      TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN



                                       NO. 03-04-00443-CV



                                James Howard Myers, Appellant

                                                  v.

                                      State of Texas, Appellee




     FROM THE DISTRICT COURT OF TRAVIS COUNTY, 353RD JUDICIAL DISTRICT
        NO. GV201709, HONORABLE SUZANNE COVINGTON, JUDGE PRESIDING



                                           OPINION


                In this appeal, we are asked to determine whether the agent of a club holding a mixed

beverage permit is liable for mixed-beverage taxes assessed by the Texas Comptroller of Public

Accounts. James Howard Myers was one of two officers of Little G’s, a club that obtained permits

from the state to serve alcohol. The tax code requires a mixed-beverage “permittee” to pay taxes on

the sale of alcohol. Tex. Tax Code Ann. § 183.021 (West 2002). Myers admits that he was an agent

of Little G’s but contends that, under the tax code, permittee refers only to the permit holder and not

to its agents. The trial court granted summary judgment in favor of the State and entered a judgment

against Myers and the other officer1 in the amount of $64,218.99 for the tax due, including interest

and penalties, plus $3,000 in attorneys’ fees. We find that the definition of permittee in the tax code


       1
           The other officer, Veda Renee Rowell, did not appeal the judgment.
does not unambiguously define who may be held liable for the mixed-beverage tax. Therefore, we

refer to the Comptroller’s rule concerning administration of the mixed-beverage tax, which states

that only the permit holder may be liable for the tax. See 34 Tex. Admin. Code § 3.1001(a)(6)

(2005). Consequently, we reverse the judgment of the trial court and remand for further proceedings

consistent with this opinion.


                                         BACKGROUND

               Little G’s was formed for the purpose of providing “pleasure, entertainment, and

recreation” to its members. The club’s rules specifically state that the association would be governed

by two officers—a president and a secretary. The club’s rules required that these officers prepare

and file an application with the Texas Alcoholic Beverage Commission (the “Commission”) for the

following permits for the sale of mixed beverages: a private club registration permit, a private club

late hours permit, and a beverage cartage.

               Myers, the secretary of the club, and club president Veda Renee Rowell signed the

application for these permits. The Commission requires an applicant for a private club permit to

submit to a criminal background check. In addition to the background check, an applicant must

provide notice of his intent to obtain or renew a permit and must complete a publisher’s affidavit

enclosing a copy of the published notice. The notice must state the type of permit applied for, the

location of the place of business, the name and title of each officer, and any assumed or trade name.

Myers submitted and signed a personal history sheet that subjected him to the required criminal

background check. Little G’s published notice listed Myers as the secretary of the association. After

Little G’s satisfied the application requirements, the Commission granted the mixed-beverage

                                                  2
permits on April 15, 1998. The permits were subsequently renewed in 1999, 2000, and 2001. Myers

continued to act as an agent of Little G’s in the renewal process.

                 Section 183 of the tax code imposes a tax on the gross receipts a permittee receives

from the sale of mixed beverages.2 Tex. Tax Code Ann. § 183.021. In addition, a permittee is

required to file a tax return stating its total gross receipts and to pay the Comptroller the amount due.

Tex. Tax Code Ann. §§ 183.022(b), 183.023 (West 2002).

                 The Comptroller audited the association in 2000 for the period of April 1, 1998,

through October 31, 2000, and established a mixed-beverage tax liability in the amount of

$45,381.05. The total tax liability involved in this suit also included estimated monthly tax returns

beginning August 1, 2001, and ending October 31, 2001. The State filed suit on June 10, 2002,

against Rowell and Myers, alleging that they were liable under the provisions of chapter 183 of the

tax code for the mixed-beverage gross receipts taxes, interest, and penalties.3




        2
            Section 183.021 provides:

            A tax at the rate of 14 percent is imposed on the gross receipts of a permittee
            received from the sale, preparation, or service of mixed beverages or from the
            sale, preparation, or service of ice or nonalcoholic beverages that are sold,
            prepared, or served for the purpose of being mixed with an alcoholic beverage
            and consumed on the premises of the permittee.

