      TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN


                                       NO. 03-10-00644-CV



                         Energy Education of Montana, Inc., Appellant

                                                  v.

   Texas Comptroller of Public Accounts and the Attorney General of Texas, Appellees


     FROM THE DISTRICT COURT OF TRAVIS COUNTY, 126TH JUDICIAL DISTRICT
      NO. D-1-GN-09-001249, HONORABLE LORA J. LIVINGSTON, JUDGE PRESIDING



                             MEMORANDUM OPINION


               Energy Education of Montana, Inc. (EEM) brought this tax refund suit against the

Comptroller of Public Accounts and the Attorney General of Texas (collectively, “the Comptroller”)

seeking to recover the use tax it paid, under protest, on an airplane it purchased in 2003. On cross-

motions for summary judgment, the district court granted the Comptroller’s motion and denied

EEM’s motion. On appeal, EEM argues that it is entitled to an exemption from the use tax under a

proper interpretation of tax code section 151.328(a)(4). We will affirm the district court’s judgment.


                                            Background

               The facts are undisputed, having been established below in a stipulation of facts.

EEM is a Montana corporation incorporated on June 20, 2003, solely for the purpose of purchasing

a Hawker 800 XP corporate jet from Raytheon Aircraft Company for $7,239,722.50. EEM is a

wholly-owned subsidiary of Energy Education, Inc. (EEI), a privately-held Texas corporation in

the business of energy consulting with physical offices in Dallas and Wichita Falls, Texas. EEM
purchased the Hawker to transport EEI personnel on EEI business. On June 26, 2003, EEI’s

president, William Spears, boarded the Hawker in Little Rock, Arkansas, where the Hawker’s

interior was completed, and flew to Helena, Montana, where he took delivery of the aircraft for

EEM and attended an EEI business meeting. The next day, Spears and his wife flew on board the

Hawker to Santa Monica, California, where they and the aircraft stayed for a few days and then

returned to EEM headquarters in Wichita Falls, Texas. Over the next three years—i.e., until it was

sold in October 2006—the Hawker was based in Wichita Falls and the majority of its flights

originated in Texas. Although EEM had originally intended to hangar the Hawker in Lawton,

Oklahoma—approximately 50 miles north of Wichita Falls—it instead used hangar space at the

Wichita Falls airport for the three years it owned the Hawker.

               Two days before its purchase of the Hawker, EEM mailed to Raytheon a Comptroller

form titled, “Texas Aircraft Exemption Certificate Out-of-State Registration and Use.” This form

stated that EEM was claiming “an exemption from Texas sales tax pursuant to Texas Tax Code

section 151.328(a)(4) because the aircraft is purchased for registration and use outside Texas.” It

also stated that the Hawker would be registered and hangared in Helena, Montana and that “the

aircraft is purchased for registration and use outside Texas before any use in Texas.” Two sentences

on the form authorizing the Comptroller to notify the purchaser’s home state about the purchase were

marked through with the explanation that “This paragraph is not applicable because Montana has

no state sales tax.”1 Around that same time, EEM registered the Hawker with the Federal Aviation


       1
           The marked-through sentences read as follows: “I understand that by signing this form,
I am authorizing the Texas Comptroller of Public Accounts to furnish copies to officials of
my home state. I understand that the purpose of providing this information to officials of my
home state is to facilitate the enforcement of any taxes imposed on the purchase or use of the
aircraft in my home state.” Texas Comptroller of Public Accounts Form 01-907, available at

                                                 2
Administration and the State of Montana using the Montana address of its registered agent for

service. EEM also paid annual registration fees to the state of Montana over the next three years.

