport system for the benefit of the
public.
Petitioner, rather than the exempt municipalities or airport authorities,
purchased the items at issue. Unlike the improvements to real property
discussed in the preceding contention, the Tax Code and Comptroller’s rules do
not exempt tangible personal property or services purchased by a private entity
on the basis that the primary use and benefit was for the exempt entity. As
authority to the contrary, Petitioner cites Comptroller’s Decision No. 23,130
(1989), a case in which sales brochures purchased by a fund raising
organization and donated to school districts were found exempt under Tax Code
Section 151.155(e), which exempts taxable items donated to an exempt
organization. That case has no application here, as nothing has been provided
to show that the items at issue were donated to the airport authorities. Nor
has Petitioner shown that title to the items passed to the exempt entities,
that the items were resold to the exempt entities, or that it acted as a de
facto agent in purchasing the items for the exempt entities. [ENDNOTE: (23)]
Petitioner attaches particular importance to the Texas Transportation Code,
which provides that operating a county or municipal airport is a public and
governmental function exercised for a public purpose and necessity. [ENDNOTE:
(24)] Petitioner reasons that any purchases used to operate the airports are
exempt as a matter of law, regardless of whether the purchase was made by an
exempt entity or by a private lessee operating the airport on behalf of an
exempt entity. As discussed with regard to the prior contention, the
provisions of the Texas Transportation Code are relevant to determining the
exempt purpose of an airport authority. But Petitioner’s construction of the
statutes as conferring a general exemption on purchases by taxpayers engaged in
air transportation is a reach too far. The statutes that state municipal
airport operations are a public and governmental function exercised for a
public purpose were enacted for such purposes as limiting municipal liability
for negligence. [ENDNOTE: (25)] They do not confer tax exemptions. Statutory
exemptions from tax are subject to strict construction because they place a
greater burden on other taxpayers; an exemption cannot be raised by
implication, but must affirmatively appear, and all doubts are resolved against
the taxpayer. [ENDNOTE: (26)]
Petitioner’s reliance on Comptroller’s Decision No. 17,245 (1988) is also
unwarranted. In that case, the purchases of office equipment and furniture
were made by the exempt entity itself, an airport authority, who leased the
items to a private airline for use in the airline’s headquarters and
reservations office. The purchases were found to be not exempt, even though
made by an exempt entity, because the use and benefit was for the airline and
did not serve the airport’s exempt purpose of operating a public airport. The
analysis in that case is incorrect because purchases by a political subdivision
of the State of Texas are exempt if the exempt entity pays for the taxable item
and issues an exemption certificate. [ENDNOTE: (27)] The requirement that the
purchases relate to the exempt purpose of the organization applies only to the
religious, educational, and public service organizations described in Tax Code
Section 151.310. [ENDNOTE: (28)] In any event, the decision would not support
Petitioner’s contention, there are no statutes or rules that state tangible
personal property and services purchased by a private entity are exempt because
somehow congruent with a public purpose. Petitioner’s purchases of tangible
personal property and taxable services in connection with its airline
operations are taxable unless a specific exemption applies. The fact that the
items were used for providing air service, operating and maintaining the
airport facilities, or for security purposes does not make them exempt.
Petitioner has not proved exemption by clear and convincing evidence and its
contention should therefore be denied. [ENDNOTE: (29)]
Invoice No. 015171 from COMPANY A, merits a final comment. That invoice
reflects charges for janitorial, weekend, and graveyard shift services.
Petitioner presented testimony that this vendor used solvents and high pressure
hot water to clean the aircraft to allow for inspection of possible cracks and
fractures, and that this procedure is required by the Federal Aviation
Administration. [ENDNOTE: (30)] Staff agreed that this particular activity
would be exempt as aircraft repair, remodeling or maintenance services under
Tax Code Section 151.328(b). However, the witness also testified that the
vendor performed janitorial services inside the aircraft as well, and the
invoice itself only describes janitorial services. The evidence is
insufficient to establish by clear and convincing proof that the invoice was
for exempt services, and for that reason a refund or credit is not recommended.
3. Items Used in Aircraft Repair, Remodeling, or Maintenance
Petitioner contends that several purchases qualify for exemption as items used
by an air carrier to repair, remodel, or maintain aircraft. Exemption is
claimed for the following items:
Overstitched parts bags used to hold screws, nuts, bolts, and other hardware
during aircraft maintenance.
Prefilters that are part of a gas mask used by aircraft technicians in the
paint shop during repair and maintenance of aircraft.
Nitrile gloves used by maintenance technicians during repair and maintenance of
aircraft. The gloves do not dissolve or deteriorate from exposure to chemicals
or fuels.
Earplugs used by maintenance technicians during aircraft repair and maintenance.
Styrofoam packaging materials used to ship aircraft parts.
Software module used to schedule, track, optimize, and maintain Petitioner’s
long range aircraft maintenance plan.
