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ALERT – Sections 151.054 and 151.154 were amended to change the 60 day timeframe for presenting resale/exemption certificates to the auditor. Senate Bill 296, 87th Leg. Session (2021) requires that certificates be presented to the auditor within 90 days or a date agreed to by the comptroller and the seller effective 06/07/2021.
SOAH DOCKET NO. 304-12-7535.26
CPA HEARING NO. 104,720
RE: *************
TAXPAYER NO.: *************
AUDIT OFFICE: *************
AUDIT PERIOD: July 1, 2004 THROUGH September 30, 2004
Limited Sales, Excise, And Use Tax/RDT
BEFORE THE COMPTROLLER
OF PUBLIC ACCOUNTS
OF THE STATE OF TEXAS
SUSAN COMBS
JOHN D. BOSTICK
Representing Tax Division
*************
Representing Petitioner
COMPTROLLER’S DECISION
The (Comptroller) assessed tax and
interest against ************* (Petitioner) on the sale of an aircraft.
Petitioner requested redetermination contending that: (1) the tax should be
reduced by the value of a trade-in aircraft; (2) the sale was an exempt sale
for resale; (3) the Comptroller is estopped from assessing tax because of its
inconsistent representations; (4) the transaction qualifies as a like-kind
exchange under federal law; and (5) the assessment against Petitioner was time
barred because Petitioner was dissolved more than three years before the tax
was assessed. In his Amended Proposal for Decision, the Administrative Law
Judge (ALJ) finds that Petitioner’s first four contentions should be denied.
The ALJ further recommends that Petitioner’s fifth contention be granted and
that the entire assessment for that reason should be dismissed.
I. PROCEDURAL HISTORY
A hearing convened before ALJ Alvin Stoll on December 4, 2012. The Comptroller
was represented by Assistant General Counsel John D. Bostick. Petitioner was
represented by *************. To allow time for filing corrected exhibits, the
ALJ ordered the record to close on December 7, 2012.
A Proposal for Decision was issued on December 14, 2012. Staff filed Exceptions
on January 10, 2013. Petitioner did not respond. The Amended Proposal for
Decision represents the ruling on Staff’s Exceptions.
II. REASONS FOR DECISION
A. Evidence Submitted
Comptroller Staff (Staff) called as a witness Patricia Gonzales of the
Comptroller’s Audit Division. Staff submitted the following documents:
1. 60-Day Notice Letter;
2. Texas Notice of Exam Results;
3. Business Activity Research Team Documents;
4. Sales and Use Tax Summary Inquiry;
5. Sales and Use Tax Data Inquiry;
6. Comptroller Letters dated May 18, 2010, and January 30, 2009;
7. Computation of Taxable Base; and
8. Affidavit of Cale Savage, Comptroller Accounts Examiner, with exhibits:
A. Sales and Use Tax Returns filed by Petitioner; and
B. Comptroller Penalty and Interest Inquiries.
Petitioner did not call any witnesses. Petitioner submitted the following
exhibits:
1. Texas Notification of Amended Exam Results;
2. Promissory Note;
3. Aircraft Dry Lease Agreement;
4. Option Exercise Notice;
5. Aircraft Bill of Sale;
6. Aircraft Security Agreement;
7. Uniform Sale for Resale Certificate;
8. Petitioner’s Documents on file with Delaware Secretary of State;
9. Texas Notification of Exam Results dated October 15, 2008, Petitioner’s
Letter dated December 5, 2008, Comptroller Certificate of Account Status, and
Comptroller Letter dated January 30, 2009; and
10. Designation of Authorized Representative;
All documents were admitted into the record without objection.
B. Agreed Changes to the Assessment
Staff agreed to waive interest for the period February 1, 2011, through May 31,
2012.
