|
|
SOAH DOCKET NO. 304-22-1580.26
CPA HEARING NO. 117,870
RE: **************
TAXPAYER NO: **************
AUDIT OFFICE: **************
AUDIT PERIOD: January 1, 2015 THROUGH September 30, 2017
SOAH DOCKET NO. 304-22-1581.26
CPA HEARING NO. 117,997
RE: **************
TAXPAYER NO: **************
AUDIT OFFICE: **************
AUDIT PERIOD: December 1, 2016 THROUGH October 31, 2018
Sales And Use Tax/RFD
BEFORE THE COMPTROLLER
OF PUBLIC ACCOUNTS
OF THE STATE OF TEXAS
GLENN HEGAR
Texas Comptroller of Public Accounts
DANIEL NEUHOFF
Representing Respondent
**************
Representing Petitioner/Claimant
COMPTROLLER’S DECISION
This decision is considered final on July 8, 2022, unless a motion for rehearing is timely filed; this date of finality is calculated based on the Administrative Procedure Act (APA).[1] The failure to timely file a motion for rehearing may result in adverse legal consequences.
Administrative Law Judge (ALJ) Kathy Pickup of the State Office of Administrative Hearings (SOAH) issued a Proposal for Decision (PFD) that includes Findings of Fact and Conclusions of Law. SOAH served the PFD on each party and each party was given an opportunity to file exceptions and replies with SOAH in accordance with SOAH’s rules of procedure. The ALJ recommended that the Comptroller adopt the PFD as written.
After review and consideration, IT IS ORDERED that the PFD is adopted as changed.[2]
The results from this Decision are Attachments A. The ALJ’s letter to the Comptroller is Attachment B. The PFD as changed is Attachment C. Attachments A, B, and C are incorporated by reference.
Attachments A reflect a credit owed to Claimant in Hearing No. 117,870 and a zero amount due in Hearing No. 117,997.
The credit will be processed after the date the comptroller’s decision is final. The parties may waive the right to file a motion for rehearing to expedite the processing of the credit. A waiver of rehearing or motion for rehearing may be filed as described above.
SIGNED on this 13th day of June 2022
GLENN HEGAR
Comptroller of Public Accounts
By: Lisa Craven
Deputy Comptroller
Attachments A, Texas Notifications of Hearing Results
Attachment B, ALJ’s letter to the Comptroller
Attachment C, Proposal for Decision as changed
ATTACHMENT B
State Office of Administrative Hearings
Kristofer S. Monson
Chief Administrative Law Judge
May 24, 2022
The Honorable Glenn Hegar
Comptroller of Public Accounts
LBJ Building
111 E. 17th Street, 1st Floor
Austin, TX 78701
RE: SOAH Docket: 304-22-1580.26 and 304-22-1581.26
TCPA Hearing No.: 117,870 and 117,997; Taxpayer No.: **************
************** v. Texas Comptroller of Public Accounts
Dear Comptroller Hegar:
On May 13, 2022, Petitioner filed exceptions to the Proposal for Decision (PFD) issued on May 3, 2022 in the above-referenced matters. the Tax Division (Staff) of the Texas Comptroller of Public Accounts (Comptroller) filed its response on May 20, 2022. Petitioner excepts to several Conclusions of Law (COL) because it does not agree with the conclusions reached. In some cases (i.e., COL 6 and 13), Petitioner suggests additional wording, but the COLs as drafted quote the applicable rule or statute and are correct.
Petitioner’s exceptions reassert arguments made in the hearing. Having reviewed the filings of the parties and finding no errors in the findings of fact or conclusions of law, I recommend that the PFD be adopted as written.
Sincerely,
Kathy Pickup
Administrative Law Judge
ATTACHMENT C
SOAH DOCKET NO. 304-22-1580.26
TCPA DOCKET NO. 117,870
**************
Taxpayer No. **************
SOAH DOCKET NO. 304-22-1581.26
TCPA DOCKET NO. 117,997
**************
Taxpayer No. **************
v.