                Following a 2005 audit of EEM, the Comptroller assessed a use tax, including

penalties and interest, on the Hawker in the amount of $890,601.19. EEM paid the assessed use tax,

penalties, and interest under protest and, after exhausting its administrative remedies, filed the

underlying tax refund suit. See Tex. Tax Code Ann. § 112.052 (West 2008) (authorizing taxpayer

suit after payment under protest). In addition to and as part of its claim for a refund of use taxes

paid, EEM’s petition sought declaratory judgments regarding the application of the tax code’s

aircraft exemption to EEM’s use of the Hawker in Texas. See Act of May 9, 1995, 74th Leg., R.S.,

ch. 147, § 1, 1995 Tex. Gen. Laws 994, 995 (amended 2007) (current version at Tex. Tax Code Ann.

§ 151.328(a)(4) (West Supp. 2012)) (cited hereinafter as “Former § 151.328(a)(4)”).2 This aircraft

exemption specifically provided that an aircraft is exempt from sales and use taxes if the aircraft was

“sold to a person for use and registration in another state or nation before any use in this state other

than flight training in the aircraft and the transportation of the aircraft out of this state.” See Former

§ 151.328(a)(4).3 The parties filed competing motions for summary judgment on the issue of

whether EEM was entitled to a use-tax exemption under former section 151.328(a)(4), with the




http://www.window.state.tx.us/taxinfo/taxforms/01-907.pdf. There is no indication in the record that
EEM sent this form to the Comptroller.
        2
         All references to tax code section 151.328(a)(4) and the “aircraft exemption” refer to the
1995 version of this statute unless otherwise indicated.
        3
          The 2007 amendment to former section 151.328(a)(4) added “in this state” after the word
“sold”—i.e., “sold in this state to a person for use and registration in another state or nation before
any use in this state . . . .” See Act of May 27, 2007, 80th Leg., R.S., ch. 1266, § 9, 2007 Tex. Gen.
Laws 4234, 4237 (current version at Tex. Tax Code Ann. § 151.328(a)(4) (West Supp. 2012)).

                                                    3
Comptroller specifically urging that it was entitled to summary judgment because section 151.328

creates a sales-tax exemption for aircraft sold in Texas to be used and kept in another state. The

district court granted the Comptroller’s motion for summary judgment and denied EEM’s. It is from

this judgment that EEM now appeals.


                                       Standard of review

               Summary judgment is proper if the movant establishes that there is no genuine issue

of material fact and that it is entitled to judgment as a matter of law. See Tex. R. Civ. P. 166a(c);

Southwestern Elec. Power Co. v. Grant, 73 S.W.3d 211, 215 (Tex. 2002). In our de novo review

of a summary judgment, we indulge every reasonable inference and resolve any doubts in

the nonmovant’s favor. Id. When, as here, both parties move for summary judgment and the

district court grants one motion and denies the other, we review the summary-judgment evidence

presented by both sides, determine all questions presented, and render the judgment the trial court

should have rendered. Texas Workers’ Comp. Comm’n v. Patient Advocates, 136 S.W.3d 643, 648

(Tex. 2004).


                                            Discussion

               In one issue on appeal, EEM argues that it and not the Comptroller was entitled to

summary judgment under the plain language of former section 151.328(a)(4) because the summary-

judgment evidence conclusively established that EEM purchased the Hawker in Montana, registered

the Hawker in Montana, and then used the Hawker in Montana and California for six days before

using it in Texas. In specific support of its argument, EEM argues that the plain text of former




                                                 4
section 151.328(a)(4) does not require that the aircraft be purchased in Texas and that, therefore, it

creates an exemption for both the sales tax and the use tax.

               Because EEM’s sole issue on appeal involves the proper construction of former

section 151.328(a)(4) and its application to the stipulated facts of this case, our decision here turns

on the interplay of various provisions from tax code chapter 151:


Sales tax: Section 151.051(a) imposes a sales tax “on each sale of a taxable item in this state.”
“Taxable item” includes tangible personal property. See Tex. Tax Code Ann. § 151.010.