C. Background and Basis for the Assessment
Petitioner was a Delaware limited liability company with a principal location
in CITY, Massachusetts. On August 23, 2003, Petitioner purchased a Cessna 550,
Registration Number ************* (the Aircraft). Immediately afterwards,
Petitioner leased the Aircraft to ************* (COMPANY), a Texas limited
liability company. Petitioner collected and remitted Texas sales and use tax on
the lease payments it received under the lease. The lease agreement provided
COMPANY an option to purchase the Aircraft. Approximately one year into the
lease period, COMPANY exercised that option, and Petitioner sold the Aircraft
to COMPANY on August 19, 2004.
The Comptroller’s Business Activities Research Team (BART) reviewed
Petitioner’s initial purchase of the Aircraft and determined it qualified for
exemption as a sale for resale. BART further determined that the August 19,
2004 sale to COMPANY qualified as an occasional sale of the entire operating
assets of a business under TEX. TAX CODE ANN. Section 151.304(b)(2). BART
concluded that sales tax was nevertheless due under TEX. TAX CODE ANN. Section
151.055(a), a rarely invoked statute that provides when tangible personal
property is purchased for resale for the purpose of renting or leasing the
property, but subsequently the property is sold in an occasional sale, tax is
due based on the difference between the original purchase price and the amount
of sales tax remitted on the lease or rental payments. BART computed the tax
due by subtracting from the August 23, 2003 purchase price the total of the
tax on the rentals that Petitioner had collected and remitted. By Texas
Notification of Exam Results dated October 15, 2008, tax of $*************, a
10% penalty, and accrued interest was assessed. A Texas Notification of Amended
Exam Results dated May 18, 2010, corrected the tax amount to $*************,
with corresponding changes in the penalty and interest assessments.
D. Analysis and Recommendation
1. Trade-in Aircraft
The taxable transaction in this case was Petitioner’s August 19, 2004 sale of
the Aircraft to COMPANY. Under TEX. TAX CODE ANN. Section 151.055(a), the
amount of tax due is based on the amount paid by Petitioner upon initial
purchase of the Aircraft, and Staff computed the assessment based on
Petitioner’s August 23, 2003 purchase price. Petitioner contends that the
purchase price should be reduced by the value of a trade-in aircraft that it
conveyed to the seller. TEX. TAX CODE ANN. Section 151.007(c)(5) provides that
the purchase price does not include the value of tangible personal property
taken by a seller as all or part of the consideration of a taxable item, if the
tangible personal property is the type of property sold by the seller in the
regular course of business. Petitioner’s contention must be denied because
Petitioner did not establish any facts regarding a trade-in aircraft or the
seller’s regular course of business and consequently did not prove by a
preponderance of the evidence pursuant to 34 TEX. ADMIN. CODE Section
1.40(2)(B) that the assessment was incorrect.
2. Resale Exemption
Petitioner contends that the sale is exempt under TEX. TAX CODE ANN. Section
151.006 and 151.302 as the sale of tangible personal property to a purchaser
who acquires it for the purpose of reselling it. As supporting evidence,
Petitioner submitted a Border States Uniform Sale for Resale Certificate issued
by COMPANY. A seller of taxable items may prove the resale exemption only by
means of a timely and properly completed resale certificate received in good
faith. SEE TEX. TAX CODE ANN. Section 151.054. The resale certificate is dated
August 4, 2004, fifteen days prior to the date that Petitioner states the sale
occurred. In the space for the eleven-digit taxpayer number there is the
notation: “08-03-2004.” Petitioner explains that this is the date when COMPANY
applied for a sales tax permit. A valid resale certificate must show the number
from the sales tax permit held by the purchaser, or a statement that an
application for a permit is pending before the comptroller. If the application
is pending, the resale certificate is valid for 60 days, after which time a
resale certificate with the permanent number must be obtained. 34 TEX. ADMIN.
CODE Section 3.285(g)(2). Petitioner has not presented proof that Petro Wing’s
application was pending, and even if such proof were presented, the certificate
would still be subject to the requirement that it be renewed with a permanent
number within 60 days. The resale certificate therefore must be rejected
because it does not contain a valid taxpayer number or a statement that an
application is pending. In addition, the certificate does not contain a
description of the property being purchased or a description of the taxable
items generally sold by the purchaser. SEE 34 TEX. ADMIN. CODE Section
3.285(g). The exemption certificate was not properly completed, and Petitioner
has not proved exemption by clear and convincing evidence as required by 34
TEX. ADMIN. CODE Section 1.40(2)(A).