TEXAS COMPTROLLER OF PUBLIC ACCOUNTS
BEFORE THE STATE OFFICE OF ADMINISTRATIVE HEARINGS
PROPOSAL FOR DECISION
************** (Claimant), a chemicals manufacturer, filed claims for sales and use tax refunds. The Tax Division (Staff) of the Texas Comptroller of Public Accounts (Comptroller) partially granted the claims but denied Claimant’s contentions that the manufacturing exemption applies to its purchases of returnable containers and related cleaning and transportation services. Claimant requested refund hearings asserting the manufacturing exemption’s applicability and also alleging that the refund denials violate its right to equal and uniform taxation under the Texas and U.S. Constitutions, and amount to Equal Protection violations and invalid rule making under the Administrative Procedure Act. In this Proposal for Decision, the Administrative Law Judge (ALJ) recommends affirming the refund denials.
I. PROCEDURAL HISTORY, NOTICE, & JURISDICTION
Staff referred the contested cases to the State Office of Administrative Hearings (SOAH) and, on February 8, 2022, issued Notices of Hearing by Written Submission. On February 11, 2022, ALJ Kathy Pickup issued Order No. 1, which joined the cases and set the written submission hearing. Claimant was represented by ************** of COMPANY A. Daniel Neuhoff represented Staff. The record closed on May 2, 2022. There are no issues of notice or jurisdiction; therefore, those matters are set out in the Findings of Fact and Conclusions of Law without further discussion.
II. REASONS FOR DECISION
A. Evidence Presented
Staff provided the pleadings the parties exchanged prior to referring the matter to SOAH and offered the following exhibits for SOAH Docket No. 304-22-1580.26:
1. 60-Day Letter;
2. Amended Refund Audit;
3. Amended Refund Audit Plan;
4. Refund Audit;
5. Refund Audit Plan; and
6. Refund Claim;
Staff offered the following exhibits for SOAH Docket No. 304-22-1581.26:
1. Refund Audit;
2. Refund Audit Plan; and
3. Refund Claim.
Claimant offered the following exhibits for both hearings:
1. Affidavit of INDIVIDUAL A;
2. Affidavit of INDIVIDUAL B;
3. Sample Containers;
4. Sample Plant Map; and
5. Sample Process Floor Maps.
The parties’ exhibits were admitted into the record without objection.
B. Agreed Adjustments
Staff did not agree to any additional refunds.
C. Facts Established and Issues Presented
Claimant manufactures various types of chemicals for the energy and water industries and filed sales and use tax refund claims for the periods of January 1, 2015, through September 30, 2017, and December 1, 2016, October 1, 2017, through October 31, 2018. Staff initiated refund audits and agreed with many of Claimant’s contentions; however, disagreements remain.
Source: See Finding of Fact No. 9.
During the refund periods, Claimant packaged the chemicals it sells into returnable containers. Claimant designed the majority of the containers to hold the hazardous chemicals it produces. For example, the design ensures the chemicals do not have a reaction while in transport, preserves the chemical composition of the product, and meets government regulations and standards. Claimant uses three types of containers: stainless steel, polyethylene-lined, and plastic bottle inside a stainless steel shell. The containers are returnable and reusable and vary in size from 30 to 700 gallons.
Claimant’s chemical manufacturing process consists of charging raw materials in bulk tanks by blending the materials and adding a catalyst. It then tests the product to ensure it meets customer and industry specifications. Next, Claimant cools the product and transfers it directly from the reactor into the container at the plant. After filling the container, the container is tagged and sealed. If a tag or seal is broken at delivery, the container and its contents are not used. After the customer finishes using the product, Claimant engages a third‑party vendor to retrieve the container. All containers are then reconditioned and cleaned, and damaged ones are either repaired or discarded. The average life span of a container is twenty to thirty years.