Tex. Tax Code Ann. § 183.021 (West 2002).
        3
          Myers argues that an officer of an unincorporated association is not liable for its tax debt.
In its amended motion for summary judgment, the State abandoned its attempt to impose liability
based on Myers’s status as an officer and focused solely on his status as an agent. Because the
summary judgment is based on the State’s amended motion for summary judgment, his liability as
an officer is not relevant to this appeal.

                                                   3
                  In its amended motion for summary judgment, the State asserted that Rowell and

Myers were liable for the taxes due because the tax code specifically incorporates the definition of

permittee in section 1.04 of the alcoholic beverage code. See Tex. Tax Code Ann. § 183.001(a)

(West 2002). The alcoholic beverage code defines permittee as “a person who is the holder of a

permit provided for in this code, or an agent, servant, or employee of that person.” Tex. Alco. Bev.

Code Ann. § 1.04(11) (West 1995). In response to the State’s contention, Myers urged that the tax

code’s definition of permittee in section 183.001(b)(1), which does not mention agents, is controlling

because it is the more specific definition of a permittee. See Tex. Tax Code Ann. § 183.001(b)(1)

(West 2002). The trial court granted summary judgment in favor of the State.


                                            DISCUSSION

                  On appeal, Myers contends that the State relied on the more general definition of

permittee in the alcoholic beverage code, rather than the more specific definition of permittee in the

tax code that refers only to the permit holder and not its agents. Myers asserts that, as an agent of

a mixed-beverage permit holder, he is not subject to liability for unpaid mixed-beverage gross

receipts taxes.

                  In deciding this case, we must determine whether the definition of permittee in the

tax code, which incorporates the definitions in the alcoholic beverage code, is meant to include a

permit holder’s agent. Issues of statutory construction are legal questions, thus we review a trial

court’s construction of a statute de novo. In re Forlenza, 140 S.W.3d 373, 376 (Tex. 2004). In

construing a statute, our ultimate purpose is to discover and give effect to the legislature’s intent in

enacting it. In re Canales, 52 S.W.3d 698, 702 (Tex. 2001). We presume that the legislature

                                                   4
intended a just and reasonable result in enacting a statute and that the entire statute is intended to be

effective. Tex. Gov’t Code § 311.021(2), (3) (West 2005); see also Meritor Auto., Inc. v. Ruan

Leasing Co., 44 S.W.3d 86, 90 (Tex. 2001). In determining legislative intent, we should consider

the entire statute, not merely confine our review to words, phrases, or clauses in isolation. Meritor,

44 S.W.3d at 90. Courts should not assign a meaning to a provision that would be inconsistent with

other provisions of the act. Clint Indep. Sch. Dist. v. Cash Invs., Inc., 970 S.W.2d 535, 539 (Tex.

1998). We should not give one provision a meaning out of harmony or inconsistent with other

provisions, although it might be susceptible to such a construction standing alone. Helena Chem.

Co. v. Wilkins, 47 S.W.3d 486, 493 (Tex. 2001).

                The portion of the tax code under review here is the definition section of chapter 183.

Section 183.001 provides in pertinent part:


        (a) The definitions in Section 1.04, Alcoholic Beverage Code, apply to this chapter.

        (b) In this chapter:

             (1) “Permittee” means a mixed beverage permittee, a private club registration
                 permittee, a private club exemption certificate permittee, a private club late
                 hours permittee, a daily temporary private club permittee, a private club
                 registration permittee holding a food and beverage certificate, a daily
                 temporary mixed beverage permittee, a mixed beverage late hours
                 permittee, a mixed beverage permittee holding a food and beverage
                 certificate, or a caterer permittee.


Tex. Tax Code Ann. § 183.001(a)-(b)(1).

                Section 1.04 of the alcoholic beverage code, which is expressly incorporated into

section 183.001 of the tax code, provides a more expansive definition of a permittee as “a person



                                                   5
who is the holder of a permit provided for in this code, or an agent, servant, or employee of that

person.” Tex. Alco. Bev. Code Ann. § 1.04(11). Myers insists that a conflict arises between the

definition set forth in the alcoholic beverage code’s definition of permittee, which includes agents,

and section 183.001(b)(1), which does not.

