          TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN



                                         NO. 03-03-00643-CV



                                  Alpine Industries, Inc., Appellant

                                                     v.

  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, 126TH JUDICIAL DISTRICT
             NO. 98-12998, HONORABLE DARLENE BYRNE, JUDGE PRESIDING




                              MEMORANDUM OPINION


                In this tax protest suit, Alpine Industries, Inc. (AAlpine@) appeals from the district court=s

grant of summary judgment in favor of Carole Keeton Strayhorn, Comptroller of Public Accounts, and Greg

Abbott, Attorney General of the State of Texas (collectively, AComptroller@). The Comptroller determined

that Alpine, which manufacturers air-purification equipment sold in Texas and elsewhere by Alpine=s

network of independent dealers, is a direct sales organization. As a result, Alpine, and not its dealers, is

responsible for collecting and paying Texas sales taxes. See Tex. Tax Code Ann. ' 151.024 (West 2002);
Former 34 Tex. Admin. Code ' 3.286.1 Alpine argues that the district court=s grant of summary judgment

in favor of the Comptroller is in error because (1) the Comptroller failed to prove as a matter of law that

Alpine is a direct sales organization; (2) the Comptroller failed to comply with the tax code by failing to

make an individualized determination that Alpine is a direct sales organization and that treatment of Alpine as

a retailer for tax purposes is necessary for the efficient administration of chapter 151 of the tax code;2 (3)

the tax violates the commerce clause of the United States Constitution; (4) the tax violates the due process

clause of the United States Constitution; (5) the tax violates the equal protection clauses of the United States

Constitution and the Texas Constitution; and (6) the Comptroller failed to prove as a matter of law that it

was entitled to summary judgment on its counterclaim. We will affirm the district court=s summary judgment.


                                BACKGROUND AND PROCEDURE

                 Alpine is a Tennessee-based company that manufactures air-purification equipment. Its

equipment is sold in Texas and throughout the United States by a network of independent salespersons. In

order to become a salesperson for Alpine, one is required to pay Alpine a fee on a yearly basis. In


        1
         21 Tex. Reg. 11800 (1996) (amended 2002) (current version at 34 Tex. Admin. Code Ann.
3.286 (2004)) (Former 34 Tex. Admin. Code ' 3.286).
        2
            As an individual issue, Alpine argues the Comptroller failed to prove that its tax is necessary for
the efficient administration of the tax code. Because this issue is duplicative of the argument contained within
its second issue, we will address Alpine=s argument in conjunction with that issue.




                                                      2
exchange for the fee, Alpine sends to each salesperson promotional materials including a videotape and a

copy of a manual entitled AYour Alpine Success and Evaluation Manual.@

                Alpine describes itself as a multilevel marketing company, with different levels of

salespersons. Each salesperson is encouraged to recruit others to join Alpine=s network. A salesperson=s

recruits are known as Alegs@ and form a Adownline.@ Alpine provides incentives such as automobiles and

world travel if a salesperson=s recruits are successful and pays bonuses to its salespersons based upon the

dollar volume of products ordered. Alpine=s accounting records indicate that up to 20,000 persons with

Texas addresses registered with Alpine to sell Alpine=s products between 1994 and 1998.3




          3
                Alpine correctly notes that not all persons listed in its accounting records sold Alpine
products during every year from 1994 to 1998. However, our review of Alpine=s records reveals
hundreds, if not thousands, of salespersons with Texas addresses who purchased Alpine products during
one or more of each of the years in question.




                                                    3
                 The Texas Tax Code allows the Comptroller to treat a dealer, distributor, supervisor, or

employer as a retailer for tax purposes if Ait is necessary for the efficient administration of this chapter

[regarding limited sales, excise, and use taxes].@4 Tex. Tax Code Ann. ' 151.024 (West 2002). At the

time of this dispute, the Texas Administrative Code provided that a retailer is engaged in business in Texas if

the retailer is Autilizing independent salespersons in direct sales of taxable items.@ Former 34 Tex. Admin.

