
TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN



NO. 03-02-00346-CV


Carole Keeton Strayhorn, Comptroller of Public Accounts of the State of Texas, and Greg
Abbott, Attorney General of the State of Texas/Raytheon E-Systems, Inc., Appellants

v.

Raytheon E-Systems, Inc./Carole Keeton Strayhorn, Comptroller of Public Accounts of the
State of Texas, and Greg Abbott, Attorney General of the State of Texas, Appellees





FROM THE DISTRICT COURT OF TRAVIS COUNTY, 200TH JUDICIAL DISTRICT
NO. GN101511, HONORABLE LORA J. LIVINGSTON, JUDGE PRESIDING


O P I N I O N

	In this case, we must decide whether Raytheon E-Systems, Inc. ("Raytheon") is
entitled to a refund of sales tax under the "sale for resale" exemption of the tax code.  Raytheon
seeks the exemption for purchases of tangible overhead items charged as indirect costs to its
contracts with the federal government.  Carole Keeton Strayhorn, Comptroller of Public Accounts,
and Greg Abbott, Attorney General of the State of Texas (collectively, "Comptroller") (1) appeal,
contending that the district court erred in concluding that Raytheon was entitled to the refund.  In a
cross appeal, Raytheon contends that the district court erred in dismissing Raytheon's claim for
declaratory relief and attorney's fees for lack of jurisdiction.  We affirm the judgment of the district
court in part, reversing in part that portion of the judgment ordering the Comptroller to issue
warrants to Raytheon for a sales tax refund and remanding the cause for a factual determination of
whether Raytheon has collected the sales tax from the federal government.

FACTUAL AND PROCEDURAL BACKGROUND
	The facts in this case are not in dispute.  Raytheon's facilities in Garland and
Greenville, Texas, provide intelligence systems, aircraft navigation systems, and other defense-related products to the federal government and the private sector.  From June 1, 1989 through
December 31, 1996 ("refund period"), Raytheon paid sales tax to the Comptroller on its purchase
of overhead items that it allocated as "indirect costs" to multiple federal contracts.  Since 1975,
federal contractors in Texas have been exempt from paying sales tax on purchases of items charged
as direct costs to federal contracts.  See Day & Zimmermann, Inc. v. Calvert, 519 S.W.2d 106, 110
(Tex. 1975) (holding that a federal contractor who transferred title of items to the government could
claim a sale for resale exemption).  Direct costs are charged only to one contract.
	In 1998, in revised internal procedures memos, the Comptroller broadened the
exemption to include purchases of overhead items charged as indirect costs, which are allocated
among multiple contracts.  Based on these revised procedures, the accounting firm of Ernst &
Young, at Raytheon's direction, prepared a request for a refund of sales taxes paid on tangible
overhead items charged to contracts as indirect costs during the refund period.  In August 2000, the
Comptroller changed its policy and denied Raytheon's refund claims for indirect costs.
	Raytheon filed two administrative appeals.  In both, the administrative law judge
upheld the denial of the refund claims.  Raytheon then sued the Comptroller in district court for a
refund.  See Tex. Tax Code Ann. § 112.151 (West 2002).  Raytheon also sought declaratory relief
and attorney's fees under the Uniform Declaratory Judgments Act ("UDJA"), seeking a declaratory
judgment that the Comptroller unlawfully denied its refund claims.  See Tex. Civ. Prac. & Rem.
Code Ann. § 37.004 (West 1997).  The Comptroller filed pleas to the jurisdiction, requesting that
the district court dismiss Raytheon's request for declaratory relief because, by seeking relief that was
redundant to the relief provided in the tax code, it was an improper pretext for obtaining attorney's
fees.
	After conducting discovery, the parties agreed to stipulated facts.  Raytheon then filed
a motion for summary judgment, contending that no sales tax was due as a matter of law and that
there were no factual issues concerning either the amount of the refund or Raytheon's entitlement
to attorney's fees pursuant to the UDJA.  The Comptroller also filed a motion for summary
judgment, contending that the purchases of overhead items charged as indirect costs to federal
contracts were not eligible for the sale for resale exemption.
	The district court granted the Comptroller's pleas to the jurisdiction and in turn
dismissed Raytheon's claims for declaratory relief and attorney's fees.  The court also granted
Raytheon's motion for summary judgment in part, finding that it was entitled to a sales tax refund
but that a fact issue existed as to the amount of the refund.  It denied the Comptroller's motion for
summary judgment.  The parties then entered into a supplemental stipulation of fact that the amount
of the refund totaled $5,381,609.  The district court, in light of the stipulation, determined in its final
judgment that there were no factual issues to be tried and ordered the Comptroller to issue warrants
for a tax refund.
	The Comptroller contends in its appeal that the district court erred in its conclusion
that Raytheon was entitled to the refund under the sale for resale exemption.  Raytheon, in a cross
appeal, contends that the district court erred in its conclusion that Raytheon was not entitled to
declaratory relief and attorney's fees.  We will first address the Comptroller's appeal.