On May 2, 2019, and June 8, 2020, respectively, Staff notified Claimant that its refund request was partially denied. Claimant requested refund hearings. It first contends that Staff improperly denied a refund for sales and use tax paid on its purchases of the returnable containers and related transportation charges and cleaning services. Claimant also argues that Staff’s denial of its exemption claims violates its right to equal and uniform taxation under the Texas and U.S. Constitutions. Furthermore, according to Claimant, the refund denial amounts to a violation of the Administrative Procedure Act. Staff disagrees with all of Claimant’s assertions.
D. ALJ’s Analysis and Recommendation
If the Comptroller finds that an amount of tax, penalty, or interest has been unlawfully or erroneously collected, the Comptroller shall credit or refund the amount. Tex. Tax Code § 111.104(a). When a taxpayer requests a refund, it must establish by a preponderance of evidence that taxes were erroneously collected or paid. See, e.g., 34 Tex. Admin. Code § 1.26(e); Comptroller’s Decision No. 109,787 (2015). If a claimant relies on an exemption to establish the error, then it must provide clear and convincing evidence. 34 Tex. Admin. Code § 1.26(c); Comptroller’s Decision No. 100,477 (2012). Furthermore, exemptions from taxation are subject to strict construction since they are the antithesis of equality and uniformity and because they place a greater burden on other taxpaying businesses and individuals. See Bullock v. National BancShares Corp., 584 S.W.2d 268 (Tex. 1979). An exemption cannot be raised by implication, but must affirmatively appear, and all doubts are resolved in favor of the taxing authority and against a claimant. See, e.g., Comptroller’s Decision Nos. 41,522, 44,260 (2010).
Texas imposes a tax on each sale of a taxable item in this state. Tex. Tax Code § 151.051. The term “taxable item” includes tangible personal property and taxable services. Id. § 151.010. The transportation or installation of tangible personal property as well as transportation incident to the performance of a taxable service are part of the sales price of a taxable item. Id. § 151.007(a)(3), (4). The Tax Code provides an exemption for tangible personal property that will be sold, leased, or rented to, or stored, used, or consumed by a manufacturer if the tangible personal property is directly used or consumed in or during the actual manufacturing, processing, or fabrication of tangible personal property for ultimate sale and the use or consumption of the property is necessary or essential to the manufacturing, processing, or fabrication operation and directly makes or causes a chemical or physical change to the product being manufactured, processed, or fabricated for ultimate sale. Id. § 151.318(a)(2)(A). The exemption also includes any intermediate or preliminary product that will become an ingredient or component part of the product being manufactured, processed, or fabricated for ultimate sale. Id. § 151.318(a)(2)(B). Moreover, but for exceptions that do not apply to the instant matter, the purchase of a service that is performed on tangible personal property that would be exempted because of the nature of the property, its use, or combination of its nature and use, is also exempt. Id. § 151.3111.
The sales of the following containers are exempt from tax: (1) a container sold with its contents if the sales price of the contents is not taxed under this chapter; (2) a nonreturnable container sold without contents to a person who fills the container and sells the contents and the container together; and (3) a returnable container sold with its contents or resold for refilling. See Id. § 151.322(a); see also 34 Tex. Admin. Code § 3.314(g)(3) (providing an exemption for returnable containers sold with the contents in connection with the retail sale of the contents or when resold for refilling and emphasizing that the seller must pay sales or use tax on the container at the time of purchase).
The Tax Code imposes a tax on the repair, maintenance, and restoration of tangible personal property. Tex. Tax Code § 151.0101(a)(5). Sales or use tax is due from the purchaser on the entire charge for a service to repair, remodel, maintain, or restore tangible personal property, including any separately stated charge for materials, parts, labor, consumable supplies, or equipment. 34 Tex. Admin. Code § 3.292(b)(1).[3] In addition, the purchaser owes sales or use tax on any charge connected to the taxable service, including separately stated charges for inspecting, monitoring, or testing. Id.