Code ' 3.286(a)(1)(D). The same rule provided: AA direct sales organization engaged in business as

defined in paragraph (1)(D) of this subsection is a seller and is responsible for the collection and remittance

of the sales tax collected by the independent salespersons selling the organization=s product.@ Id. '

3.286(a)(3). Finally, the rule provided: AIndependent salespersons of direct sales organizations will not be

required to hold sales tax permits. It is the responsibility of the direct sales organization to hold Texas

permits and to collect Texas tax.@ Id. ' 3.286(b)(3).




          4
                 The tax code provides:

          ' 151.024. Persons Who May be Regarded as Retailers

                 If the comptroller determines that it is necessary for the efficient administration of
          this chapter to regard a salesman, representative, peddler, or canvasser as the agent of
          a dealer, distributor, supervisor, or employer under whom he operates or from whom
          he obtains the tangible personal property that he sells, whether or not the sale is made
          in his own behalf or for the dealer, distributor, supervisor, or employer, the comptroller
          may so regard the salesman, representative, peddler, or canvasser, and may regard the
          dealer, distributor, supervisor, or employer as a retailer or seller for the purpose of this
          chapter.

Tex. Tax Code Ann. ' 151.024 (West 2002).


                                                       4
                On June 20, 1996, the Comptroller wrote Alpine and stated: AIt has come to our attention

that your company is a multi-level marketing company/direct sales company. . . . [Y]our company is

required to collect and remit Texas sales and use taxes for its independent distributors.@ On July 3, 1996,

Alpine responded to the Comptroller=s letter and stated that Awe are not a typical multi-level organization@

and that Awe feel that Rule 3.286(a)(3) does not apply to our business practice.@ The Comptroller and

Alpine then engaged in a series of correspondence regarding whether Alpine was responsible for the

collection and payment of Texas sales and use taxes. After Alpine refused to comply with a Comptroller

request to complete a business tax questionnaire, the Comptroller estimated the amount of tax Alpine owed

and issued several notices of tax due.

                Alpine paid $33,004.14 under protest and filed suit on November 20, 1998. See Tex. Tax

Code Ann. '' 112.051-.052 (West 2001). The Comptroller answered and filed a counterclaim, seeking

the actual amount of taxes Alpine owed. See id. ' 112.052(c). After discovery, the Comptroller

determined that Alpine made sales of $32,014,745.21 through its independent salespersons in Texas from

1994 to 1998. Based on these sales figures, the Comptroller sought judgment against Alpine for

$2,000,921.57 in back taxes. The Comptroller filed a motion for summary judgment on Alpine=s protest

suit and on its own counterclaim. The district court granted the Comptroller summary judgment. This

appeal followed.


                                      STANDARD OF REVIEW

                When a taxpayer files suit to recover taxes paid under protest, it is the taxpayer=s burden to

go forward and show a right to the taxes paid under protest. See A. W. Cullum & Co. v. Calvert, 450

                                                     5
S.W.2d 419, 422 (Tex. Civ. App.CAustin 1970, writ ref=d); Calvert v. Union Producing Co., 258

S.W.2d 176, 181 (Tex. Civ. App.CAustin 1953, no writ). When the constitutional validity of a tax is

contested, we begin with a presumption that the statute is constitutional. See Enron Corp. v. Spring

Indep. Sch. Dist., 922 S.W.2d 931, 934 (Tex. 1996); see also Upjohn Co. v. Rylander, 38 S.W.3d

600, 610 (Tex. App.CAustin 2000, pet. denied).                Taxpayers must rebut this presumption of

constitutionality by introduction of Aclear and cogent@ evidence. See Container Corp. of Am. v.

Franchise Tax Bd., 463 U.S. 159, 164 (1983); Norton Co. v. Department of Revenue, 340 U.S. 534,

537 (1951); Upjohn, 38 S.W.3d at 610.