COMPTROLLER'S APPEAL
	In four issues, the Comptroller contends that the trial court erred in granting
Raytheon's motion for summary judgment and denying its motion for summary judgment. 
Specifically, the Comptroller argues that Raytheon's purchases of tangible overhead items charged
as indirect costs to multiple federal contracts do not qualify for the sale for resale exemption because
(i) Raytheon purchases the items for its own consumption and use; (ii) the sale for resale exemption
does not encompass overhead costs charged to multiple contracts; and (iii) there is insufficient
evidence of transfer of title to the federal government and, nevertheless, that mere transfer of title
is not a sufficient basis for a sale for resale exemption.
	The standards for review of a traditional summary judgment are well established: the
movant must show there is no genuine issue of material fact and that it is entitled to judgment as a
matter of law; in deciding whether there is a disputed material fact issue precluding summary
judgment, the court must take evidence favorable to the nonmovant as true; and the court must
indulge every reasonable inference in favor of the nonmovant and resolve any doubts in the
nonmovant's favor.  See Cathey v. Booth, 900 S.W.2d 339, 341 (Tex. 1995); Nixon v. Mr. Prop.
Mgmt. Co., 690 S.W.2d 546, 548-49 (Tex. 1985).  A plaintiff must establish all elements of the cause
of action as a matter of law.  Tex. R. Civ. P. 166a(c); City of Houston v. Clear Creek Basin Auth.,
589 S.W.2d 671, 678 (Tex. 1979).  A defendant, however, must disprove at least one essential
element of each of the plaintiff's theories of recovery or conclusively establish each element of an
affirmative defense to prevail.  See Friendswood Dev. Co. v. McDade + Co., 926 S.W.2d 280, 282
(Tex. 1996).  We review the trial court's decision to grant summary judgment de novo.  Natividad
v. Alexsis, Inc., 875 S.W.2d 695, 699 (Tex. 1994).
	Generally, a party cannot appeal the denial of a motion for summary judgment
because it is an interlocutory order and thus not appealable.  See Cincinnati Life Ins. Co. v. Cates,
927 S.W.2d 623, 625 (Tex. 1996).  However, when both parties move for summary judgment and
the district court grants one motion and denies the other, the unsuccessful party may appeal both the
prevailing party's motion and the denial of its own.  See Holmes v. Morales, 924 S.W.2d 920, 922
(Tex. 1996).  We will review the summary judgment evidence presented by both sides, determine
all questions presented, and render such judgment as the trial court should have rendered. 
Commissioners Court v. Agan, 940 S.W.2d 77, 81 (Tex. 1997).  We are required to consider all
summary judgment grounds the trial court ruled on and the movant preserved for appellate review
that are necessary for final disposition of the appeal.  Cincinnati Life Ins. Co., 927 S.W.2d at 625-26.
	To put Raytheon's claim for the sale for resale exemption in context, we will first
examine Raytheon's contracts with the government, as well as the relevant federal regulations.  The
Federal Acquisition Regulations ("FARs") set forth standards for government contracts.  See 48
C.F.R. ch. 1, pts. 1-99 (2001). (2)  Raytheon's contracts included both "fixed-price," in which the
government pays a set price for the contract, see 48 C.F.R. § 16.201, and "cost-type," in which the
government pays certain costs in performance of the contract, plus an additional fee, see id. § 16.301. 
The government paid the fixed-price contracts in "progress payments" over the course of Raytheon's
performance of the contracts.
	Both the fixed-price and cost-type contracts contain title-vesting clauses upon which
Raytheon relies for its argument that it sells its overhead items to the federal government.  FAR
52.232-16(d), incorporated in fixed-price contracts entered into after April 1984, (3) states as follows:

	PROGRESS PAYMENTS

	. . . .


 Title.


 Title to the property described in this paragraph (d) shall vest in the
Government.  Vestiture shall be immediately upon the date of this contract,
for property acquired or produced before that date.  Otherwise, vestiture
shall occur when the property is or should have been allocable or properly
chargeable to this contract.
 



	"Property," as used in this clause, includes all of the below-described items
acquired or produced by the Contractor that are or should be allocable or
properly chargeable to this contract under sound and generally accepted
accounting principles and practices.


 

				  Parts, materials, inventories, and work in process;


				 Special tooling and special test equipment to which the Government
is to acquire title under any other clause of this contract;



				Nondurable (i.e., noncapital) tools, jigs, dies, fixtures, molds, patterns,
taps, gauges, test equipment, and other similar manufacturing aids,
title to which would not be obtained as special tooling under paragraph
(d)(2)(ii) of this clause; and


				Drawings and technical data, to the extent the Contractor or
subcontractors are required to deliver them to the Government by other
clauses of this contract.