Staff alternatively contends that since the transaction qualified as an
occasional sale it cannot at the same time be considered a sale for resale.
Staff had not cited any authority for that proposition. However, resolution of
the issue is not necessary because Petitioner’s resale contention fails for
other reasons.
3. Estoppel
Petitioner contends that the Comptroller is estopped from asserting the tax
liability due to prior statements made to Petitioner. BART notified Petitioner
by letter dated January 30, 2009, that based on the information provided, the
Comptroller’s records have been updated to reflect that “the purchase of the
above referenced aircraft [the Aircraft] qualifies for an exemption from the
sales and use tax.” Petitioner contends it understood this statement as a
representation that its sale to COMPANY was an exempt sale for resale, and that
its reliance on the statement caused it to not timely obtain a valid resale
certificate. Staff issued Petitioner a 60-day notice letter for obtaining
additional certificates on July 14, 2010, and the time for obtaining a valid
resale certificate has now expired. SEE TEX. TAX CODE ANN. Section 151.054(e).
Petitioner further asserts that the Comptroller has communicated inconsistent
and vacillating theories regarding the tax liability to Petitioner and to
COMPANY, who was assessed a deficiency for the same transaction and who is
represented by the same counsel. Staff responds that there can be no estoppel
based on the erroneous acts of the Comptroller’s agents when exercising
governmental functions.
The ALJ finds that Petitioner’s contention fails on both factual and legal
grounds. For example, regardless of any statements in the Comptroller’s January
30, 2009 letter, Petitioner was on notice that the Comptroller continued to
assert a tax liability when it received the Texas Notification of Amended Exam
Results of May 18, 2010, and Petitioner was afterwards given an opportunity to
obtain resale certificates. Petitioner has not otherwise shown that the
Comptroller’s statements denied it an opportunity to contest the audit
assessment. Moreover, there is no legal basis for granting relief for the
erroneous act of governmental agents exercising a public or governmental
function. COMPTROLLER’S DECISION NO. 103,972 (2010), citing S & H MKTG. GROUP,
INC. V. SHARP, 951 S.W.2d 265 (Tex. App.–Austin 1997, no writ). Petitioner has
not proved any grounds for relief on the basis of inconsistent or incorrect
Comptroller statements.
4. Exchange under Federal Law
Petitioner contends that the sale to COMPANY is exempt because Petitioner
served as a qualified intermediary in a like-kind exchange under 26 U.S.C.A.
Section 1031. This contention is rejected because the Texas Tax Code does
not provide a state tax equivalent of a section 1031 exchange and does not
recognize the federal tax consequences of a qualifying section 1031 exchange.
COMPTROLLER’S DECISION NO. 102,538 (2010). Petitioner has not established any
grounds for relief.
5. Survival of Action against Dissolved Entity
Petitioner contends that the tax liability must be dismissed because it was
assessed more than three years after Petitioner terminated its existence.
Petitioner cites the Business Organizations Code, which applies to “filing
entities” such as corporations, limited partnerships, and limited liability
companies. TEX. BUS. ORG. CODE ANN. Section 1.002(22). [ENDNOTE: (1)] A
“terminated filing entity” is liable only for an existing claim. TEX. BUS. ORG.
CODE ANN. Section 11.351. Notwithstanding the termination of a domestic filing
entity, the entity continues in existence until the third anniversary of the
termination date for the purposes of permitting the survival of an existing
claim by or against the terminated filing entity. TEX. BUS. ORG. CODE ANN.
Section 11.356(a)(2). An existing claim by or against a terminated filing
entity is extinguished unless an action or proceeding is brought on the claim
not later than the third anniversary of the termination date. TEX. BUS. ORG.
CODE ANN. Section 11.359(a).