                 We give serious consideration to an agency=s construction of a statute, as long as the

construction is reasonable and does not contradict the plain language of the statute. Continental Cas. Co.

v. Downs, 81 S.W.3d 803, 807 (Tex. 2002) (citing Tarrant Appraisal Dist. v. Moore, 845 S.W.2d 820,

823 (Tex. 1993)). We recognize that the legislature intends an agency created to centralize expertise in a

certain regulatory area Abe given a large degree of latitude in the methods it uses to accomplish its regulatory

function.@ Moore, 845 S.W.2d at 823.

                 We construe the text of an administrative rule under the same principles as if it were a

statute. Phillips Petroleum Co. v. Texas Comm=n on Envtl. Quality, 121 S.W.3d 502, 507 (Tex.

App.CAustin 2003, no pet.) (citing Texas Gen. Indem. Co. v. Texas Workers= Comp. Comm=n, 36

S.W.3d 635, 641 (Tex. App.CAustin 2000, no pet.)). We bear in mind that an administrative agency has

the power to interpret its own rules, and its interpretation is entitled to great weight and deference. Id. The

agency=s construction of its rule is controlling unless it is plainly erroneous or inconsistent. Id.


                                                       6
                                              DISCUSSION

Direct Sales Organization

                 Alpine argues the Comptroller failed to prove as a matter of law that Alpine is a direct sales

organization. See Former 34 Tex. Admin. Code ' 3.286; see also Tex. Tax Code Ann. ' 151.024

(allowing treatment of certain dealers, distributors, supervisors, or employers as retailers if doing so is

necessary for administrative efficiency). Although the Texas Legislature has not specifically defined the term

Adirect sales organization,@ the Comptroller=s rule provides that a direct seller can be a retailer Autilizing

independent salespersons in direct sales of taxable items.@ Former 34 Tex. Admin. Code ' 3.286(a)(1)(D),

(3). When Alpine asked for a more specific definition of Adirect sales organization,@ the Comptroller

responded that a direct sales organization Auses individual canvassers, solicitors, peddlers, door-to-door

salespersons, etc., to sell its products.@

                 The Comptroller=s summary-judgment evidence from Alpine=s own manual establishes that

Alpine marketed its products through a network of independent salespersons and encouraged them to sell

Alpine products through cold calls, teaser mailing, and person-to-person approaches, among others.5




        5
            Alpine asserts for the first time on appeal that there is no evidence to support the Comptroller=s
contention that Alpine is a direct sales organization because Athe only evidence proffered by the Comptroller
was a manual that was not issued until after the tax years in question.@ Although the manual submitted as an
exhibit to the Comptroller=s motion for summary judgment was printed in April 1998, it clearly indicates that
it was first printed in November 1995 and that the information contained therein was copyrighted in 1995.
Moreover, Alpine does not argue that its manual does not accurately reflect Alpine=s business practice for
any of the tax years in question. We therefore reject Alpine=s contention that the manual constitutes no
evidence.


                                                      7
                 Alpine argues that its dealers are not Asalesmen, representatives, peddlers, or canvassers,@

as envisioned in the Comptroller=s definition of direct sales organization and in section 151.024 of the tax

code. Rather, Alpine asserts its dealers are Aindependent contractors.@ Notwithstanding Alpine=s

characterization, its dealers function in the same way as salesmen, representatives, peddlers, or canvassers

function. Alpine encourages its independent salespersons to hold meetings in their homes to sell Alpine

products and recruit new salespersons; compensation for Alpine=s dealers is based not on fixed rates or the

number of hours worked, but on the amount of Alpine=s products they sell and the price at which the sales

are made; and Alpine=s dealers utilize a variety of sales techniques, including cold calls, teaser mailing, and

person-to-person sales, all of which are suggested by Alpine.