Tax Code Section 151.328(d) exempts “[m]achinery, tools, supplies, and
equipment used or consumed exclusively in the repair, remodeling, or
maintenance of aircraft, aircraft engines, or aircraft components” purchased by
a person using the aircraft as a certificated or licensed carrier of persons or
property. [ENDNOTE: (31)] The Comptroller’s rule adds the following: “Included
in the exemption is equipment used to sustain or support safe and continuous
operations or to keep the aircraft in good working order by preventing its
decline, failure, lapse, or deterioration, such as battery chargers or
diagnostic equipment.” [ENDNOTE: (32)]
The Comptroller’s rule is noteworthy in that it states a qualification that is
not in the statute. The statute exempts machinery, tools, supplies, and
equipment “used or consumed exclusively” in the repair, remodeling, or
maintenance of aircraft. The rule, as in effect before and after the 1995
statute amendment, restates this provision to exempt “machinery, tools,
supplies and equipment used directly and exclusively in aircraft repair,
remodeling, or maintenance” (emphasis added). The parties have argued whether
the addition of the word “directly” is a valid exercise of the Comptroller’s
rule-making authority. The Comptroller may adopt rules to enforce the tax
statutes, if they are consistent with the statutes or the Texas or United
States Constitution. [ENDNOTE: (33)] In the case of Tyler Pipe Industries v.
Sharp, [ENDNOTE: (34)] the Texas Court of Appeals addressed the use of the term
“directly used” with regard to the manufacturing exemption. The Comptroller
argued that machinery and equipment “consumed or used in or during actual
manufacturing” was not exempt unless it was used directly on the raw materials
to produce the finished product. The court held that it was invalid for the
Comptroller to impose the requirement that the items be directly used when the
statute contained no such language. A determination as to whether the rule is
consistent with the statute would in part depend upon what meaning to the term
“directly and exclusively” is used in aircraft repair, remodeling, or
maintenance. In its post-hearing brief, Staff concludes, after an examination
of Comptroller letter rulings, that “those items used in maintenance areas or
processes but not used to repair the aircraft itself are not exempt under
Section 151.328,” and that “directly” only “refines” what is meant by exclusive
use. This does not provide certainty as to what meaning Staff ascribes to the
term “directly used.” In view of this ambiguity, and the fact that the
Comptroller may not impose requirements other than those stated i
n the statute, the provision in the Comptroller’s rule regarding direct use is
not accepted as providing a basis for determining exemption in this case.
A determination of whether the items at issue fall within the exempt categories
of “machinery, tools, supplies and equipment” can perhaps best be made by
turning to the items in contention. The first items are parts bags used to
hold screws, nuts, bolts, and other hardware during aircraft maintenance. The
bags were used by maintenance personnel to categorize and organize small
aircraft parts as they are removed from the aircraft, so that they may be
reinstalled in the correct position and sequence. With regard to the category
of supplies, it is interesting to note that Tax Code Section 151.328(d) as
originally enacted exempted only “machinery, tools, and equipment.” [ENDNOTE:
(35)] In 1995, the statute was amended to its present form to exempt
“machinery, tools, supplies, and equipment” (emphasis added). [ENDNOTE: (36)]
Prior to the 1995 amendment, the Comptroller’s rule included an additional
sentence: “Consumable supplies, such as cleaning solvents, used in providing
the repair, remodeling, or maintenance, but that are not part of or used in the
aircraft, are not included in the exemption provided by this paragraph.”
[ENDNOTE: (37)] That sentence was deleted from the current version of the
rule, effective August 12, 1998. Since the deleted sentence refers to
supplies, the deletion apparently was a response to the Legislature’s 1995
addition of “supplies” to the list of items exempted by Section 151.328(d).
The rule history indicates that the Comptroller considers “supplies” to be
items that are consumed when used. That result would be consistent with
Attorney General’s Opinion No. WW-1025 (1961) that “family supplies for home
and farm use” mean consumable articles. Accordingly, it is concluded that the
parts bags are not supplies.
For the manufacturing exemptions in Tax Code Section 151.318, machinery is
defined as “power-operated machines.” [ENDNOTE: (38)] Similarly, for machinery
sold to an enterprise project under Tax Code Section 151.429, the Comptroller
has stated that machinery generally means a mechanically, electrically, or
electronically operated device for performing a task. [ENDNOTE: (39)]
Therefore, in view of these definitions, the parts bags cannot be categorized
as machines because they are not power operated.
The term “equipment” is defined for the manufacturing exemption as “an
apparatus, work clothing, device, or simple machine.” [ENDNOTE: (40)]
Similarly, for the exemptions regarding enterprise projects, equipment is
defined broadly to include tangible personal property other than consumables,
building materials, electricity, and motor vehicles. [ENDNOTE: (41)] With
regard to the exemption issue for aircraft repair, racks, scaffolding, paint
booths, machining booths, and ladders were found exempt in a September 22,
1994, Comptroller letter ruling. [ENDNOTE: (42)] Staff contends that the bags
are storage bins, which were found not exempt in that letter ruling. The
evidence, however, establishes that they were used not for storage, but to
facilitate removal and reinstallation of aircraft parts. In view of the
meaning given to equipment in other contexts, and the express terms and plain
meaning of the statute, the parts bags are found to be equipment for purposes
of the Section 151.328(d) exemption. [ENDNOTE: (43)] Since Petitioner has
established that the parts bags were used exclusively in the repair and
maintenance of aircraft, a refund or credit should be allowed. [ENDNOTE: (44)]
The next three items in contention are similar in that they are used for
safety-related reasons. The prefilters are inserted into a gas mask used by
workers in a paint shop during repair and maintenance of aircraft. The nitrile
gloves are used by aircraft technicians to prevent skin damage that would
otherwise result from chemical solvents. The specialized earplugs are used to
protect hearing when testing jet engines and other loud equipment. The items
appear to be safety equipment, with the possible exception of the nitrile
gloves, which could be regarded as supplies if they are consumed upon use.