Use tax: Section 151.101 imposes a use tax “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.” Id.
§ 151.101. The use tax complements the sales tax in that it is not applicable to a purchaser who has
paid sales-tax to an in-state retailer, see id. § 151.303; 30 Tex. Admin. Code § 3.346(c), and it is
designed to tax transactions not reached by the sales tax—i.e., it taxes the use or consumption in
this state of property purchased outside the state. See Combs v. Chapal Zenray, Inc., 357 S.W.3d
751, 756 (Tex. App.—Austin 2011, pet. denied) (citing Bullock v. Foley Bros. Dry Goods Corp.,
802 S.W.2d 835, 838 (Tex. App.—Austin 1990, writ denied)). “[T]angible personal property that
is shipped or brought into this state by a purchaser is presumed, in the absence of evidence to
the contrary, to have been purchased from a retailer for storage, use, or consumption in this state.”
Tex. Tax Code Ann. § 151.105(a).

Aircraft exemption: Former section 151.328(a)(4) provides a tax exemption for aircraft “sold to a
person for use and registration in another state or nation before any use in this state other than
flight training in the aircraft and the transportation of the aircraft out of this state.” See Former
§ 151.328(a)(4).


               Statutory construction is a question of law that we review de novo. See State

v. Shumake, 199 S.W.3d 279, 284 (Tex. 2006). Our primary objective in construing statutes is to

give effect to the Legislature’s intent and, ordinarily, the truest manifestation of what lawmakers

intended is what they enacted. See First Am. Title Inc. Co. v. Combs, 258 S.W.3d 627, 632

(Tex. 2008). The language emerging from the legislative process “constitutes the law, and when a

statute’s words are unambiguous and yield but one interpretation, ‘the judge’s inquiry is at an end.’”


                                                  5
Combs v. Roark Amusement & Vending, L.P., __S.W.3d__, No. 11-0261, 2013 WL 855737, at *2

(Tex. Mar. 8, 2013) (quoting Alex Sheshunoff Mgmt. Servs., L.P. v. Johnson, 209 S.W.3d 644,

651–52 (Tex. 2006)). We give such unambiguous statutes their plain meaning without resort to rules

of construction or extrinsic aids. Id. (citing Texas Lottery Comm’n v. First State Bank of DeQueen,

325 S.W.3d 628, 635, 637 (Tex. 2010) (branding such reliance “improper,” because “[w]hen a

statute’s language is clear and unambiguous, it is inappropriate to resort to rules of construction or

extrinsic aids to construe the language” (quoting City of Rockwall v. Hughes, 246 S.W.3d 621, 626

(Tex. 2008))). In so doing, we use any definitions prescribed by the Legislature and consider

any technical or particular meaning that the words have acquired. See Tex. Gov’t Code Ann.

§ 311.011(b) (West 2005). Absent legislative definition, we rely on the plain meaning of the text

unless a different meaning is apparent from the context or application of the literal language

would lead to absurd results. City of Rockwall v. Hughes, 246 S.W.3d 621, 625–26 (Tex. 2008); see

Tex. Gov’t Code Ann. § 311.011 (West 2005) (“Words and phrases shall be read in context and

construed according to the rules of grammar and common usage.”). We look to the entire act in

determining the Legislature’s intent with respect to specific provisions. Railroad Comm’n v. Texas

Citizens for a Safe Future & Clean Water, 336 S.W.3d 619, 628 (Tex. 2011); Upjohn Co.

v. Rylander, 38 S.W.3d 600, 607 (Tex. App.—Austin 2000, pet. denied). On the other hand, “‘[i]f

a statute is vague or ambiguous, we defer to the agency’s interpretation unless it is plainly erroneous

or inconsistent with the language of the statute.’” Id. (quoting Texas Dep’t of Ins. v. American Nat’l

Ins. Co.,__S.W.3d__, 2012 WL 1759457, at *8 (Tex. 2012)).