                 Alpine further argues that the Comptroller failed to prove that Alpine is a direct sales

organization because, according to the affidavit of Alpine=s president, Alpine is not a Atypical@ direct sales

organization and Asells both to individuals who do not have fixed-store operations and to those who do.@

However, Alpine has failed to introduce actual evidence of a single independent salesperson who sold

Alpine=s products through a fixed-store operation. 6 Because Alpine=s president=s statements could not have

been Areadily controverted@ and are conclusory, they constitute no evidence. See Tex. R. Civ. P. 166a(c)

(affidavits by interested witness constitute evidence if, among other factors, they could have been readily

controverted); Burrow v. Arce, 997 S.W.2d 229, 236 (Tex. 1999) (conclusory affidavit is incompetent

summary-judgment evidence). We therefore hold that the Comptroller established that Alpine is a direct

sales organization. We overrule Alpine=s first issue.


        6
            In Alpine=s early correspondence to the Comptroller, Alpine stated that its products were being

                                                      8
Compliance with Texas Tax Code

                Alpine asserts the Comptroller violated section 151.024 of the tax code in two ways. First,

Alpine argues that the Comptroller failed to make Aan individualized determination that unique tax treatments

for differing persons is warranted,@ a step Alpine alleges is required by section 151.024. Second, Alpine

contends that section 151.024 of the tax code does not authorize the Comptroller to create a class of

persons labeled Adirect sales organizations@ and require them to collect sales and use taxes.


1.   Determination of Administrative Efficiency




sold at retail through AHome Environment Center@ franchises. Although the Comptroller requested
additional information about Alpine=s contention and informed Alpine that the Comptroller=s determination
could change upon receipt of additional facts, Alpine failed to support its bare assertion that its products
were being sold in AHome Environment Center@ franchises.




                                                     9
                 The legislature authorizes the Comptroller Ato regard a salesman, representative, peddler, or

canvasser as the agent of a dealer, distributor, supervisor, or employer . . . [and to] regard the dealer,

distributor, supervisor, or employer as a retailer or seller for the purpose of [chapter 151 of the tax code]@ if

the Comptroller Adetermines that it is necessary for the efficient administration of [the chapter].@ Tex. Tax.

Code Ann. ' 151.024. Alpine argues that the Comptroller failed to make an individualized determination

that requiring Alpine to remit sales taxes is necessary for administrative efficiency. As support for its

contention, Alpine states the Comptroller never conducted investigations, hearings, or studies in making such

a determination.7




        7
         The tax code entitles a taxpayer to obtain a hearing to redetermine a tax. Tex Tax. Code Ann. '
151.510 (West 2002). Alpine never requested such a hearing.




                                                      10
                Although the legislature requires that the Comptroller determine that treatment of a dealer,

distributor, supervisor, or employer as a retailer is necessary for administrative efficiency, the legislature

does not require the Comptroller to take particular steps in making this determination. The Comptroller

produced ample evidence to show that it did, in fact, determine that Alpine is a direct sales organization and

that treatment of Alpine as a retailer under section 151.024 is necessary for administrative efficiency. The

Comptroller produced letters from its Tax Policy Division to Alpine that were part of the Comptroller=s

investigation, various internal e-mails that were part of the Comptroller=s investigation, and Alpine=s

accounting records that show up to 20,000 Alpine salespersons residing in Texas during the tax years in

question. The Comptroller argued in both its correspondence to Alpine and its argument to the district court

that treatment of Alpine as a retailer and the corresponding requirement that Alpine collect the taxCas

opposed to taxation of up to 20,000 individual salespersonsCis necessary for administrative efficiency. See

Letter Op. Tex. Comptroller No. 9907537L (1999) (AThe purpose of the policy is to ease the

administrative burden to our state. By regarding the direct sales organization as the retailer and not

permitting the independent distributors, the administrative burden of permitting thousands of home-based

distributors who sell products for direct sales companies is eliminated.@). We hold that the Comptroller=s

summary-judgment evidence establishes that the treatment of Alpine as a retailer for tax purposes is

necessary for administrative efficiency.8


2.   Statutory Authority


        8
           We also overrule appellant=s separate issue that the Comptroller failed to prove that its tax is
necessary for administrative efficiency.