48 C.F.R. § 52.232-16(d) (emphasis added).  FAR 52.245-5(c), incorporated in cost-type contracts
entered into after April 1984, states as follows:


 Title.


		(1)	The Government shall retain title to all Government-furnished property.

		(2)	Title to all property purchased by the Contractor for which the Contractor
is entitled to be reimbursed as a direct item of cost under this contract shall
pass to and vest in the Government upon the vendor's delivery of such
property.

		(3)	Title to all other property, the cost of which is reimbursable to the
Contractor, shall pass to and vest in the Government upon--
 
		  (i)	Issuance of the property for use in contract performance;


 Commencement of processing of the property or use in contract
performance; or


				(iii)	Reimbursement of the cost of the property by the Government,
whichever occurs first.

		(4)	All Government-furnished property and all property acquired by the
Contractor, title to which vests in the Government under this paragraph
(collectively referred to as "Government property"), are subject to the
provisions of this clause.  Title to Government property shall not be
affected by its incorporation into or attachment to any property not owned
by the Government, nor shall Government property become a fixture or lose
its identity as personal property by being attached to any real property.


48 C.F.R. § 52.245-5(c) (emphasis added).
	Raytheon purchased many different items of tangible personal property for use in
performing the contracts.  Some of the items, called "direct costs," were tied to only one "cost
objective," which is a contract.  Id. § 31.202.  Other items, such as overhead costs of office supplies,
were charged across multiple government and private contracts.  These were "indirect costs," "not
directly identified with a single, final cost objective, but identified with two or more final cost
objectives or an intermediate cost objective."  Id. § 31.203(a).  At dispute in this appeal is the
imposition of sales tax on the purchase of tangible overhead items charged as indirect costs to
government contracts.
	Whether Raytheon is entitled to the sale for resale exemption is a question of state
law.  See 48 C.F.R. § 29.303 (sales tax exemption for a contractor's purchase charged to a contract
"may not rest on the Government's immunity from direct taxation by States and localities.  It may
rest instead on provisions of the particular State or local law involved, or, in some cases, the
transaction may not in fact be expressly exempt from the tax."). (4)  Accordingly, we will next turn to
the applicable state tax provisions.
	Tax exemptions are strictly construed against the taxpayer.  See North Alamo Water
Supply Corp. v. Willacy County Appraisal Dist., 804 S.W.2d 894, 899 (Tex. 1991); Upjohn Co. v.
Rylander, 38 S.W.3d 600, 606 (Tex. App.--Austin 2000, pet. denied).  But, "the rule of strict
construction cannot be used as an excuse to stray from reasonableness."  Sharp v. Tyler Pipe Indus.,
Inc., 919 S.W.2d 157, 161 (Tex. App.--Austin 1996, writ denied).  The claimant has the burden of
clearly showing that it is entitled to the exemption.  North Alamo Water Supply, 804 S.W.2d at 899.
	Raytheon is seeking a sales tax refund under the "sale for resale" provision of the tax
code: "The sale for resale of a taxable item is exempt from the taxes imposed by this chapter."  Tex.
Tax Code Ann. § 151.302(a) (West 2002).  The purpose of the sale for resale exemption is to prevent
double taxation.  Sharp v. Clearview Cable TV, Inc., 960 S.W.2d 424, 426 (Tex. App.--Austin 1998,
pet. denied).  A "sale for resale" is a sale of

	tangible personal property or a taxable service to a purchaser who acquires the
property or service for the purpose of reselling it . . . in the normal course of business
in the form or condition in which it is acquired or as an attachment to or integral part
of other tangible personal property or taxable service.


Id. § 151.006(1) (West 2002).  A "sale" includes a "transfer of title or possession of tangible
personal property" that is "done or performed for consideration."  Id. § 151.005(1) (West 2002). 
Additionally, a taxable item sold to the federal government is exempt from sales tax.  Id.
§ 151.309(1) (West 2002).
	Raytheon argues that passage of title to indirect costs to the federal government under
the title-vesting provisions of the contracts relieves it of tax liability.  The Comptroller disagrees for
several reasons.  The Comptroller first contends that there is insufficient evidence of a transfer of
title to the government on the grounds that the affidavit of Carol Covey, who has worked for the
federal government on contracting matters since 1973, "does not unequivocally and directly say that
the FARs pass title."  We disagree.  Covey, who was designated to state the official position of the
Department of Defense, construed the relevant FARs.  She averred that under FAR 52.232-16(d), 
concerning fixed-price contracts, title to property acquired after the contract

	vests when the property is or should have been allocable or properly chargeable to
the defense contract.  Upon completion of all obligations under the contract, the
Government is deemed to have received all property in which it was vested title. 
This property was (i) delivered to and accepted by the Government under the defense
contract; (ii) incorporated in items delivered to and accepted by the Government
under the defense contract; or (iii) consumed in the performance of the defense
contract.  Indirectly charged property is normally considered to be consumed during
the year in which it was charged to the contract.