Staff quotes a Comptroller letter ruling of September 22, 1994, that latex
gloves are not exempt. [ENDNOTE: (45)] That letter came before Section
151.328(d) was amended to include “supplies.” The letter quotes with emphasis
the prior rule provision that consumable supplies are not included in the
exemption, and it is possible that was the basis for the letter ruling. In
view of the current statute and the relevant definitions, the three items
qualify as safety equipment or supplies. Since Petitioner provided evidence
that they were exclusively used in aircraft repair and maintenance, the
exemption should be allowed. [ENDNOTE: (46)]
Petitioner’s case for exemption is probably at its most tenuous with regard to
the Styrofoam packaging materials used to ship aircraft parts. Petitioner uses
the materials in connection with a foam packer to encase fragile and expensive
aircraft parts in polyurethane film to protect them during shipping. [ENDNOTE:
(47)] The packaging materials may well be supplies, but they are used in the
shipment of parts, an activity readily distinguishable from the actual repair
and maintenance of aircraft. Special shipping supplies such as packaging foams
were found nonexempt in a Comptroller letter ruling. [ENDNOTE: (48)] That
conclusion is consistent with the requirement that the items be used or
consumed exclusively in repair, remodeling, or maintenance activities. The
claimed exemption for packaging materials should be denied.
The final item is the software module used to schedule, track, optimize, and
maintain Petitioner’s long range aircraft maintenance plan. Petitioner
operates more than 350 passenger aircraft that must be maintained according to
manufacturer specifications and requirements of the Federal Aviation
Administration. The software is used to determine when maintenance is
necessary, where it should be done, and what resources are available to perform
the maintenance. The software is used to monitor Petitioner’s large maintenance
budget and to ensure that it is expended at maximum efficiency without waste of
parts, employee time, and other resources. [ENDNOTE: (49)] A Comptroller
letter ruling of September 21, 1995 states that an aircraft maintenance manual
that contained maintenance procedures and instruction was exempt under Section
151.328(d) as a tool or as equipment. The letter states that manuals may not
qualify if they simply provide for record keeping regarding procedures that
have been performed or completed. A Comptroller letter ruling of December 3,
1996 recognizes an exemption for an “overhaul and repair procedure manual”
required by the Federal Administration Procedure for all part numbers repaired
at a particular facility. [ENDNOTE: (50)] The software may well fall within
the category of machinery or equipment, but it is not entirely used for the
exempt purposes stated in the statute. It perhaps comes close to meeting the
guidelines announced in the policy letters to the extent it is used to
determine when maintenance is needed under manufacturer standards and federal
requirements. Other functions, however, clearly relate to Petitioner’s
resource planning and logistical efficiency, which though related to aircraft
maintenance, are not the actual repair, remodeling, or maintenance of aircraft,
aircraft engines, or aircraft components as required by Section 151.328(d). As
the software is not exclusively used for the exempt purpose set forth in the
statute, it should not be considered exempt.
4. Property Necessary for Normal Operation of Aircraft
During the audit and refund periods, Petitioner purchased toiletry items such
as tissue paper, towels, seat covers, and other items. Petitioner claims
exemption for these items under Tax Code Section 151.328(e), which exempts
tangible personal property “that is permanently affixed or attached as a
component part of an aircraft owned or operated by [a certified or licensed
carrier of persons or property or a flight instructor], or that is necessary
for the normal operations of the aircraft and is pumped, poured, or otherwise
placed in the aircraft ” (emphasis added). Petitioner contends that the
toiletry items qualify because they are “placed in the aircraft” and are
necessary and essential for the normal operations of an aircraft used as a
carrier of people. Staff responds that the “normal operation” of an aircraft
is flying, and that the supplies placed on the aircraft for the convenience of
passengers is unrelated to the operation of the aircraft.
Both parties cite Southwest Airlines v. Bullock, [ENDNOTE: (51)] in which
pillows and pillowcases, blankets, sweeper brushes, coffee pots, air sick bags,
and other items were found not to be “component parts” of an aircraft. When
that case was decided, the exemption in Section 151.328(e) was limited to
tangible personal property permanently affixed or attached as a component part
of an aircraft. The provision that Petitioner particularly relies on,
regarding tangible personal property necessary for the normal operations of the
aircraft and that is pumped, poured, or otherwise placed in the aircraft, was
added to Section 151.328(e) effective July 1, 1995. The case of Southwest
Airlines v. Bullock, which came before that amendment and construed only the
“component parts” provision, does not address the specific exemption at issue
here.