               We agree with the Comptroller that under a plain-meaning review of the applicable

tax code, EEM is not entitled to an exemption from the use tax under former section 151.328(a)(4).


                                                  6
A use tax is imposed on the use of a taxable item in this state. See Tex. Tax Code Ann. § 151.101(a)

(imposing tax “on the . . . use . . . in this state of a taxable item purchased from a retailer for . . . use

. . . in this state”) (emphases added). In contrast, the aircraft exemption by its own terms applies

only to aircraft sold “for use . . . in another state.” See Former Tex. Tax Code Ann. § 151.328(a)(4)

(emphases added). This provision does not create an exemption to the use tax because the use tax

and the exemption are mutually exclusive: an aircraft that is used in Texas, subjecting it to the use

tax, could not have been sold for use in another state; likewise, an aircraft that was sold for use in

and used in another state, would not be subject to the use tax so no exemption from the use tax is

needed. In sum, it would be unreasonable to construe former section 151.328(a)(4) to create a tax

exemption for a tax that it does not impose.

                Relatedly, and perhaps more important here, we also agree with the Comptroller

that EEM is not entitled to an exemption under former section 151.328(a)(4) because that

exemption applies only to aircraft sold in Texas. Although the former version of the aircraft

exemption does not include the phrase “in this state,” the only reasonable construction of former

section 151.328(a)(4) is to limit its application to aircraft sold in Texas. First, section 151.328(f)

explicitly limits former section 151.328(a)(4)’s application to aircraft purchased in Texas: “To

qualify for the exemption provided under Subsection (a)(4), the person purchasing the aircraft in this

state must sign at the time of purchase an exemption certification . . . .” Former Tex. Tax Code Ann.

§ 151.328(f) (emphasis added). Second, if the aircraft exemption could apply to aircraft sold outside

Texas, the Legislature would not have needed to include the transportation exception—allowing

aircraft to be flown “out of this state” without losing exemption—within the terms of the exemption.

Finally, based on our earlier conclusion that former section 151.328(a)(4) does not create an


                                                     7
exemption to the use tax, the aircraft exemption can only apply to sales tax, which can only be

assessed on items sold in Texas. See Tex. Tax Code Ann. § 151.051(a) (imposing a sales tax “on

each sale of a taxable item in this state”).

                EEM argues that Comptroller rule 3.927(c)(9) supports its construction of the aircraft

exemption because that rule refers to both “sales and use tax”:


        Texas sales or use tax is not due on aircraft sold to a person for use and registration
        in another state or nation before any use in Texas. Flight training in the aircraft
        in Texas and flying the aircraft out of state does not constitute a use of the aircraft
        in Texas.


34 Tex. Admin. Code § 3.297(c)(9) (2005) (Comptroller of Pub. Accounts, Carriers). Relatedly,

EEM argues that the Comptroller’s promulgation of rule 3.297(c)(9) precludes the Comptroller,

through principles of quasi-estoppel, from arguing in this case that the aircraft had to be sold in

Texas to qualify for the exemption because that rule does not require that the aircraft be sold in

Texas. We disagree with both arguments. In addition to the fact that the State is not subject to

the equitable defenses of limitations, laches, and estoppel, State v. Durham, 860 S.W.2d 63, 67

(Tex. 1993), we would note that Comptroller rule 3.297(c)(9) is simply a restatement of former

section 151.328(a)(4). The rule’s reference to “sales and use tax” is no different than former

section 151.328(a)(4)’s reference to “the taxes imposed by this chapter.” See Tex. Tax Code Ann.

§ 151.328(a) (“Aircraft are exempted from the taxes imposed by this chapter . . . .”). Moreover, it

is not incorrect to say that use tax is not due on an item to be used and registered in another state.

As such, the rule is not inconsistent with the notion that the aircraft exemption requires purchase

in Texas.