Petitioner received its Certificate of Formation from the Delaware Secretary of
State on May 9, 2003. A Certificate of Cancellation, signed by Petitioner on
April 14, 2004, was filed with the Delaware Secretary of State on October 6,
2004. The effective date of the cancellation is stated to be the date of filing
unless a different date is specified, which there is not. The Delaware
Secretary of State certified that these two documents are the only documents
concerning Petitioner on file in that office. On November 8, 2004, the
Comptroller issued a Certificate of Account Status stating that Petitioner had
filed and paid all required state tax reports. The Certificate of Account
Status further states: “This certificate must be filed with the Texas Secretary
of State to legally end the corporation’s existence in Texas. This certificate
is valid for the purpose of dissolution, merger, conversion, or withdrawal
through December 31, 2004.” Petitioner has not submitted documents from the
Texas Secretary of State terminating its authorization to do business in Texas,
but that fact is not fatal to Petitioner’s claim because any authority to
transact business in Texas is necessarily derivative of Petitioner’s continued
existence elsewhere. SEE TEX. BUS. ORG. CODE ANN. Section 1.002(27) and (28).
The tax liability qualifies as an “existing claim” because Petitioner incurred
it on August 15, 2004, before it terminated its existence. The Comptroller was
required to bring any action on the existing claim within three years of
Petitioner’s dissolution, which occurred on October 6, 2004. The Texas
Notification of Exam Results was issued on October 15, 2008, a date more than
three years afterwards.
Although the assessment was not within the three-year period of the Business
Organizations Code, it was within the limitations period set forth in TEX. TAX
CODE ANN. Section 111.201, which provides that no tax may be assessed after
four years from the date that the tax becomes due and payable. The tax
liability is for the period July 1, 2004, through September 30, 2004, the
quarter in which the taxable sale of the Aircraft took place. Since Petitioner
was a quarterly filer during the audit period, the tax return for that period
was due on October 20, 2004. TEX. TAX CODE ANN. Section 151.401. The tax
assessment occurred on October 15, 2008, five days before limitations expired.
In addition, an assessment may be made at any time when no report has been
filed, or when the assessment is for a gross error, defined as an amount of tax
due that exceeds the amount initially paid by at least 25%. TEX. TAX CODE ANN.
Section 111.205. It is clear therefore that the assessment was timely under the
Tax Code limitations statute.
Staff contends that the Tax Code limitations periods must take precedence over
Business Organizations Code provisions regarding the survival of actions
against dissolved limited liability companies. Staff cites the rule of
statutory construction that when statutes are in conflict a specific provisions
controls over a general provision. Staff contends that the four-year period
stated in Tax Code Section 111.201 is the provision specific to taxes. However,
the converse of this proposition is equally logical: it is the Business
Organizations Code provisions that apply specifically to claims against
dissolved entities. Moreover, the two provisions are more correctly construed
as cumulative rather than contradictory to each other. Business Organizations
Code Section 11.356 and 11.359 contain provisions that closely parallel a prior
statute: Article 7.12 of the Texas Business Corporations Act (expired January
1, 2010). In construing Article 7.12, Texas courts have noted that at common
law the legal existence of a corporation was terminated upon dissolution, along
with all claims against the corporation. The Legislature changed this result by
enacting Article 7.12, allowing for the survival of existing claim against a
corporation for three years after its dissolution, and that statute was the
exclusive relief for those asserting a claim against a dissolved corporation.
PELLOW V. CADE, 990 S.W.2d 307 (Tex. App.–Texarkana 1999, no pet.). Article
7.12 is a survival statute, not a statute of limitations. The distinction
between a survival statute and a limitations statute is that the former gives
life for a limited time to right or claim that would otherwise have been
destroyed entirely, while a limitations statute determines the time in which a
stale claim may be brought. MARTIN V. TEX. WOMAN’S HOSP., 930 S.W.2d 717 (Tex.
App.—Houston [1st Dist.] 1996, no writ). A claim cannot be brought outside the
time limits of the survival statute because there is no longer an entity that
can be sued. A dissolved corporation cannot be revived by a statute of
limitations, no matter how sweeping its reach. Id. at 721; SEE ALSO GOMEZ V.