The applicable Comptroller’s rule states that machinery, tools, and equipment
that support the overall carrier operation such as baggage loading or handling
equipment, garbage and other waste disposal equipment, or reservation making or
booking machinery and equipment, do not qualify for exemption. [ENDNOTE: (52)]
The rule also specifically states: “Pillows, blankets, trays, ice for drinks,
kitchenware, or toilet articles are not exempt from tax.” [ENDNOTE: (53)] The
rule is consistent with an interpretation that the exemption for tangible
personal property that is “pumped, poured, or otherwise placed in the aircraft”
means lubricants, fluids, or similar items that are necessary for the actual
flight operations of the aircraft. Since the Comptroller’s rule specifically
excludes the toiletry items at issue, Petitioner’s contention can only be
sustained upon a finding that the rule is invalid. The administrative
construction of a statute may be considered, regardless of whether the statute
is facially ambiguous. [ENDNOTE: (54)] The administrative construction of
statutory language is generally accorded great weight in the interpretation of
a statute. [ENDNOTE: (55)] In view of these considerations, and the fact that
the Comptroller’s rule is supported by the statutory language and is consistent
with it, the Comptroller’s rule is found to be a valid exercise of the
Comptroller’s rule-making authority. Petitioner’s contention therefore should
be denied.
5. Statute of Limitations
Comptroller Staff denied refunds for a group of purchases on the grounds that
refunds were barred by limitations. [ENDNOTE: (56)] Some of the transactions
relate to the managed audit period of April 1, 1999 through March 31, 2003. A
Texas Notification of Audit Results was issued on July 29, 2005. Agreements to
extend limitations were in effect for the managed audit period for all report
periods. Other transactions relate to the refund claim, filed on February 20,
2003, for the period November 1, 1998 through March 31, 1999. During
verification, Staff determined that the refund claim was timely only for
transactions on or after January 1, 1999. For that reason, the refund claim is
limited to the period from January 1 through March 31, 1999. The issue
presented is whether the limitations period should be determined with reference
to the invoice dates or to the date that Petitioner made an accrual entry for
the purchase on its books and records.
Staff contends that whether the refund claims were timely for the purchases at
issue must be determined by reference to the invoice date for those
transactions. Petitioner argues that the relevant date is the date that the
transaction was accrued as an expense on its books. Petitioner presents a
hypothetical transaction in which a vendor performed a service on July 27. The
vendor issued an invoice for the service on August 29. On September 2
Petitioner processed the invoice and booked or accrued the amount of the
invoice as an expense. Petitioner contends that because it is an accrual based
taxpayer, the last date, September 2, is the controlling date for determining
limitations.
The Tax Code provides that tax may not be assessed after four years from the
date the tax becomes due and payable. [ENDNOTE: (57)] For monthly filers such
as Petitioner, tax becomes due and payable on or before the 20th day of the
month following the end of each calendar month. [ENDNOTE: (58)] A refund claim
must be filed before the expiration of the limitations period stated in Section
111.201. [ENDNOTE: (59)] Therefore, unless limitations have been tolled for
some reason, a refund claim must be filed within four years from the date the
tax became due and payable.
A taxpayer whose books are kept on a cash or accrual basis, or some other
generally recognized accounting basis, may file its tax reports on the same
basis that is used for its regular books. [ENDNOTE: (60)] The concept of
accrual accounting requires that revenues and expenses be measured and reported
in the accounting period in which the transactions occur rather than when the
related cash is received or paid. [ENDNOTE: (61)] For sales tax purposes, a
“sale” or “purchase” occurs when title or possession of tangible personal
property is transferred, or when a taxable service is performed. [ENDNOTE:
(62)]
Under these provisions, sales tax for an accrual-based purchaser would be due
and payable on the 20th day of the month following the month in which the
transaction occurred. The invoice date, absent any facts to the contrary, is
accepted as a reliable indicator of the transaction date. Petitioner’s
contention that the tax only become “due and payable” on the date when it made
an expense accrual is not accepted. A purchaser’s tax obligation arises as a
result of making a taxable purchase, and not as a result of booking the
expense, and this is so for a taxpayer, such as Petitioner, that uses an
accrual basis method of accounting. The “due and payable” date for an
accrual-based taxpayer is the tax reporting date in the month immediately
following the period in which the transaction occurred. And for the reasons
discussed, the date that Petitioner booked the expense does not determine the
transaction date.
Petitioner relies on Comptroller’s Decision No. 35,159 (1997). [ENDNOTE: (63)]
In that case, the taxpayer was audited for the period April 1, 1991 through
December 31, 1991. The taxpayer did not have complete invoices and the auditor
scheduled transactions from the taxpayer’s purchase journal. Among the
purchases scheduled was one for which tax was accrued on April 12, 1991. The
taxpayer produced the invoice, which was dated March 27, 1991, and contended
that the transaction could not be assessed because it was outside the audit
period. The decision finds that, because the taxpayer was on the accrual basis
of accounting, the due and payable date was May 20, 1991. For the reasons
discussed above, that is incorrect; the due and payable date was April 20,
1991. The decision finds that assessment of the transaction was not barred by
limitations. That finding, whether correct or not, given that the reporting
periods within limitations in that case were the subject of an agreement to
extend limitations, is not accepted as support for Petitioner’s contention
here. In view of the applicable statutes and precedents, the due and payable
dates are properly determined by reference to the date of the actual purchase
transactions, and not the date that Petitioner recorded the expense. [ENDNOTE:
(64)] Petitioner’s contention should accordingly be denied.
6. Scheduling Date for Refund Item
This issue involves a single purchase of services from Petitioner’s vendor,
COMPANY B. The vendor invoiced Petitioner on January 1, 1999. During June of
2000, Petitioner accrued and remitted sales tax on the entire invoice amount.