She further attested that property under cost-type contracts encompasses indirect costs "included in
an overhead rate applicable to the performance of the contract."  Title to items charged as indirect
costs to cost-type contracts, she went on to state,

	passes to the government at the earliest of the following three events: the property is
(i) issued by the contractor for use under the contract; or (ii) processed or used by the
contractor in performing the contract; or (iii) reimbursed by the Government as an
item of cost to the contractor.  Indirect property is deemed to be issued, processed,
or used during the year in which it is properly allocated or charged to the contract. 
The Government is vested with title to all reimbursable property under FAR 52.245-5(c).


The Comptroller urges that because Raytheon controls and uses the overhead items, the federal
government has abandoned title.  See Railroad Comm'n v. Waste Mgmt. of Texas, Inc., 880 S.W.2d
835, 843 (Tex. App.--Austin 1994, no writ) (abandonment of personal property includes "an intent
by the owner to leave the property free to be appropriated by any other person").  There is no
indication that the government abandoned title: Raytheon was obligated by contract to consume the
overhead items in the course of performing the government contracts, and the stipulation of facts
stated that Raytheon did consume the overhead items in the course of performing the contracts.
	The applicable FARs and Covey's affidavit make clear that the government obtains
title to overhead items charged as indirect costs to government contracts at the time the costs are
allocated to the contracts.  For fixed-price contracts with progress payments, "[t]itle to the property
described in this paragraph (d) shall vest in the Government."  48 C.F.R. 52.232-16(d).  In cost-type
contracts, title in property acquired by the contractor vests when the property is issued for contract 
performance, processed for contract performance, or reimbursed by the government, whichever
comes first.  48 C.F.R. 52.245-5(c).  Covey attests that for both types of contracts the government
acquires title to property charged as indirect costs.  Moreover, under the business and commerce
code, "title to goods passes from the seller to the buyer in any manner and on any conditions
explicitly agreed on by the parties."  Tex. Bus. & Com. Code Ann. § 2.401(a) (West 1994).  Viewing
together the governing federal regulations, the Covey affidavit, the stipulation that Raytheon
consumed the items in the course of performing the contracts, and the explicit contractual
agreements, we conclude that there is clear evidence that title to overhead items charged as indirect
costs did pass to the federal government.
	The Comptroller further argues that even if we conclude that title does pass to the
government, the sale for resale exemption turns on control and use, not mere title.  It contends that
Raytheon's consumption and use of the overhead items defeats its tax exemption claim.  Although
Raytheon did retain control of the overhead items and consume them for its own use, it did so in the
course of performing the contracts.  An agreed stipulation of fact stated that all of the overhead items
charged to the federal contracts "were consumed by Raytheon in performing its Government
Contracts and Government Subcontracts and not incorporated into any final product delivered to the
Federal Government."  (Emphasis added.)  A sale includes a transfer of "title or possession."  Tex.
Tax Code Ann. § 151.005(1).  The tax code does not require a sale to hinge on control and use. 
Therefore, transfer of title alone, which Raytheon has established, does not defeat Raytheon's claim
for a sale for resale exemption.
	The Comptroller next contends that Raytheon did not sell or transfer the overhead
items to the government in the "normal course of business."  Tex. Tax Code Ann. § 151.006(1).  It
urges that Raytheon's normal course of business is "selling machines of war," not selling pencils and
employee awards to the government.  This argument is without merit.  Raytheon's normal course
of business in this context is performing government contracts.  It allocated overhead items that it
purchased to perform government contracts.  We thus conclude that it sold the items to the federal
government in the normal course of business.
	Citing Sharp v. Clearview Cable TV, Inc., the Comptroller further argues that the sale
for resale exemption applies only to "sale of discrete items," and thus that Raytheon cannot claim
the exemption for allocation of portions of items to federal contracts.  Although this Court agreed
with the Comptroller in Clearview Cable that cable equipment composed of five items but integrated
as one unit must still be viewed as five items for tax purposes, 960 S.W.2d at 427, our opinion
simply did not address the issue of ownership of portions of items.  We find persuasive Raytheon's
argument in response that the Comptroller has allowed exemptions for an undivided interest in
property in other instances. (5)
	Furthermore, the federal regulations allow title to pass for allocated portions of
indirect costs.  The FAR addressing recordkeeping of government property states that

	[a]ll Government material furnished to the contractor, as well as other material to
which title has passed to the Government by reason of allocation from contractor-owned stores or purchase by the contractor for direct charge to a Government
contract or otherwise, shall be recorded in accordance with the contractor's property
control system and the requirements of this section.