PASADENA HEALTH CARE MGMT., 246 S.W.3d 306 (Tex. App. – Houston [14th Dist.]
2008, no pet.) (“Article 7.12 prevails over the statute of limitations contained
in the Medical Liability Act.”)
Staff contends that applying the survival statute to tax assessments would
enable business entities to engage in deliberate tax avoidance by collecting
taxes and then terminating their existence in the hope of avoiding detection
for three years. However, one purpose of survival statutes such as Article 7.12
is to protect shareholders, officers, and directors of dissolved corporations
from prolonged and uncertain liability. HUNTER V. FORT WORTH CAPITAL CORP., 620
S.W.2d 547 (Tex. 1981). That rationale applies to tax liabilities as much as to
any other type of liability. The fact that Article 7.12 was understood to apply
to Comptroller tax assessments is plain from REVEILLE TOOL & SUPPLY, INC. V.
STATE, 756 S.W. 2d 102 (Tex. App.–Austin 1988, no writ), in which the
Comptroller issued a jeopardy determination against a corporate taxpayer,
followed by a redetermination hearing. The State of Texas then filed suit to
recover the taxes. The taxpayer argued that an “action or proceeding” regarding
the taxes had not been brought until the state filed suit, a date more than
three years after the taxpayer was dissolved. The Court of Appeals rejected
this claim on the grounds that the earlier assessment and redetermination
hearing had occurred with the three-year survival period in Article 7.12. The
case of REVEILLE TOOL & SUPPLY is authority for the proposition that
Comptroller tax assessments are subject to the survival statutes, which are now
contained in Business Organizations Code Section 11.356 and 11.359.
A final question is how the survival provisions of the Business Organizations
Code apply to a tax assessment against Petitioner, a foreign limited liability
company authorized to do business in Texas. Since Petitioner was chartered in
Delaware, it was a “foreign entity,” defined as an organization formed under
the laws of a jurisdiction other than Texas. The internal affairs of a foreign
entity are governed by the laws of the jurisdiction in which it is formed. TEX.
BUS. ORG. CODE ANN. Section 1.002(27). A foreign entity enjoys the same but no
greater rights and privileges as the domestic entity to which it most closely
corresponds. TEX. BUS. ORG. CODE ANN. Section 9.202. With exceptions not
applicable here, in any matter that affects the transaction of intrastate
business in Texas, a foreign entity is subject to the same duties,
restrictions, penalties, and liabilities imposed on a domestic entity to which
it most closely corresponds. TEX. BUS. ORG. CODE ANN. Section 9.203. The
assessment is for Texas sales and use tax due on the sale of an aircraft in
Texas to a Texas purchaser, and it is a claim based on Petitioner’s intrastate
business in Texas. These considerations support a finding that this case should
be decided under Texas law.
Moreover, the law applicable to a foreign corporation is presumed to be the
same as that of Texas unless a party has properly pled and proved otherwise.
PELLOW, 990 S.W.2d at 313. Staff in its Exceptions submitted a Delaware statute
regarding tax assessment limitations but nothing with respect to Delaware law
for survival of actions against dissolved business entities. The ALJ therefore
concludes that this Amended Proposal for Decision must be based on the Texas
Business Organizations Code. The ALJ further concludes, based on the
uncontested facts of this case, that Petitioner has established its contention
by a preponderance of the evidence and that the assessment should be dismissed
in its entirety.
III. FINDINGS OF FACT
1. The (Comptroller) assessed tax and
interest against ************* (Petitioner) on the sale of an aircraft.
Petitioner timely requested redetermination.
2. On July 31, 2012, the case was referred to the State Office of
Administrative Hearings. Comptroller Staff issued a Notice of Hearing on
Written Submission that contained a statement of the nature of the hearing; the
legal authority and jurisdiction under which the hearing was to be held; a
reference to the particular sections of the statutes and rules involved; and a
short, plain statement of the matters asserted. At Petitioner’s request the
case was converted to an oral hearing.