A tax is imposed on the storage, use, or other consumption in this state of a taxable item purchased from a retailer for storage, use, or other consumption in this state. Tex. Tax Code § 151.101(a). Neither “use” nor “storage” includes the exercise of a right or power over or the keeping or retaining of tangible personal property for the purpose of transporting the property outside the state for use solely outside the state; or processing, fabricating, or manufacturing the property into other property or attaching the property to or incorporating the property into other property to be transported outside the state for use solely outside the state. Id. § 151.011(f).
The transactions at issue relate to Claimant’s purchases of empty returnable containers that were filled with products it manufactured and sold. Claimant contends that these containers are exempt manufacturing equipment. Staff maintains that the exemption for the sale of containers in Texas Tax Code § 151.322(a) is an exception to the general exemption for purchases that qualify for the manufacturing exemption. As explained in Texas Administrative Code § 3.314(g)(3), the manufacturer must pay sales and use tax on its purchases of the containers because its sales of the returnable containers are exempt from tax under Texas Tax Code § 151.322(a)(3). Staff contends that its position is supported by the plain language of the statute, the Comptroller’s interpretation of the statute, long‑standing Comptroller policy and precedent, as well as a seminal court case. Staff cites East Texas Oxygen Co. v. State, 681 S.W.2d 741 (Tex. App.–Austin 1984, no writ) (ETOC) as the controlling authority addressing exemption claims for empty returnable containers. Staff also cites Comptroller’s Decisions, such as Comptroller’s Decision No. 36,698 (2000), that rely on and/or incorporate the analysis in ETOC in interpreting and administering the exemption for containers.
Claimant contends that its purchases of the returnable containers are exempt from tax based on the manufacturing exemption under Texas Tax Code § 151.318, and that neither ETOC nor Section 151.322(a)(3) is relevant to the determination of taxability. To support its contentions, Claimant cites to State Tax Automated Research Document Nos. 200108400L (August 6, 2001) (determining that returnable steel reels to transport cables are tax exempt wrapping and packaging under Rule § 3.300 (d)(14)); 200005295L (May 11, 2000) (generally explaining the manufacturing and resale exemptions); and 9904382L (April 7, 1999) (determining that packaging for bulk items such as grains and coffee beans are tax exempt under Rule 3.314(b)(1)). None of these letters provide guidance specifically regarding the application of the manufacturing exemption to purchases of tangible personal property for which the purchaser will not charge tax on the sale because of the applicability of Section 151.322(a)(3).
The more relevant, and consequently controlling, authority is found in the Comptroller’s denial of Claimant’s identical claims for earlier periods in Comptroller’s Decision Nos. 115,973 (2020), 114,815 and 114,816 (2019).[4] In those decisions the Comptroller ruled that the statutory construction analysis in ETOC and the Comptroller’s policy and precedent that relies on that holding are controlling authority with regard to the exemption available for purchases of empty returnable containers by manufacturers. The ETOC court held that, in order to give meaning to Texas Tax Code § 151.322 and ensure that the returnable containers are taxed at some point, the provisions specifically dealing with the sale of containers constitute an exception to the general resale exemption for purchases for resale. Analogously, the exemption from tax on the sale of returnable containers, such as those at issue in this case, under Section 151.322(a)(3), is effectively an exception to the exemption for purchases by the manufacturer under § 151.318. The instant cases present nothing that would warrant a departure from Comptroller policy and precedent or a different conclusion from the Comptroller’s denial of Claimant’s identical claims for earlier periods. Even Claimant’s Petitioner’s evidence, in respect of the affidavits of Messrs. INDIVIDUAL A and INDIVIDUAL B, are the identical affidavits submitted for the last hearing. Therefore, the ALJ recommends that the Comptroller affirm Staff’s refund denials. Because the purchases of the returnable containers are not exempt from tax, any transportation and delivery fees associated with the purchases are also taxable.
Claimant requested a refund for sales and use tax paid on its purchases of cleaning services performed on returnable containers. Claimant purchased cleaning services when the containers were returned by its customers, washing the interior and exterior of the containers, de‑labeling the containers, and, if necessary, recertifying the returnable containers to comply with government regulations. Because the purchases of the returnable containers at issue were not exempt, the purchases of the taxable services performed on the containers were not exempt under Texas Tax Code § 151.3111.