               In considering the entire statute, we find that the two definitions of permittee

incorporated into the tax code—the definition from the alcoholic beverage code and the tax code’s

additional definition—are inconsistent. If the meaning of a provision is doubtful or ambiguous, the

construction placed upon a statutory provision by the agency charged with its implementations is

entitled to serious consideration. Tex. Gov’t Code Ann. § 311.023(6) (West 2005); Texas Water

Comm’n v. Brushy Creek Mun. Util. Dist., 917 S.W.2d 19, 21 (Tex. 1996). Therefore, we turn to

the rules promulgated by the Comptroller concerning the assessment of the mixed-beverage tax.

               Construction of a statute by an administrative agency charged with its enforcement

is entitled to consideration as long as it is reasonable and does not conflict with the plain language

of the statute. Tarrant Appraisal Dist. v. Moore, 845 S.W.2d 820, 823 (Tex. 1993). Courts should

construe administrative rules like statutes and, unless the rule is ambiguous, follow the rule’s clear

language. Rodriguez v. Service Lloyds Ins. Co., 997 S.W.2d 248, 254 (Tex. 1999). Courts should

defer to an agency’s interpretation of its own rules, unless the agency’s interpretation is inconsistent

with the regulation. Id. at 254-55. If an agency does not follow the unambiguous language of its

own rules, we must consider its actions arbitrary and capricious. Id. at 255. Allowing an agency to

create broad amendments to its rules through adjudication, rather than through its rule making




                                                   6
authority, effectively undercuts the Administrative Procedures Act. See Tex. Gov’t Code Ann.

§ 2001.001-.038 (West 2000 & Supp. 2004-05); Rodriguez, 997 S.W.2d at 255-56.

               In this case, the Comptroller urges a definition of a permittee that conflicts with one

of its own rules. See 34 Tex. Admin. Code § 3.1001(a)(6). The Comptroller’s rule concerning the

tax administration of the mixed-beverage tax defines permittee as:


       A holder of a mixed beverage permit, a mixed beverage late hours permit, a mixed
       beverage permit holding a food and beverage certificate, a daily temporary mixed
       beverage permit, a private club registration permit, a private club exemption
       certificate permit, a private club late hours permit, a daily temporary private club
       permit, a private club registration permit holding a food and beverage certificate, or
       a caterer’s permit issued by the Texas Alcoholic Beverage Commission (TABC).


Id. (emphasis added). The Comptroller’s rule is unambiguous and does not include agents. It

presents a reasonable construction of the tax code by defining permittee in a manner that resolves

any conflict between the definitions of permittee in the tax code and the alcoholic beverage code.

Therefore, we defer to the Comptroller’s rule concerning who may be assessed the mixed-beverage

tax. The assessment of the tax against Myers, as agent of a permit holder, conflicts with the rule.

               Furthermore, because this case involves the construction of a tax statute, to the extent

that there is any doubt concerning the construction of the tax code, courts should strictly construe

the applicability of taxation against the taxing authority and in favor of the taxpayer. See Calvert

v. Texas Pipeline Co., 517 S.W.2d 777, 781 (Tex. 1974); Texas Utils. Elec. Co. v. Sharp, 962

S.W.2d 723, 726 (Tex. App.—Austin 1998, pet. denied).

               Considering that ambiguous tax statutes are construed in favor of the taxpayer, and

applying the unambiguous language of the Comptroller’s rule, we hold that Myers, as an agent of

                                                  7
a permit holder, is not a holder subject to the tax imposed on mixed-beverage permittees. Therefore,

we reverse the judgment of the trial court.


                                         CONCLUSION

               We reverse the summary judgment granted in favor of the Comptroller. Because

Myers did not have a competing motion for summary judgment, we remand for further proceedings

consistent with this opinion.




                                              Bea Ann Smith, Justice

Before Chief Justice Law, Justices B. A. Smith and Puryear

Reversed and Remanded

Filed: July 12, 2005




                                                 8