The Comptroller auditor determined that 10 percent of the invoice amount was
subject to sales tax and that the remainder was nontaxable. Accordingly, the
nontaxable portion of the invoice was allowed as a credit item on a detailed
basis in the managed audit for the period April 1, 1999 through March 31, 2003.
Petitioner contends that the credit should be transferred to the sample and
projection exam for the refund period of April 1, 1999 through March 31, 1999,
thus increasing the refund due to Petitioner.
At the outset, it should be noted that this is not an issue concerning
limitations. Staff readily concedes that this transaction is not barred by
limitations for inclusion in either the audit period or the refund period.
However, Staff contends that the transaction should remain in the detailed
audit exam because the tax overpayment with regard to this purchase occurred in
June of 2000, a period within the managed audit. Staff contends that the tax
credit should not be projected in the refund exam, because that exam is for
periods prior to when the tax overpayment was made. To allow projection in the
earlier period would result in a tax refund for periods before the tax
overpayment was made.
Petitioner contends that the credit transaction should be included in the
refund exam because of the invoice date. Petitioner reasons that since the
limitations periods for tax assessments and refunds are determined by reference
to the transaction dates, this item should be then scheduled according to those
dates. However, the answer as to how this agreed refund item should be
scheduled is not found in the statutes regarding limitations. A more
applicable statute is Tax Code Section 151.508, which states: “In making a
determination, the comptroller may offset an overpayment for one or more
periods against an underpayment, penalty, and interest accrued on the
underpayment for the same period or one or more other periods.” Staff appears
to have handled this transaction in accordance with the statute by scheduling
it in the managed audit for the period in which the overpayment occurred. This
is so even though the transaction dates are the relevant dates for determining
the expiration of the limitations period. Petitioner therefore has not proved
by a preponderance of the evidence that Staff’s action was incorrect and its
contention for that reason should be denied.
D. Summary of Recommendations
For the reasons discussed, refunds of credits should be allowed for the
following purchases: COMPANY C Invoice No. 046465 for locker room improvements;
Invoice Nos. 03-0024815 and 12581 from COMPANY D for parts bags; Invoice No.
933877306 for prefilters; Invoice No. 9334319580 for nitrile gloves; and
Invoice No. XH223741 from COMPANY E for ear plugs. The remaining refunds and
credits requested by Petitioner should be denied.
III. FINDINGS OF FACT
1. On February 20, 2003, ************* (Petitioner) requested a refund of sales
and use taxes for the period November 1, 1998 through March 31, 1999. The
refund claim was reviewed by an auditor for the Texas Comptroller of Public
Accounts (Comptroller) and denied. Petitioner’s timely request for a refund
hearing was docketed as Hearing No. 44,896.
2. Petitioner was the subject of a managed audit for sales and use tax
compliance for the period April 1, 1999 through March 31, 2003. On July 29,
2005, a Texas Notification of Audit Results was issued that stated a credit
due. Petitioner timely requested a redetermination hearing that was docketed
as Hearing No. 47,235. The transactions at issue in Hearing No. 47,235 include
assessed items and disallowed credit or refund items.
3. The cases were referred to the State Office of Administrative Hearings
(SOAH) on November 9, 2007.
4. A hearing was held on December 5, 2007, in Austin, Texas. The record closed
on January 16, 2008.
Contention One:
5. At all times relevant to the audit and refund claims at issue in this
hearing, Petitioner provided commercial air travel services at AIRPORT B,
AIRPORT C, AIRPORT D, and AIRPORT E. The airports are owned by the respective
municipalities and are political subdivisions of the State of Texas.
6. COMPANY C Invoice No. 046465 (April 22, 1999) reflects a lump-sum charge for
labor and materials to install lockers and benches in Hangar E at AIRPORT B.
The lockers and benches were bolted to the floor.
7. The men’s and women’s locker rooms in Hangar E contain toilets and showers,
and the rooms are accessible to anyone who uses Hangar E. They are not locked
or restricted areas.
8. Petitioner leased Hangar E at AIRPORT B from the CITY A. The agreement
provided that upon construction Hangar E would immediately become property of
the city. The lease requires Petitioner to assume the responsibility and cost
for operating, repairing, and maintaining the hangar and other facilities, and
to pay water, heat, electricity, air conditioning, sewer rents, and other
utilities with respect to the leased premises. The city has the right to enter
the hangar and other facilities to inspect, maintain, or repair them, or to
exercise governmental functions.
9. Petitioner made the improvements to the locker room at Hangar E after it
occupied the premises in connection with the initial finish-out of the
facility. Petitioner paid for the improvements, but title to the items vested
in the CITY A.
10. Other carriers are allowed to use Hangar E when necessary because it is the
common goal of all the carriers operating at the airport to ensure that the
airport operates safely and efficiently.
11. Representatives of the airport authority enter Hangar E periodically to
perform inspections pursuant to the CITY A’s right under the lease to confirm
that the facility is in good repair and working order.
12. COMPANY F. Invoice No. 99-1701 (April 22, 1999) reflects a lump-sum charge
for labor and materials to repair a public restroom in a terminal facility at
AIRPORT A in CITY A, Texas.