Claimant proposes that the Comptroller’s interpretation and application of the exemption for the sale of containers in Texas Tax Code § 151.322 exceeds the Comptroller’s authority and results in the denial of otherwise valid exemptions. Claimant argues that the Comptroller’s denial of its exemption claims violates the Texas and U.S. Constitutions. To the extent Claimant is contending that the rules or the Tax Code provisions at issue are unconstitutional, the assertions fall outside of the jurisdiction of SOAH. In administering tax laws, an agency may not determine the constitutionality of a statute or rule. See Central Power & Light v. Sharp, 960 S.W.2d 617 (Tex. 1997); Texas State Bd. of Pharmacy v. Walgreens Tex. Co., 520 S.W.2d 845 (Tex. Civ. App.—Austin 1975, writ ref’d n.r.e.); see also Comptroller’s Decision Nos. 109,672 (2015), 109,290 (2015) (superseded on other grounds), 103,059 (2011). In addition, to the extent Claimant contends that Texas Administrative Code § 3.314(g) is invalid due to the constitutional issues raised, the ALJ does not have the authority to make a determination as to the validity of a rule. See Comptroller’s Decision Nos. 110,905, 111,342, 111,343, 111,344 (2016). Claimant’s constitutional claims must be denied.
Finally, Claimant challenges the Comptroller’s authority to deny its refund claim, stating that the denial violates the Administrative Procedure Act. However, Claimant’s allegation is without substantive legal argument or evidence. Therefore, the ALJ recommends denying Claimant’s refund claims.
III. FINDINGS OF FACT
1. During the period at issue, ************** (Claimant) manufactured various types of chemicals for the energy and water industries.
2. Claimant packaged the chemicals it sells into returnable containers that it purchased from third parties.
3. Claimant designed the majority of the containers, and they are specifically designed to hold the hazardous chemicals Claimant produces. For example, the design ensures the chemicals do not have a reaction while in transport, preserves the chemical composition of the product, and meets government regulations and standards.
4. Claimant uses three types of containers: stainless steel, polyethylene-lined, and plastic bottle inside a stainless steel shell. The containers are returnable and reusable and vary in size from 30 to 700 gallons.
5. Claimant’s chemical manufacturing process consists of charging raw materials in bulk tanks by blending the materials and adding a catalyst. It then tests the product to ensure it meets customer and industry specifications. Next, Claimant cools the product and transfers it directly from the reactor into the container at the plant. After filling the container, the container is tagged and sealed. If a tag or seal is broken at delivery, the container and its contents are not used.
6. After its customer finishes using the product, Claimant engages a third-party vendor to retrieve the container.
7. All containers are reconditioned and cleaned after the customer uses them, and damaged ones are either repaired or discarded.
8. The average life span of a container is twenty to thirty years.
9. Claimant filed sales and use tax refund claims for the periods January 1, 2015, through September 30, 2017, and December 1, 2016, October 1,2017, through October 31, 2018.
Source: See Staff’s Exhibit No. 1, Certified Refund Audit, Hearing No. 117,997.
10. The Tax Division (Staff) of the Texas Comptroller of Public Accounts (Comptroller) initiated a refund audit.
11. On May 2, 2019, and June 8, 2020, Staff notified Claimant that its respective refunds were partially denied.
12. Claimant timely requested refund hearings, and Staff referred the cases to the State Office of Administrative Hearings (SOAH).
13. On February 8, 2022, Staff issued Notices of Hearing by Written Submission to Claimant. The notices contained a statement of the nature of the hearings; a statement of the legal authority and jurisdiction under which the hearings were to be held; a reference to the particular sections of the statutes and rules involved; and a short, plain statement of the factual matters asserted or an attachment that incorporated by reference the factual matters asserted in the complaints or petitions filed with the state agency.