3. Petitioner was a Delaware limited liability company with a principal
location in CITY, Massachusetts.
4. On August 23, 2003, Petitioner purchased a Cessna 550, Registration Number
************* (the Aircraft). Immediately afterwards, Petitioner leased the
Aircraft to ************* (COMPANY), a Texas limited liability company.
Petitioner collected and remitted Texas sales and use tax on the lease payments
it received under the lease.
5. The lease agreement provided COMPANY an option to purchase the Aircraft.
Approximately one year into the lease period, COMPANY exercised that option,
and Petitioner sold the Aircraft to COMPANY on August 19, 2004.
6. The Comptroller’s Business Activities Research Team (BART) reviewed
Petitioner’s initial purchase of the Aircraft and determined it qualified for
exemption as a sale for resale. BART further determined that the August 19,
2004 sale to COMPANY qualified as an occasional sale of the entire operating
assets of a business under TEX. TAX CODE ANN. Section 151.304(b)(2).
7. BART concluded that sales tax was due under TEX. TAX CODE ANN. Section
151.055(a). BART computed the tax due by subtracting from the August 23, 2003
purchase price the total of the tax on the rentals that Petitioner had
collected and remitted.
8. By Texas Notification of Exam Results dated October 15, 2008, tax of
$*************, a 10% penalty, and accrued interest was assessed for the period
July 1, 2004, through September 30, 2004. A Texas Notification of Amended Exam
Results dated May 18, 2010, corrected the tax amount to $*************, with
corresponding changes in the penalty and interest assessments.
9. Petitioner did not submit evidence regarding a trade-in aircraft or the
seller’s regular course of business.
10. Petitioner submitted a Border States Uniform Sale for Resale Certificate
issued by COMPANY. The resale certificate is dated August 4, 2004, fifteen
days prior to the date that Petitioner states the sale occurred. The resale
certificate did not contain a valid taxpayer number or a statement that an
application is pending. In addition, the certificate does not contain a
description of the property being purchased or a description of the taxable
items generally sold by the purchaser.
11. BART notified Petitioner by letter dated January 30, 2009, that based on
the information provided, the Comptroller’s records have been updated to
reflect that “the purchase of the above referenced aircraft [the Aircraft]
qualifies for an exemption from the sales and use tax.” Petitioner did not
submit evidence to show that it received incorrect Comptroller statements that
denied it an opportunity to contest the audit assessment.
12. Petitioner received its Certificate of Formation from the Delaware
Secretary of State on May 9, 2003. A Certificate of Cancellation, signed by
Petitioner on April 14, 2004, was filed with the Delaware Secretary of State on
October 6, 2004. The effective date of Petitioner’s cancellation was October 6,
2004.
13. The Texas Notification of Exam Results was issued on October 15, 2008, a
date more than three years after the effective date of Petitioner’s
cancellation.
14. Petitioner filed its sales tax returns on a quarterly basis during the
audit period. Petitioner filed its quarterly return for the third quarter of
2004 on the due date of October 20, 2004.
15. The assessment is for Texas sales and use tax due on the sale of an
aircraft in Texas to a Texas purchaser, and it is a claim based on Petitioner’s
intrastate business in Texas.
IV. CONCLUSIONS OF LAW
1. The Comptroller has jurisdiction over this hearing pursuant to TEX. TAX CODE
ANN. ch. 111.
2. The State Office of Administrative Hearings has jurisdiction over the
hearing, 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. TEX. TAX CODE ANN. Section 151.055(a) provides that when tangible personal
property is purchased for resale for the purpose of renting or leasing the
property, but subsequently the property is sold in an occasional sale, tax is
due based on the difference between the original purchase price and the amount
of sales tax remitted on the lease or rental payments.
5. TEX. TAX CODE ANN. Section 151.007(c)(5) provides that the purchase price
does not include the value of tangible personal property taken by a seller as
all or part of the consideration of a taxable item, if the tangible personal
property is the type of property sold by the seller in the regular course of
business.