                                                     11
                 Alpine argues that section 151.024 of the tax code does not authorize the Comptroller to

create a class of persons labeled direct sales organizations and require them to collect sales and use taxes.

The core of Alpine=s argument is that if the Comptroller is not required to make a determination that

treatment of direct sales organizations as retailers is necessary for administrative efficiency, then the

Comptroller=s rule constitutes an unlawful delegation of legislative authority. See Moody v. City of Univ.

Park, 278 S.W.2d 912, 922 (Tex. Civ. App.CDallas 1955, writ ref=d n.r.e.) (AIt is fundamental that a

legislative body may not delegate unlimited legislative powers and functions to an administrative agency.@).

                 The Comptroller responds that because it did, in fact, determine that treatment of Alpine as

a retailer is necessary for administrative efficiency, it complied with section 151.024. The Comptroller

further argues that its rule Ais a valid exercise of the authority granted to the Comptroller under [section

151.024 of the tax code] to treat distributors of products sold through salesmen as the retailer of those

products.@ See Former 34 Tex. Admin. Code ' 3.286.

                 We agree with the Comptroller. Although Alpine argues that the Comptroller has created a

blanket category of Adirect sales organizations@ and treats all direct sales organizations as retailers for tax

purposes, the summary-judgment evidence regarding an individualized determination as to Alpine proves

otherwise. Because the Comptroller made an individualized determination, we hold that the Comptroller

complied with the tax code. We overrule Alpine=s second issue.


Constitutional Claims

A. Commerce Clause




                                                     12
                 By specifically delegating to Congress the power Ato regulate Commerce . . . among the

several States,@ the commerce clause implicitly prohibits the states from actions that interfere with interstate

commerce. U.S. Const. art. I, ' 8, cl. 3; see Quill Corp. v. North Dakota, 504 U.S. 298, 309 (1992).

The prohibition does not, however, render impermissible all direct state taxation of interstate commerce.

Rylander v. Bandag Licensing Corp., 18 S.W.3d 296, 299 (Tex. App.CAustin 2000, pet. denied). A

state tax on a foreign corporation will be sustained if the Atax [1] is applied to an activity with a substantial

nexus with the taxing State, [2] is fairly apportioned, [3] does not discriminate against interstate commerce,

and [4] is fairly related to the services provided by the State.@ Complete Auto Transit, Inc. v. Brady, 430

U.S. 274, 279 (1977).

                 Alpine=s protest letter stated that the Comptroller=s tax violated the commerce clause of the

United States Constitution because AAlpine does not have a sufficient nexus with the State of Texas.@ This

was also the only ground asserted by Alpine in support of its commerce-clause contention in its summary-

judgment response. For the first time on appeal, however, Alpine argues that the Comptroller failed to

carry its summary-judgment burden because it failed to introduce evidence on the last three Complete Auto




                                                      13
commerce-clause factors.9 Alpine=s argument ignores that the issues to be determined in a protest suit Aare

limited to those arising from the reasons expressed in the written protest as originally filed.@ Tex. Tax Code

Ann. ' 112.053(b) (West 2001).10 Because the nexus requirement of the Complete Auto factors was the

only argument ever made by Alpine in support of its commerce-clause contention, we reject Alpine=s

argument that the Comptroller was required to rebut as a matter of law arguments not asserted by Alpine in

its protest letter.