14. On February 11, 2022, Administrative Law Judge (ALJ) Kathy Pickup issued Order No. 1, which joined the cases and set the written submission hearing.
15. The record closed on May 2, 2022.
IV. CONCLUSIONS OF LAW
1. The Comptroller has jurisdiction over these matters. See Tex. Tax Code ch. 111.
2. SOAH has jurisdiction over matters related to the hearings, including the authority to issue a proposal for decision with findings of fact and conclusions of law. See Tex. Gov't Code ch. 2003.
3. Staff provided a proper and timely notice of hearing. See Tex. Gov't Code ch. 2001; Tex. Tax Code § 111.105.
4. If the Comptroller finds that an amount of tax, penalty, or interest has been unlawfully or erroneously collected, the Comptroller shall credit or refund the amount. Tex. Tax Code § 111.104(a).
5. When a taxpayer requests a refund, it must establish by a preponderance of evidence that taxes were erroneously collected or paid. See, e.g., 34 Tex. Admin. Code § 1.26(e); Comptroller’s Decision No. 109,787 (2015).
6. If a claimant relies on an exemption to establish the error, then it must provide clear and convincing evidence. 34 Tex. Admin. Code § 1.26(c); Comptroller’s Decision No. 100,477 (2012).
7. Exemptions from taxation are subject to strict construction since they are the antithesis of equality and uniformity and because they place a greater burden on other taxpaying businesses and individuals. See Bullock v. National BancShares Corp., 584 S.W.2d 268 (Tex. 1979).
8. An exemption cannot be raised by implication, but must affirmatively appear, and all doubts are resolved in favor of the taxing authority and against a claimant. See, e.g., Comptroller’s Decision Nos. 41,522, 44,260 (2010).
9. Texas imposes a tax on each sale of a taxable item in this state. Tex. Tax Code § 151.051.
10. The term “taxable item” includes tangible personal property and taxable services. Tex. Tax Code § 151.010.
11. The transportation or installation of tangible personal property as well as transportation incident to the performance of a taxable service are part of the sales price of a taxable item. Tex. Tax Code § 151.007(a)(3),(4).
12. The Tax Code provides an exemption for tangible personal property that will be sold, leased, or rented to, or stored, used, or consumed by a manufacturer if the tangible personal property is directly used or consumed in or during the actual manufacturing, processing, or fabrication of tangible personal property for ultimate sale and the use or consumption of the property is necessary or essential to the manufacturing, processing, or fabrication operation and directly makes or causes a chemical or physical change to the product being manufactured, processed, or fabricated for ultimate sale. Tex. Tax Code § 151.318(a)(2)(A).
13. The manufacturing exemption also includes any intermediate or preliminary product that will become an ingredient or component part of the product being manufactured, processed, or fabricated for ultimate sale. Tex. Tax Code § 151.318(a)(2)(B).
14. But for exceptions that do not apply to the instant matter, a service that is performed on tangible personal property that would be exempted because of the nature of the property, its use, or combination of its nature and use, is also exempt. Tex. Tax Code § 151.3111.
15. The following containers are exempt from tax: (1) a container sold with its contents if the sales price of the contents is not taxed under this chapter; (2) a nonreturnable container sold without contents to a person who fills the container and sells the contents and the container together; and (3) a returnable container sold with its contents or resold for refilling. See Tex. Tax Code § 151.322(f); see also 34 Tex. Admin. Code § 3.314(g)(3) (providing an exemption for returnable containers sold with the contents in connection with the retail sale of the contents or when resold for refilling).
16. The Tax Code imposes a tax on the repair, maintenance, and restoration of tangible personal property. Tex. Tax Code § 151.0101(a)(5).
17. Sales or use tax is due from the purchaser on the entire charge for a service to repair, remodel, maintain, or restore tangible personal property, including any separately stated charge for materials, parts, labor, consumable supplies, or equipment. 34 Tex. Admin. Code § 3.292(b)(1).
18. The purchaser owes sales or use tax on any charge connected to the taxable service, including separately stated charges for inspecting, monitoring, or testing. 34 Tex. Admin. Code § 3.292(b)(1).