48 C.F.R. § 45.505-3(a) (emphasis added).
	The Comptroller then contends that because the sale for resale exemption applies only
to the sale of an item "in the form or condition in which it is acquired," Tex. Tax Code Ann.
§ 151.006(1), Raytheon does not qualify because sale of a part of an item is not in the same "form
or condition" in which it is acquired.  The Comptroller, however, cites no support for this
proposition, and we find none.  Thus, we reject the Comptroller's argument that Raytheon cannot
claim the sale for resale exemption for allocation of portions of items to federal contracts.
	The Comptroller especially urges that the only Texas case applying the sale for resale
exemption to a federal contractor, Day & Zimmermann, Inc. v. Calvert, does not permit a tax
exemption for indirect costs.  519 S.W.2d at 110.  While we agree with the Comptroller that Day &
Zimmermann's contract with the federal government differed from Raytheon's contracts, the
distinctions do not undercut the application of the Day & Zimmermann analysis to this case.
	Day & Zimmermann was a federal contractor that operated a government-owned
ammunition plant.  It purchased items in its own name.  Id. at 109.  Then, when the items arrived at
the plant, they were stamped with government property labels.  The government then reimbursed
Day & Zimmermann for the items as direct costs.  The court held that Day & Zimmermann qualified
for the sale for resale exemption because a transfer of title took place from Day & Zimmermann to
the federal government, based on title-vesting clauses in the contracts.  Id. at 110.  The original sale
from the vendor to Day & Zimmermann was not taxable because title vested in the federal
government.  The sale from Day & Zimmermann to the federal government was not taxable because
of the exemption on taxes for sales to the federal government.
	The Comptroller argues that the Day & Zimmermann analysis should not apply here
because Day & Zimmermann "stepped into the shoes" of the federal government in operating the
ammunition plant, whereas Raytheon performs government contracts at its own plants.  But in both
cases, the contractors consumed the items in the course of performing contracts for the government. 
The Comptroller further contends that the sale for resale exemption to federal contractors should not
extend to indirect costs.  Also in both cases, the contracts contained title-vesting clauses.  As we
have discussed, title vests in both direct and indirect costs.  Additionally, we find persuasive the
testimony of Richard Wall, an Ernst & Young accountant with extensive experience in accounting
issues of government contracts.  In his affidavit, Wall averred that it seems illogical to allow Day
& Zimmermann to claim an exemption for office supplies and not allow Raytheon to do so, when
ninety-two percent of its business in the plants is with the federal government.  We reject the
Comptroller's argument that the Day & Zimmermann analysis does not apply to this case.
	The Comptroller also attempts to employ holdings in other Texas sale for resale
exemption cases to support its proposition that Raytheon does not qualify for the exemption here. 
None of the cases that the Comptroller cites, however, are as closely analogous as Day &
Zimmermann.  None address, for example, the issue of transfer of title to personal property.  See
Clearview Cable, 960 S.W.2d at 427 (applying exemption to a service of providing equipment to
customers without a complete divestiture of rights in property, because customers controlled the
property); East Tex. Oxygen Co. v. State, 681 S.W.2d 741, 745 (Tex. App.--Austin 1984, no writ)
(declining to apply exemption to lease of returnable containers); Davis-Kemp Tool Co., Inc. v.
Bullock, 584 S.W.2d 579, 580 (Tex. Civ. App.--Beaumont 1979, writ ref'd n.r.e.) (declining to
apply exemption to lease of equipment because customers never controlled equipment). 
Furthermore, we cannot find any holdings in these cases that prevent application of the sale for resale
exemption to Raytheon's purchases of overhead items charged as indirect costs.
	We also find persuasive the trend in other jurisdictions to apply the sale for resale
exemption in similar contexts.  These cases involved defense contracts with the federal government
that contained the same title-vesting language.  The sale for resale exemptions were similar, except
that the "form or condition" requirement is unique to Texas.  An early case holding that overhead
items charged as indirect costs to federal contracts qualify for a tax exemption was Aerospace Corp.
v. State Bd. of Equalization, 267 Cal. Rptr. 685 (Cal. Ct. App. 1990).  The court held that Aerospace
was entitled to the resale exemption because title vested in the federal government under the
contracts.  Id. at 692.  Another California court of appeals recently reiterated this holding as applied
to ad valorem taxes.  See Hughes Aircraft Co. v. County of Orange, 117 Cal. Rptr. 2d 601, 614 (Cal.