                                                  8
               We also reject EEM’s argument that the Comptroller’s March 2006 tax publication

serves as a judicial admission that an aircraft does not have to be sold in Texas to qualify for the

aircraft exemption. First, for the same reasons set forth above regarding rule 3.297, the publication

referenced here does not conflict with the plain language of former section 151.328(a)(4). Further,

a judicial admission involves a formal waiver of proof as to facts made during the course of a

judicial proceeding. See Horizon/CMS Healthcare Corp. v. Auld, 34 S.W.3d 887, 905 (Tex. 2000)

(noting that judicial admission “occurs when an assertion of fact is conclusively established in

live pleadings”); In re Graham, 251 S.W.3d 844, 849 (Tex. App.—Austin 2008, no pet.) (“A

judicial admission results when a party makes a statement of fact which disproves his right

of recovery or defense.”). Comptroller publications contain general information for the public

regarding particular areas over which the Comptroller has administrative control, such as state taxes.

The publication referenced here was not a pleading in this case, was not made in the course of a

judicial proceeding, and does not contain assertions of fact. As such, the Comptroller publication

is not a judicial admission.

               EEM argues that a Comptroller letter and memo, which EEM refers to as the

Comptroller’s “transitory entity rules,” support its argument that an aircraft can be purchased outside

Texas and still qualify for the aircraft exemption. But the letter and memo on which EEM relies

are merely Comptroller responses to taxpayer requests regarding whether a taxable transaction

occurred under specific facts; they did not involve requests for an exemption from a tax. Further,

the transactions involved were non-taxable events because the asset was acquired by the ultimate

consumer through the liquidation of a transitory subsidiary entity, not via purchase from a retailer.




                                                  9
Thus, because the tax code only imposes a use tax on the use of a taxable item that was purchased

from a retailer, see Tex. Tax Code Ann. § 151.101(a), these “rules” do not inform our decision here.

                Finally, EEM argues that the Comptroller violated administrative rule-making

procedures when it effectively amended former section 151.328(a)(4) and rule 3.297(c)(9) by

taking the position that the aircraft exemption applies only if the aircraft is purchased in Texas. See

Tex. Gov’t Code Ann. §§ 2001.033 (setting forth agency rule-making procedures), .035 (invalidating

rules adopted in violation of rule-making procedures). EEM, however, did not seek relief from this

alleged violation in its petition to the district court and, thus, has waived this argument. Regardless,

however, there exists no rule or policy to deem void that would change the outcome of our holding

here that the statutory aircraft exemption in former section 151.328 requires purchase in Texas and

does not create a use-tax exemption.4

                In sum, we hold that former section 151.328(a)(4) applies only to aircraft purchases

made in Texas and, relatedly, does not create a use-tax exemption. Therefore, because the summary-

judgment evidence conclusively established that EEM purchased the Hawker outside Texas

and was assessed a use tax based on its use of the Hawker in Texas, EEM is not entitled to the

aircraft exemption under former section 151.328(a)(4). Accordingly, we affirm the district court’s

judgment.5


       4
         EEM complains about the Comptroller’s use of legislative history as summary-judgment
evidence, but we need not address that complaint given that our holding does not rely on extrinsic
aids. See Texas Lottery Comm’n v. First State Bank of DeQueen, 325 S.W.3d 628, 635, 637
(Tex. 2010) (noting that reliance on extrinsic aids is improper for unambiguous statute).
       5
          In its briefs to this Court, EEM makes multiple references to, and lengthy argument about,
its objections to certain of its stipulations. It appears that EEM’s specific objections are to the
relevance of those stipulations, but we need not address this matter given that our holding here does
not rely on any of stipulations to which EEM “objects.”

                                                  10
                                          Conclusion

              Having overruled EEM’s sole issue on appeal, we affirm the district court’s judgment.




                                            __________________________________________

                                            Jeff Rose, Justice

Before Justices Puryear, Pemberton, and Rose

Affirmed

Filed: April 25, 2013




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