19. A tax is imposed on the storage, use, or other consumption in this state of a taxable item purchased from a retailer for storage, use, or other consumption in this state. Tex. Tax Code § 151.101(a).
20. Neither “use” nor “storage” includes the exercise of a right or power over or the keeping or retaining of tangible personal property for the purpose of transporting the property outside the state for use solely outside the state; or processing, fabricating, or manufacturing the property into other property or attaching the property to or incorporating the property into other property to be transported outside the state for use solely outside the state. Tex. Tax Code § 151.011(f).
21. In Comptroller’s Decision Nos. 115,973 (2020), 114,815 and 114,816 (2019), the Comptroller denied Claimant’s identical claim for earlier periods, holding that East Texas Oxygen Co. v. State, 681 S.W.2d 741 (Tex. App.–Austin 1984, no writ) (ETOC) and the Comptroller’s policy and precedent, such as Comptroller’s Decision No. 36,698 (2000), which relies on the ETOC holding, are controlling authority with regard to the exemption available for purchases of empty returnable containers.
22. Because Claimant’s sales of the returnable containers are tax exempt under Texas Tax Code § 151.322(a)(3), its purchases of the containers are not eligible for an exemption from tax, despite the manufacturing exemption usually available for a manufacturer’s purchases under Texas Tax Code § 151.318.
23. Because the purchases of the returnable containers are not exempt from tax, transportation and delivery fees included in the sales price are also subject to tax. Tex. Tax Code § 151.007(a)(3).
24. Because the purchases of the returnable containers at issue were not exempt, the purchases of the taxable services performed on the containers were not exempt under Texas Tax Code § 151.3111.
25. Claimant has not provided sufficient evidence to establish that it used any of the purchased returnable containers remaining in dispute solely outside of Texas so that use tax would not be due per Texas Tax Code § 151.011(f).
26. Claimant has not provided sufficient evidence to establish that any of the remaining claimed refund amounts are for purchases of services performed outside of Texas.
27. In administering tax laws, an agency may not determine the constitutionality of a statute or rule. See Central Power & Light v. Sharp, 960 S.W.2d 617 (Tex. 1997); Texas State Bd. of Pharmacy v. Walgreens Tex. Co., 520 S.W.2d 845 (Tex. Civ. App.—Austin 1975, writ ref’d n.r.e.); see also Comptroller’s Decision Nos. 109,672 (2015), 109,290 (2015) (superseded on other grounds), 103,059 (2011).
28. Claimant’s contentions regarding the constitutionality of the rules or the Tax Code provisions at issue fall outside of the jurisdiction of SOAH.
29. The ALJ does not have the authority to make a determination as to the validity of a rule. See Comptroller’s Decision Nos. 110,905, 111,342, 111,343, 111,344 (2016).
30. Claimant’s constitutional claims must be denied.
31. Claimant’s challenge to the Comptroller’s authority to deny its refund claim as a violation of the Administrative Procedure Act is without substantive legal argument or evidence.
32. Staff’s partial denial of the refund claims should be affirmed.
SIGNED May 3, 2022.
KATHY PICKUP
ADMINISTRATIVE LAW JUDGE
STATE OFFICE OF ADMINISTRATIVE HEARINGS
ENDNOTES:
[1] The date calculated is 25 days after this decision is signed. See APA, Tex. Gov’t Code § 2001.146(a); S.B. 1095, Acts 2017, 85th Leg. For additional guidance, refer to the Frequently Asked Questions Related to Motions for Rehearing, found here: http://comptroller.texas.gov/taxes/publications/96-1789.pdf
[2] See Tex. Gov’t Code § 2003.101(e) and (f).
[3] See 31 TexReg 7133, effective June 19, 2017.
[4] In hearing numbers 114, 815 and 114, 816, the named claimant was COMPANY B. On February 6, 2020, Claimant changed the legal name of its entity from COMPANY B to **************.