                  As to the nexus requirement, Alpine contends that the Comptroller failed to prove as a

matter of law that its tax Ais applied to an activity with a substantial nexus with the taxing State.@ See

Complete Auto, 430 U.S. at 279. The nexus requirement of Complete Auto is satisfied if the taxpayer has

a physical presence in the taxing state. See Quill, 504 U.S. at 317-18 (upholding bright-line physical

presence test for determining whether out-of-state company may be taxed); see also National Bellas Hess,



         9
         Although Alpine has introduced no evidence that the Comptroller=s tax violates any of the final
three Complete Auto factors, Alpine argues that A[t]his one procedural omission requires reversal of the
summary judgment.@
             10
                This requirement serves a twofold purpose: (1) allowing the Comptroller the first
opportunity to determine the merits and validity of the protest; and (2) preventing the protestor from taking
advantage by Achanging horses@ at trial. Lawrence Indus., Inc. v. Sharp, 890 S.W.2d 886, 892 (Tex.
App.CAustin 1994, writ denied).




                                                     14
Inc. v. Department of Revenue, 386 U.S. 753, 758-89 (1967) (providing safe harbor for mail-order or

catalogue companies with no physical presence in taxing state).

                 The presence of a sales force in the taxing state is sufficient to satisfy the physical presence

test. See, e.g., Tyler Pipe Indus., Inc. v. Washington State Dep=t of Revenue, 483 U.S. 232, 250

(1987); Scripto, Inc. v. Carson, 362 U.S. 207, 211 (1960). Scripto, a Georgia corporation, had no office

or regular employees in Florida, but it employed wholesalers or jobbers to solicit sales of its products in

Florida. Scripto, 362 U.S. at 208-11. The United States Supreme Court held that a sufficient nexus

existed and that Florida may require these solicitors to collect a use tax from Florida customers. Id. at 211.

Although Scripto argued correctly that the Asalesmen@ were not employees of Scripto, the United States

Supreme Court determined that Asuch a fine distinction is without constitutional significance.@ Id.; accord

National Geographic Soc=y v. California Equalization Bd., 430 U.S. 551, 556-558 (1977).

                 In Tyler Pipe, Tyler sold a large volume of cast iron, pressure and plastic pipe and fittings,

and drainage products in Washington, but manufactured the products in other states. 483 U.S. at 249.

Tyler maintained no office, owned no property, and had no employees residing in the State of Washington;

its solicitation of business in Washington was directed by executives who maintained their offices out of state

and by an independent contractor located in Seattle. Id. Although Tyler argued that its representative in

Seattle was an independent contractor, as opposed to an agent, the United States Supreme Court affirmed

the Washington Supreme Court=s analysis Athat this showing of a sufficient nexus could not be defeated by

the argument that the taxpayer=s representative was properly characterized as an independent contractor




                                                      15
instead of as an agent.@ Id. The United States Supreme Court again stated that Asuch a fine distinction is

without constitutional significance.@ Id. (citing Scripto, 362 U.S. at 211).

                 Alpine=s first argument in support of its contention that the Comptroller did not establish a

sufficient nexus between Texas and Alpine=s sales activities is that Alpine had no inventory, real estate,

employees, offices, bank accounts, or other assets in Texas. However, the Comptroller introduced

evidence that Alpine maintained a network of up to 20,000 independent salespersons in Texas. Alpine=s

Texas sales network made sales of $32,014,745.21 from 1994 to 1998. Alpine suggested a variety of

sales techniques in its ASuccess and Evaluation@ manual for its sales force to use when selling Alpine=s

products.     Alpine=s extensive network of salespersonsCeven though they are independent

contractorsCestablishes a sufficient nexus between Texas and Alpine=s sales activities. See Tyler Pipe, 483

U.S. at 249; Complete Auto, 430 U.S. at 279; Scripto, 362 U.S. at 211.