13. At the time of the restroom repairs reflected in Invoice No. 99-1701,
Petitioner provided commercial air travel services at AIRPORT A.
14. Under an Airport Lease Agreement with the CITY A, Petitioner as lessee
leased a terminal site, consisting of specified land, for Petitioner’s exclusive
use. The lease contemplates that temporary terminal facilities are to be
constructed by Petitioner, and any improvements, modifications, or major repairs
were subject to approval by the City. Title to the temporary terminal facilities
remained vested in Petitioner.
15. The terminal facility Petitioner operated at AIRPORT A, including the
restroom that was the subject of the repairs, was open to the public and was
used by the public in connection with air travel.
Contention Two:
16. Petitioner leased Terminals B, C, and E at AIRPORT B from the CITY A. The
lease agreements required Petitioner to provide all maintenance and janitorial
services in the areas of the terminals reserved for its use, and to pay all
utility charges.
17. Invoice No. 60686 from COMPANY G (April 19, 1999) reflects a charge for
janitorial services provided in Terminal C at AIRPORT B. The services were
provided throughout the areas operated by Petitioner at the terminal, which is
open to the public.
18. Invoice No. 5068 from COMPANY H (April 21, 1999) reflects charges for
cleaning plants and plant containers in areas operated by Petitioner at
Terminal C.
19. Invoice No. 015171 from COMPANY A (January 20, 1999), reflects charges for
janitorial, weekend, and graveyard shift services.
20. Invoice No. 91877641 from COMPANY J (August 9, 2002) reflects the purchase
of a Model 550 riding scrubber. Petitioner used the scrubber to clear surfaces
where aircraft operate or are maintained to remove fluids and other foreign
object debris that could be ingested into an aircraft engine or cause other
safety hazards.
21. Invoice No. 88947-02 (July 15, 2000) reflects the rental of fifteen storage
containers called Mobile Minis used as jetways. They were used by passengers
as walkways to gates that had to be relocated during the terminal construction.
22. Invoice Nos. 24822, 269070, and 220978 from the CITY A Department of
Aviation reflect the purchases of IAH-ID badges used by Petitioner’s employees.
The badges are used to enter secure areas of the airport.
23. Invoice Nos. 402663, 405120, 406699, 405933, 407493, and 407745 from
COMPANY K reflect the purchases of security supplies that were shipped to and
used by private security contractors.
24. During the relevant periods, Petitioner purchased gas and electricity for
use in airport facilities it leased from the CITY A.
Contention Three:
25. Invoice Nos. 03-0024815 (February 21, 2003) and 12581 (October 10, 2001)
from COMPANY D reflect the purchases of overstitched parts bags. The bags are
used to hold screws, nuts, bolts, and other hardware during aircraft
maintenance and were exclusively used by maintenance technicians during repair
and maintenance of aircraft.
26. Invoice No. 933877306 (April 5, 199) reflects the purchase of 100
prefilters that are part of a gas mask used by aircraft technicians in the
paint shop.
27. Invoice No. 9334319580 (May 22, 2001) reflects the purchase of nitrile
gloves. The gloves do not dissolve or deteriorate from exposure to chemicals
or fuels.
28. Invoice No. XH223741 (February 3, 1999) from COMPANY E reflects the
purchase of earplugs.
29. Invoice No. 678500-00 (January 13, 2003) from COMPANY L reflects the
purchase of Styrofoam packaging materials used to ship aircraft parts.
30. Invoice No. 99-038 (December 1, 1999) from COMPANY M reflects the purchase
of a Budge Module, a part of the COMPANY N. The item is aircraft maintenance
scheduling software used to schedule, track, optimize, and maintain Petitioner’s
long range aircraft maintenance plan.
Contention Four:
31. Invoice Nos. 9220360327, 9220742882, 9331023066, and 9336642294 from
COMPANY O reflect purchases of toiletry supplies such as tissues, lens,
towelettes, and seat covers. The items were placed in aircraft operated as
common carriers of people.
32. Petitioner’s commercial aircraft operating as certified common carriers of
persons have toilets on board the aircraft.
Contention Five:
33. The Comptroller auditor denied refund or credit items as barred by the
statute of limitations applicable to the audit. The denied purchases were
invoiced prior to April 1, 1999. Petitioner accrued the purchases as expenses
after that date.
34. The Comptroller auditor denied refund items as barred by the statute of
limitations for the refund claim period. The denied purchases were invoiced
prior to January 1, 1999. Petitioner accrued the purchases as expenses after
that date.
35. During the periods at issue, Petitioner used the accrual method of
accounting to maintain its books and records.
Contention Six:
36. Invoice No. 3220-09 (January 1, 1999) from COMPANY B was for the purchase
of services. Petitioner accrued and paid sales tax on the invoice during June
of 2000.
37. The Comptroller auditor determined that 90 percent of the invoice amount
was not subject to sales tax. Accordingly, the nontaxable portion of the
invoice was scheduled as a credit item on a detailed basis in the managed audit
for the period April 1, 1999 through March 31, 2003.
38. Petitioner filed a refund claim that was recognized as within the
limitations for the period January 1, 1999 through March 31, 1999. In the
refund claim, refund items were scheduled on a sample and projection basis.
IV. CONCLUSIONS OF LAW
1. The Comptroller has jurisdiction over this matter pursuant to TEX. TAX CODE
ANN. ch. 111.