Ct. App. 2002).  The Missouri Supreme Court in McDonnell Douglas Corp. v. Director of Revenue
came to the same conclusion concerning use taxes.  See 945 S.W.2d 437, 442 (Mo. 1997) (en banc). 
An Arizona court of appeals, after conducting an extensive analysis of the title-vesting provisions,
concluded that "after examining both types of contracts, we conclude that because title passed, the
items were sold and therefore were not subject to the use tax."  Motorola, Inc. v. Arizona Dep't of
Revenue, 993 P.2d 1101, 1105 (Ariz. Ct. App. 1999).
	The Comptroller argues that the above cases "are of limited value because each turned
on the statute and precedent of that state."  Although arguing that this case is solely a matter of Texas
state law, the Comptroller further contends that the controlling federal law in Texas is that the title-vesting clauses create no more than a security interest, not a full passage of title.  See United States
v. Hartec Enters., Inc., 967 F.2d 130 (5th Cir. 1992).  The issue in Hartec was whether the
defendants could be convicted of theft of government property.  Applying the rule of lenity, the court
determined that courts had inconsistently interpreted title-vesting clauses in federal contracts.  It
concluded the defendants could not be convicted of theft when they did not have "fair notice of [the]
prohibited conduct."  Id. at 133.  The court found the reasoning of another federal court to be
"compelling in this criminal case."  Id. (citing Marine Midland Bank v. United States, 687 F.2d 395
(Ct. Cl. 1982)) (emphasis added).  The Marine Midland court held that title-vesting clauses should
not be literally construed and that the clauses create no more than a security interest.  See 687 F.2d
at 403-04.  The controlling federal law in Texas concerning civil cases is United States v. Digital
Products Corp., which determined that the government held title to goods being manufactured at the
time of a contractual breach.  624 F.2d 690, 695 (5th Cir. 1980).  Accordingly, we reject the
Comptroller's argument that the Hartec holding applies in this case.
	Having addressed the Comptroller's arguments, we conclude that Raytheon has
clearly shown that it is entitled to a sales tax refund under the sale for resale exemption.  North
Alamo Water Supply, 804 S.W.2d at 899.  This exemption applies to purchases of tangible overhead
items allocated as indirect costs to contracts with the federal government.  See Tex. Tax Code Ann.
§ 151.302(a); Day & Zimmermann, 519 S.W.2d at 110.  The original sale from a vendor to Raytheon
is not taxable because title vested in the federal government.  See Tex. Tax Code Ann.
§§ 151.006(1), .302(a).  The sale from Raytheon to the federal government is not taxable because
of the exemption on taxes for sales to the federal government.  Id. § 151.309(1).
	Under the terms of the contracts, and according to the affidavit of Carol Covey, title
to the overhead items vests in the government.  Passage of title qualifies as a sale under Texas law. 
See Tex. Tax Code Ann. § 151.005(1).  Moreover, the parties stipulated that Raytheon consumed
all of the items charged to the contracts in the course of performing those contracts.  We agree with
the Missouri Supreme Court in McDonnell Douglas that there is "no compulsion at this time to
ignore the plain meaning of the title vesting provisions included in the federal contracts at issue." 
945 S.W.2d at 441.  
	Additionally, having determined that the overhead items qualify for the sale for resale
exemption, we reject the Comptroller's argument that Raytheon owes a use tax.  See id. §§ 151.101-.107, .302(a) (the sale for resale exemption applies to all taxes imposed in the chapter, which
includes the use tax).  The parties stipulated that Raytheon used the items in the course of performing
government contracts.  Further, we have determined that title to the items passed to the federal
government under the terms of the contracts.  Following the Day & Zimmermann precedent,
Raytheon does not owe a use tax.  See Day & Zimmermann, 519 S.W.2d at 110-11 (holding that the
sale for resale exemption, which also exempts use tax, applies when title passes to the federal
government).  Accordingly, we overrule all of the Comptroller's issues and affirm the judgment of
the district court.
	The Comptroller argues that "the final barrier to any recovery by Raytheon" is that
Raytheon will not be entitled to any tax refund until it repays the federal government for indirect
payment of taxes.  See Tex. Tax Code Ann. § 111.104(f) (West 2002) (no tax refund "to a person
who has collected the taxes from another person unless that person has refunded all the taxes and
interest").  Raytheon disputes that it billed taxes to the federal government.  The issue is unclear in
the record.  We conclude that although Raytheon is entitled to a refund of sales taxes under the sale
for resale exemption, double recovery is not appropriate.  Therefore, we remand to the district court
the factual determination of whether Raytheon has collected the sales tax from the federal
government.