                 Next, Alpine argues that its business structure is distinguishable from those at issue in

Scripto and Tyler Pipe, where the taxpayers= sales forces helped the taxpayers maintain markets in the

taxing states. Alpine argues that AAlpine=s independent dealers do not maintain markets, but rather are

themselves the market, which is exemplified by the large number of independent dealers and the very few

purchases each ultimately makes from Alpine.@

                 We disagree. In a letter to the Comptroller, Alpine=s president stated that A[m]ost of our

dealers are selling the product retail@ and that A[w]e actually have very little personal consumption.@ The

fact that some salespersons were making only a few purchases from Alpine does not indicate that they were

the market for Alpine; rather, it indicates that these salespersons were not willing or able to find purchasers


                                                     16
for Alpine=s products. The uncontroverted evidence shows a sufficient nexus between Texas and Alpine=s

sales activities. We therefore reject Alpine=s contention that the Comptroller=s tax violates the commerce

clause.11 We overrule Alpine=s third issue.


B. Due Process

                 Alpine argues that the Comptroller=s tax violates the due process clause of the United States

Constitution. See U.S. Const. amend. XIV, ' 1. A[D]ue process requires some definite link, some

minimum connection, between a state and the person, property or transaction it seeks to tax.@ Miller Bros.

Co. v. Maryland, 347 U.S. 340, 344-45 (1954). A[I]f a foreign corporation purposefully avails itself of the

benefits of an economic market in the forum State, it may subject itself to the State=s in personam

jurisdiction even if it has no physical presence in the State.@ Quill, 504 U.S. at 307. Because Alpine=s sales




        11
            Alpine cites Miller Brothers Co. v. Maryland, 347 U.S. 340 (1954), as support for its
contention that there is not a sufficient nexus between Texas and its sales activities. In Miller Brothers, the
United States Supreme Court held that Maryland could not tax a Delaware furniture store because the only
connection between the state and the store arose after goods were bought in Delaware and transported to
Maryland by the customer, common carrier, or by the store=s own delivery trucks. Id. at 341. Miller
Brothers, however, is easily distinguishable because the furniture store maintained no sales force in
Maryland whatsoever. Id. Here, Alpine maintains an extensive sales network in Texas for the purpose of
marketing and selling its products.




                                                     17
force in Texas constitutes a physical presence, the minimum-connection requirement is satisfied. See id. at

307-08.

                 Alpine also asserts that the Comptroller=s tax violates due process because the Comptroller

failed to show a rational basis for the tax.         See Federal Communications Comm=n v. Beach

Communications, Inc., 508 U.S. 307, 314-15 (1993). The Comptroller argues that administrative

convenience provides a rational basis for its classification of Alpine as a direct sales organization and for its

imposition of tax against Alpine. This rationale is supported by letter opinions and hearing decisions

indicating that the purpose of the Comptroller=s tax is to ease the administrative burden on the state.

Although Alpine disagrees with the Comptroller=s conclusion, it has failed to negate the rational basis

asserted by the Comptroller. See id. at 315 (party challenging tax classification bears burden to negate

every conceivable basis that might support it). We overrule Alpine=s fourth issue.


C. Equal Protection

                 Alpine argues that the Comptroller=s tax violates the equal protection clauses of the United

States Constitution and the Texas Constitution because the Comptroller=s classification of Alpine as a direct

sales organization, along with its different treatment of direct sales organizations, denies Alpine equal

protection of the law. States generally have broad powers to impose and collect taxes, but they must not

make classifications among taxpayers that are arbitrary, unreasonable, or capricious. See Hurt v. Cooper,

110 S.W.2d 896, 901 (Tex. 1937); Upjohn, 38 S.W.3d at 609. That all taxes be equal and uniform

requires only that all persons falling within the same class be taxed alike. Upjohn, 38 S.W.3d at 609.




                                                      18
                 Under the equal-protection test applied here, Alpine must show that the Comptroller=s

classification resulted in discrimination between similarly situated taxpayers. See Westcott, 104 S.W.3d

at 150; Sharp v. Caterpillar, Inc., 932 S.W.2d 230, 241 (Tex. App.CAustin 1996, writ denied)

(taxpayer must show that liability classification actually resulted in discrimination between similarly situated

taxpayers). Because Alpine was unable to make any such showing, we overrule its fifth issue.