2. The State Office of Administrative Hearings has jurisdiction over matters
related to the hearing in this matter, including the authority to issue a
proposal for decision with findings of fact and conclusions of law pursuant to
TEX. GOV’T CODE ANN. ch. 2003.
3. The Comptroller provided proper and timely notice of the hearing pursuant to
TEX. GOV’T CODE ANN. ch. 2001.
4. Based on the foregoing Findings of Fact, Petitioner met its burden of proof
under 34 TEX. ADMIN. CODE Section 1.40(2)(A) to show by clear and convincing
proof that refunds or credits are due for tax paid on the purchase of locker
room improvements for the primary use and benefit of an exempt entity pursuant
to TEX. TAX CODE Section 151.309 and 34 TEX. ADMIN. CODE Section 3.291(a)(5).
5. Based on the foregoing Findings of Fact, Petitioner met its burden of proof
under 34 TEX. ADMIN. CODE Section 1.40(2)(A) to show by clear and convincing
proof that refunds or credits are due for tax paid on the purchase of parts
bags, prefilters, nitrile gloves, and earplugs used or consumed exclusively in
the repair, remodeling, or maintenance of aircraft used by a certificated or
licensed carrier of persons or property pursuant to TEX. TAX CODE Section
151.338(d).
6. Based on the foregoing Findings of Fact, Petitioner did not meet its burden
of proof under 34 TEX. ADMIN. CODE Section 1.40(2)(A) to show by clear and
convincing proof that refunds or credits were due for other claimed purchase
transactions.
7. Based on the foregoing Findings of Fact, Petitioner did not meet its burden
of proof under 34 TEX. ADMIN. CODE Section 1.40(2)(A) to show by clear and
convincing proof that refunds or credits were due for other claimed purchase
transactions.
8. Based on the foregoing Findings of Fact, Petitioner did not meet its burden
of proof under 34 TEX. ADMIN. CODE Section 1.40(2)(B) to show by a
preponderance of the evidence that refunds or credits were denied in error for
transactions that were within limitations pursuant to TEX. TAX CODE Section
111.104(b)(3), 111.201, and 151.401(a).
9. Based on the foregoing Findings of Fact, Petitioner did not meet its burden
of proof under 34 TEX. ADMIN. CODE Section 1.40(2)(B) to show by a
preponderance of the evidence that a refund was scheduled in error in a
detailed exam rather than a sample and projection exam pursuant to TEX. TAX
CODE Section 151.508.
10. Based on the foregoing Findings of Fact and Conclusions of Law, additional
refunds or credits should be allowed as stated in the foregoing Summary of
Recommendations. The remainder of Petitioner’s contentions should be denied.
Hearing Nos. 44,896 and 47,235
ORDER OF THE COMPTROLLER
On January 30, 2008, the State Office of Administrative Hearings’ (SOAH)
Administrative Law Judge, Alvin Stoll, issued a Proposal for Decision in the
above referenced matter. Petitioner filed exceptions on February 15, 2008.
The Tax Division filed a response on March 3, 2008. The ALJ issued an Amended
Proposal for Decision in response. The parties were given fifteen days from
the date of the Amended Proposal for Decision to file exceptions with SOAH. No
exceptions were filed, and the Comptroller has determined that the
Administrative Law Judge’s Amended Proposal for Decision should be adopted as
written.
The above decision resulting in a credit to Taxpayer as set out in “Attachment
A,” which is incorporated by reference, is approved and adopted in all
respects. This decision becomes final twenty days after the date Petitioner
receives notice of this decision. If either party desires a rehearing, that
party must file a Motion for Rehearing, which must state the grounds for
rehearing, no later than twenty days after the date Petitioner receives notice
of this decision. Notice of this decision is presumed to occur on the third
day after the date of this decision.
Signed on this 19th day of October 2009.
SUSAN COMBS
by: Martin A. Hubert
Deputy Comptroller
ENDNOTE(S)
(1) Although the joined cases involve a redetermination hearing and a refund
hearing, ***************, will be referred to as Petitioner in this Decision.
(2) See TEX. TAX CODE ANN. Section 151.0101(a)(13) and 151.047.
(3) TEX. TAX CODE ANN. Section 151.005 and 151.051; 34 TEX. ADMIN. CODE Section
1.40(2)(A).
(4) TEX. TAX CODE ANN. Section 151.311.
(5) TEX. TAX CODE ANN. Section 151.056(e); see also 34 TEX. ADMIN. CODE Section
3.347(a).
(6) 34 TEX. ADMIN. CODE Section 3.357(a)(2).
(7) See e.g., Comptroller’s Decision No. 44,170 (2004) (Section 151.311 is
available only to contractor or service provider).
(8) TEX. TAX CODE ANN. Section 151.309(5).
(9) 34 TEX. ADMIN. CODE Section 3.291(a)(5).
(10) TEX. TRANSP. CODE ANN. Section 22.001 et seq., formerly known as the
Municipal Airports Act.
(11) TEX. TRANSP. CODE ANN. Section 22.002(a)(2) and 22.011(a).
(12) See e.g. Comptroller’s Decision No. 17,245 (1988) (primary use and benefit
test applies to exemptions in both Section 151.309 and Section 151.311).