6. Petitioner did not prove by a preponderance of the evidence as required by
34 TEX. ADMIN. CODE Section 1.40(2)(B) that the purchase price of the Aircraft
should be reduced by the value of a trade-in aircraft.
7. TEX. TAX CODE ANN. Section 151.006 and 151.302 provide an exemption for
the sale of tangible personal property to a purchaser who acquires it for
the purpose of reselling it. A seller of taxable items may prove the resale
exemption only by means of a timely and properly completed resale certificate
received in good faith. SEE TEX. TAX CODE ANN. Section 151.054.
8. Petitioner did not prove by clear and convincing evidence as required by 34
TEX. ADMIN. Code Section 1.40(2)(A) that the sale of the Aircraft qualified as
a sale for resale.
9. There is no legal basis for granting relief for the erroneous act of
governmental agents exercising a public or governmental function. COMPTROLLER’S
DECISION NO. 103,972 (2010), citing S & H MKTG. GROUP, INC. V. SHARP, 951
S.W.2d 265 (Tex. App.–Austin 1997, no writ).
10. Petitioner did not establish that it was entitled to any relief on grounds
of estoppel.
11. The Texas Tax Code does not provide a state tax equivalent for a like-kind
exchange under 26 U.S.C.A. Section 1031. COMPTROLLER’S DECISION NO. 102,538
(2010).
12. The Texas Business Organizations Code applies to “filing entities” such as
corporations, limited partnerships, and limited liability companies. TEX. BUS.
ORG. CODE ANN. Section 1.002(22). A “terminated filing entity” is liable only
for an existing claim. TEX. BUS. ORG. CODE ANN. Section 11.351. Notwithstanding
the termination of a domestic filing entity, the entity continues in existence
until the third anniversary of the termination date for the purposes of
permitting the survival of an existing claim by or against the terminated
filing entity. TEX. BUS. ORG. CODE ANN. Section 11.356(a)(2). An existing claim
by or against a terminated filing entity is extinguished unless an action or
proceeding is brought on the claim not later than the third anniversary of the
termination date. TEX. BUS. ORG. CODE ANN. Section 11.359(a).
13. A “foreign entity” is defined in the Texas Business Organizations Code as
an organization formed under the laws of a jurisdiction other than Texas. The
internal affairs of a foreign entity are governed by the laws of the
jurisdiction in which it is formed. TEX. BUS. ORG. CODE ANN. Section 1.002(27).
A foreign entity enjoys the same but no greater rights and privileges as the
domestic entity to which it most closely corresponds. TEX. BUS. ORG. CODE ANN.
Section 9.202. With exceptions not applicable in this case, in any matter that
affects the transaction of intrastate business in Texas, a foreign entity is
subject to the same duties, restrictions, penalties, and liabilities imposed on
a domestic entity to which it most closely corresponds. TEX. BUS. ORG. CODE
ANN. Section 9.203.
14. Petitioner established by a preponderance of the evidence that the tax was
assessed more than three years after Petitioner’s termination date. 34 TEX
ADMIN. CODE Section 1.40(2)(B).
15. The tax assessment should be dismissed in its entirety.
Hearing No. 104,720
ORDER OF THE COMPTROLLER
On December 14, 2012, the State Office of Administrative Hearings’
Administrative Law Judge (ALJ) Alvin Stoll issued a Proposal for Decision in
the above-referenced matter to which the Tax Division filed Exceptions on
January 10, 2013. An Amended Proposal for Decision was issued on February 12,
2013. The Comptroller has considered the Exceptions and the ALJ’s
recommendation letter and determined that the ALJ’s Amended Proposal for
Decision, except for minor changes to correct typographical or clerical errors,
should be adopted without change and this Decision represents the ruling
thereon.
The above Decision resulting in a zero amount due for Petitioner 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 20th day of May 2013.
SUSAN COMBS
by: Martin A. Hubert
Deputy Comptroller
ENDNOTE
(1) The quoted sections of the Business Organizations Code were effective
January 1, 2006.