The Comptroller=s Counterclaim

                 In its final issue, Alpine argues that the Comptroller failed to prove that it was entitled to

recover on its counterclaim. The Comptroller introduced evidence that Alpine=s independent salespersons

in Texas made $32,014,745.21 in sales during the audit period. The Comptroller then applied the 6.25

percent tax rate to arrive at the amount of tax due: $2,000,921.57.

                 Alpine asserts that the Comptroller=s calculation is incorrect because the Comptroller

refused to issue sales tax permit numbers to each of Alpine=s independent salespersons, thereby precluding

Alpine=s salespersons from completing resale exemption certificates for sales that should not have been

included in the gross receipts used by the Comptroller to calculate back taxes. See Tex. Tax Code Ann. '

151.054(a) (West 2002) (except for certain alcoholic beverage sales, Aall gross receipts of a seller are

presumed to have been subject to the sales tax unless a properly completed resale or exemption certificate

is accepted by the seller@); id. ' 151.302(a) (West 2002) (AThe sale for resale of a taxable item is

exempted from the taxes imposed by this chapter.@); id. ' 151.152(b) (West Supp. 2004) (resale certificate

must state sales tax permit number).




                                                      19
                 The Comptroller responds that Alpine confuses resale certificates and exemption

certificates. The purpose of resale certificates is to prevent double taxation. Sharp v. Clearview Cable

TV, Inc., 960 S.W.2d 424, 426 (Tex. App.CAustin 1998, pet. denied). In section 151.024, the legislature

authorized the Comptroller to treat certain salesmen, representatives, peddlers, or canvassers as the mere

agents of a dealer, distributor, supervisor, or employer. See Tex. Tax Code Ann. ' 151.024. The dealer,

distributor, supervisor, or employer is then treated as the actual retailer. See id. When section 151.024

appliesCas the Comptroller proved it applies hereCthe relationship between the dealer, distributor,

supervisor, or employer (Alpine) and its salespersons is that of principal and agent, not purchaser and seller.

Because Alpine is treated as the retailer for tax purposes, the Comptroller is not required to provide sales

tax permit numbers to each of Alpine=s independent salespersons.12

                 Exemption certificates, on the other hand, are used to certify that a certain sale is exempt

from sales and use tax. No sales tax permit number is required to obtain exemption certificates, which are

downloadable at no charge from the Comptroller=s website. The Comptroller allows direct sales

organizations to accept exemption certificates from its salespersons and report any exempt sales to the

Comptroller. See Letter Op. Tex. Comptroller No. 9907537L (1999). We therefore reject Alpine=s

contention that the Comptroller is not entitled to summary judgment on its counterclaim due to the

Comptroller=s failure to issue sales tax permit numbers to each of Alpine=s salespersons. The only other

arguments Alpine presents to contest the Comptroller=s counterclaim are the same arguments presented in


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           Alpine has not argued that double taxation could result from the Comptroller=s denial of sales tax
permits to Alpine=s salespersons or the Comptroller=s treatment of Alpine as a retailer.


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Alpine=s first five issues. Because we have already overruled each of these issues, we overrule Alpine=sfinal

issue on the Comptroller=s counterclaim.


                                             CONCLUSION

                The Comptroller proved as a matter of law that Alpine is a direct sales organization. The

Comptroller also proved that it determined that treatment of Alpine as a retailer for tax purposes is

necessary for administrative efficiency. The Comptroller=s imposition of tax directly against AlpineCas

opposed to imposition of the tax against Alpine=s individual salespersonsCdoes not violate the commerce

clause, due process, or equal protection. Finally, the Comptroller proved as a matter of law that it was

entitled to summary judgment on its counterclaim. We therefore affirm the district court=s summary

judgment in favor of the Comptroller.




                                                  __________________________________________

                                                  Mack Kidd, Justice

Before Justices Kidd, B. A. Smith and Pemberton

Affirmed

Filed: July 15, 2004




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