RAYTHEON'S APPEAL
	Raytheon contends that the district court erred in granting the Comptroller's pleas to
the jurisdiction and dismissing Raytheon's claim for declaratory judgment and attorney's fees for
lack of jurisdiction.  Raytheon sued the Comptroller in district court for a refund of sales taxes.  See
Tex. Tax Code Ann. § 112.151.  It also sought declaratory relief and attorney's fees under the UDJA,
seeking a declaratory judgment that the Comptroller unlawfully denied its refund claims.  See Tex.
Civ. Prac. & Rem. Code Ann. § 37.004 (West 1997).
	A plea to the jurisdiction contests the district court's subject matter jurisdiction. 
Bland Indep. Sch. Dist. v. Blue, 34 S.W.3d 547, 554 (Tex. 2000); see also Texas Dep't of Transp.
v. Jones, 8 S.W.3d 636, 637 (Tex. 1999).  Because subject matter jurisdiction poses a question of
law, we review rulings on a plea to the jurisdiction de novo.  See Mayhew v. Town of Sunnyvale, 964
S.W.2d 922, 928 (Tex. 1998).
	The plaintiff bears the burden of pleading facts that show the district court has subject
matter jurisdiction; therefore, we examine a plaintiff's good faith factual allegations to determine
whether the district court has jurisdiction.  See Texas Dep't of Crim. Justice v. Miller, 51 S.W.3d
583, 587 (Tex. 2001) (citing Texas Natural Res. Conservation Comm'n v. White, 46 S.W.3d 864,
868 (Tex. 2001)) (to determine whether a plaintiff has affirmatively demonstrated the court's
jurisdiction to hear the cause, courts should "consider the facts alleged by the plaintiff, and to the
extent it is relevant to the jurisdictional issue, the evidence submitted by the parties"); Brannon v.
Pacific Employers Ins. Co., 224 S.W.2d 466, 469 (Tex. 1949).  The nature of the issues raised in the
plea determines the scope of the court's focus; this means we may look beyond the pleadings and
are required to do so when necessary to resolve the jurisdictional issues raised.  Bland Indep. Sch.
Dist., 34 S.W.3d at 555.  Unless the defendant pleads and proves that the plaintiff's allegations were
fraudulently made to confer jurisdiction or the face of the petition affirmatively demonstrates a lack
of jurisdiction, the district court must liberally construe the plaintiff's allegations in favor of
jurisdiction.  See Continental Coffee Prods. Co. v. Cazarez, 937 S.W.2d 444, 449 (Tex. 1996); Peek
v. Equipment Serv. Co. of San Antonio, 779 S.W.2d 802, 804 (Tex. 1989).
	The Comptroller's pleas to the jurisdiction requested that the district court dismiss
Raytheon's request for declaratory relief and attorney's fees because the relief that Raytheon sought
under the UDJA was redundant to the relief it sought in its suit for a tax refund under section
112.151 of the tax code, with the exception of Raytheon's request for attorney's fees.  Attorney's
fees are recoverable only when provided for by statute or by the parties' agreement.  Dallas Cent.
Appraisal Dist. v. Seven Inv. Co., 835 S.W.2d 75, 77 (Tex. 1992).  A party proceeding under the
UDJA may recover its attorney's fees.  Tex. Civ. Prac. & Rem. Code Ann. § 37.009 (West 1997). 
The grant or denial of attorney's fees under the UDJA is within the district court's discretion, and
its order will not be reversed on appeal absent a clear showing that the court abused its discretion. 
Oake v. Collin County, 692 S.W.2d 454, 455 (Tex. 1985); Del Valle Indep. Sch. Dist. v. Lopez, 863
S.W.2d 507, 513 (Tex. App.--Austin 1993, writ denied).  The legal principle encompassed in the
term "abuse of discretion" concerns a legal error committed by the district court in its award of
attorney's fees that injured or prejudiced appellants.  Lopez, 863 S.W.2d at 513.  We review a
question of legal error de novo.  State v. Heal, 917 S.W.2d 6, 9 (Tex. 1996); Mayberry v. Texas
Dep't of Agric., 948 S.W.2d 312, 314 (Tex. App.--Austin 1997, pet. denied).
	It is an abuse of discretion to award attorney's fees under the UDJA when the relief
sought is no greater than relief that otherwise exists by agreement or statute.  See Texas State Bd. of
Plumbing Exam'rs v. Associated Plumbing-Heating-Cooling Contractors of Texas, Inc., 31 S.W.3d
750, 753 (Tex. App.--Austin 2000, pet. dism'd by agr.); University of Texas v. Ables, 914 S.W.2d
712, 717 (Tex. App.--Austin 1996, no writ).  To establish jurisdiction under the UDJA, a party must
plead the existence of an "underlying controversy" within the scope of section 37.004 of the civil
practice and remedies code.  See Kadish v. Pennington Assocs., L.P., 948 S.W.2d 301, 304 (Tex.
App.--Houston [1st Dist.] 1995, no writ).  When a statute provides an avenue for attacking an
agency order, a declaratory judgment action will not lie to provide redundant remedies.  Beacon
Nat'l Ins. Co. v. Montemayor, 86 S.W.3d 260, 267 (Tex. App.--Austin 2002, no pet.) (citing Young
Chevrolet, Inc. v. Texas Motor Vehicle Bd., 974 S.W.2d 906, 911 (Tex. App.--Austin 1998, pet.
denied)).  "There is no basis for declaratory relief when a party is seeking in the same action a
different, enforceable remedy, and a judicial declaration would add nothing to what would be
implicit or express in a final judgment for the enforceable remedy."  Universal Printing Co. v.
Premier Victorian Homes, Inc., 73 S.W.3d 283, 296 (Tex. App.--Houston [1st Dist.] 2001, pet.
denied).  It is an abuse of discretion, therefore, to award attorney's fees under the UDJA when the
statute is relied upon solely as a vehicle to recover attorney's fees.  Texas State Bd. of Plumbing
Exam'rs, 31 S.W.3d at 753.
	Raytheon urges that under this Court's decision in Rylander v. Bandag Licensing
Corp., it "had the right to seek declaratory relief in addition to a judgment for the refund it is due." 
18 S.W.3d 296 (Tex. App.--Austin 2000, pet. denied).  Raytheon further argues that the fact that
it sought a refund under the tax code did not bar the district court from entering a declaratory
judgment, because it established an underlying controversy by requesting interpretation of provisions
of the tax code and title-passing clauses in Raytheon's contracts with the federal government.  We
disagree.  Unlike Raytheon, Bandag requested a statutory interpretation that went beyond its request
for a tax refund.  See id. at 303-04 (statute prohibiting issuance of declaratory judgment was
impermissible restriction on open courts provision of Texas Constitution).
	Raytheon sought a declaratory judgment that the Comptroller's denial of its refund
claims was unlawful and that the claimed items were exempt from sales tax.  Incorporated in this
request for declaratory judgment was a suit for a refund, relief specifically provided for under the
tax code.  See Tex. Tax Code Ann. § 112.151.  Raytheon's request for statutory interpretation was
merely another mechanism for asking the court to order the Comptroller to issue a sales tax refund. 
Thus, Raytheon's request for declaratory relief was redundant to its suit for a refund.  Declaratory
relief is improper if a statute provides the same remedy.  See Beacon Nat'l Ins. Co., 86 S.W.3d at
267.  All that was left, then, of Raytheon's request for declaratory relief was a request for attorney's
fees.  A UDJA claim brought merely to receive attorney's fees will not lie.  Texas State Bd. of
Plumbing Exam'rs, 31 S.W.3d at 753.  Accordingly, we overrule Raytheon's issue and affirm the
order of the district court dismissing its request for declaratory relief and attorney's fees.