(13) See also Accession No. 9806570L (June 9, 1998)(airport improvements
including terminal, bus stations, and baggage handling system were integral to
operation of the public and designed to be used daily the public at large in
connection with air travel); Accession No. 200204006L (April 19, 2002) (air
cargo handling facilities leased to private lessee were for primary use and
benefit of airport).
(14) Testimony of INDIVIDUAL C.
(15) According to the Non-Terminal Lease or “C” Lease, Exhibit “A,” the hangar
maintenance facility at issue, and all structures, fixtures, and furnishings,
were part of a project financed by “Series 1997C Bonds”. Whether those
provisions applied to the locker room improvements has not been briefed.
(16) Testimony of INDIVIDUAL C.
(17) Tax Division’s Proposed Findings of Fact and Additional Argument, December
18, 2007.
(18) Testimony of INDIVIDUAL C.
(19) Petitioner’s Exhibit 2. The Airport Lease Agreement references Exhibits A
and B that further describe the leased premises, but those exhibits were not
attached.
(20) Testimony of INDIVIDUAL C
(21) See TEX. TAX CODE ANN. Section 151.0101(a)(11) and 151.048.
(22) TEX. TAX CODE ANN. Section 151.309(5).
(23) See, e.g., Strayhorn v. Raytheon E-Systems, Inc., 101 S.W.3d 558 (Tex.
App. - Austin 2003, pet. denied) and Day & Zimmerman, Inc. v.Calvert, 519
S.W.2d 106 (Tex. 1975).
(24) TEX. TRANSP. CODE ANN. Section 22.002(a)(2) and 22.011(a).
(25) City of Corsicana v. Wren, 317 S.W.2d 516 (1958).
(26) Bullock v. National Bancshares Corp., 584 S.W.2d 268 (Tex. 1979) and
Teleprofits of Texas v. Sharp, 875 S.W.2d 748 (Tex. Civ. App. – Austin, 1994).
(27) 34 TEX. ADMIN. CODE Section 3.322(g)(2).
(28) 34 TEX. ADMIN. CODE Section 3.322(g)(1).
(29) 34 TEX. ADMIN. CODE Section 1.40(2)(A).
(30) Testimony of ***************.
(31) TEX. TAX CODE ANN .Section 51.328(d).
(32) 34 TEX. ADMIN. CODE Section 3.297(d)(2)(A), effective August 12, 1998.
(33) TEX. TAX CODE ANN Section 111.002.
(34) 919 S.W.2d 157 (1996).
(35) TEX. TAX CODE ANN. Section 151.328(d), effective September 1, 1989.
(36) TEX. TAX CODE ANN. Section 151.328(d), effective July 1, 1995.
(37) 34 TEX. ADMIN. CODE Section 3.297(d)(2)(A), effective January 28, 1992.
(38) 34 TEX. ADMIN. CODE Section 3.300(a)(7).
(39) Accession No. 200204012L (April 25, 2002).
(40) 34 TEX. ADMIN. CODE Section 3.300(a)(4).
(41) Accession No. 200204012L; 34 TEX. ADMIN. CODE Section 3.329(a)(3).
(42) Accession No. 9409L1318F01 (September 22, 1994).
(43) See Fleming Foods of Texas v. Rylander, 65 S.W. 2d 278 (Tex. 1999).
(44) Testimony of INDIVIDUAL D.
(45) Accession No. 9409L1318F01 (September 22, 1994).
(46) Testimony of INDIVIDUAL D.
(47) Testimony of INDIVIDUAL D.
(48) Accession No. 9612988L (December 3, 1996).
(49) Testimony of INDIVIDUAL E.
(50) Star Accession No. 9612988L (December 3, 1996).
(51) 784 S.W.2d 563 (Tex. App. – Austin 1990, no pet.).
(52) 34 TEX. ADMIN. CODE Section 3.297(d)(5).
(53) 34 TEX. ADMIN. CODE Section 3.297(d)(3).
(54) TEX. GOV’T. CODE Section 311.023(6).
(55) Bullock v. Marathon Oil Company, 798 S.W.2d 353, 357 (Tex. App. - Austin
1990, no pet. hist.).
(56) Petitioner’s Reply to Position Letter, Exhibit A.
(57) TEX. TAX CODE ANN. Section 111.201.
(58) TEX. TAX CODE ANN. Section 151.401(a).
(59) TEX. TAX CODE ANN. Section 111.107.
(60) TEX. TAX CODE ANN. Section 151.408
(61) Fundamentals of Financial Accounting, Welsch, Anthony, & Short, Fourth
Edition, Page 102.
(62) TEX. TAX CODE ANN. Section 151.005.
(63) The status of this decision is “superseded;” the reason is not stated.
Petitioner states that it was told, and Staff does not deny, that the decision
was superseded due to an unrelated issue regarding medical supplies.
(64) See Comptroller’s Decision No. 21,983 (1988) (limitations period is
determined by reference to the date when the tax was due and payable under the
tax statutes, and not the date when the tax payment was actually made); see
also Comptroller’s Decision Nos. 24,985 (1989) and 36,934 (1998).
ACCESSION NUMBER: 200910694H
SUPERSEDED: N
DOCUMENT TYPE: H
DATE: 2009-10-19
TAX TYPE: SALES