CONCLUSION
	We hold that title passed to the federal government for Raytheon's tangible overhead
items charged as indirect costs to its contracts with the government.  Accordingly, we conclude that
Raytheon is entitled to a sales tax refund under the sale for resale exemption for purchases of
tangible overhead items charged as indirect costs to defense contracts with the federal government. 
We further conclude that Raytheon impermissibly sought declaratory relief that was redundant to the
relief provided for in the tax code.  Therefore, Raytheon is not entitled to any declaratory relief or
attorney's fees.  We affirm the judgment of the district court in part, reversing in part that portion
of the judgment ordering the Comptroller to issue warrants to Raytheon for a sales tax refund and
remanding the cause for further proceedings in accordance with this opinion for the factual
determination of whether Raytheon has collected the sales tax from the federal government.


  					Jan P. Patterson, Justice
Before Justices Yeakel, Patterson and Puryear
Affirmed in Part; Reversed and Remanded in Part
Filed:   January 30, 2003
1. 	We have substituted the current Attorney General as the appropriate party.  See Tex. R.
App. P. 7.2(a).  The Comptroller and the Attorney General are statutory defendants in tax protest
suits.  See Tex. Tax Code Ann. § 112.151(b) (West 2002).  Because their interests do not diverge
in this case, for convenience we will refer to them collectively as "Comptroller."
2. 	The Federal Acquisition Regulations ("FARs") have been amended since the
commencement of this action, but the amendments did not change the substance of the applicable
provisions.  For convenience, we will refer to the current FARs.
3. 	Defense contracts entered into before April 1984, which contained similar title-passing
clauses, were governed by the Defense Acquisition Regulations ("DAR").  The FAR system in
chapter 48 of the Code of Federal Regulations replaced the DAR.
4. 	The Comptroller argues that, because of this regulation, determination of whether the sale
for resale exemption applies is "wholly a matter of Texas law," although federal law controls the
terms of Raytheon's contracts with the government.
5. 	For example, the Comptroller allowed a partial use tax exemption for a joint venture that
had tax-exempt partners.  See Texas Comptroller of Public Accounts, STAR System No.
7801T0099C06, available at http://aixtcp.cpa.state.tx.us/star/openrec1.html.
