       TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN


                                        NO. 03-08-00149-CV



                                 Southern Plastics, Inc., Appellant

                                                   v.

             Susan Combs, 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. D-1-GN-06-000047, HONORABLE MARGARET A. COOPER, JUDGE PRESIDING



                             MEMORANDUM OPINION


                This is an appeal from a summary judgment in favor of the Comptroller in a suit to

recover a sales tax refund. We will affirm the judgment.


                                          BACKGROUND

                At relevant times, appellant Southern Plastics, Inc., has operated a plant near Kilgore,

Texas, where it manufactures plastic closures, such as caps and lids, which it sells to companies

that manufacture and sell beverages, personal care products, and other household products. Southern

Plastics manufactures the plastic closures by loading raw materials, such as resins and colorants,

into molding machines, heating them, and injecting them into molds. Southern Plastics also

manufactures liners for the insides of some of the plastic closures. It bonds a type of paper called

“pulp” to foil or wax paper in a machine called a “laminator,” uses a die to cut or punch out pieces

of the laminated paper in the size and shape of the closure, and then inserts the liner into the closure.
               The Comptroller conducted a sales tax audit of Southern Plastics for the period

between November 1, 1999, and October 31, 2002. During this period, Southern Plastics contracted

with the City of Kilgore to periodically remove and dispose of certain waste from its plant. It is

undisputed that there were essentially four sources or categories of waste removed by the City or its

subcontractors:


•      Waste from the process of manufacturing the plastic closures and liners, including scrap
       plastic, remnants of pulp, and “skeletons” or “webbing” of the laminated sheets from which
       the closure liners were punched.

•      Waste from discarded wrapping or packaging materials (e.g., cardboard boxes and cores,
       wooden pallets, banding, and shrink wrap) it received with incoming shipments of raw
       materials.

•      Waste from damaged or unusable wrapping or packaging materials used to prepare its
       finished products for shipment to customers, such as damaged boxes, damaged pallets, and
       excess shrink wrap.

•      Waste from Southern Plastics’s offices, including shredded paper and cardboard boxes that
       held copy paper, and waste from food and beverages consumed by employees in a break
       room area.


Southern Plastics commingled these categories of waste before removal. It paid a single charge to

the City for removal of the commingled waste that did not differentiate among the relative amounts

contributed from each of the four waste categories. Southern Plastics also paid sales tax on the full

amount of each such charge during the audit period. These sales tax payments totaled $4,872.78 for

the audit period.

               Subsequently, Southern Plastics requested from the Comptroller a refund of all

the sales taxes it had paid for the City’s waste removal services during the audit period. It claimed



                                                 2
the taxes had been paid in error because the waste was “industrial solid waste” for which removal

costs are not subject to the sales tax. See Tex. Tax Code Ann. § 151.0048(a)(3)(b) (West 2008);

34 Tex. Admin. Code § 3.356(a)(3)(E) (2009) (Tex. Comptroller of Pub. Accts.). The Comptroller

denied the requested refund and Southern Plastics’s ensuing motion for rehearing. Southern Plastics

then filed suit under chapter 112 of the tax code seeking a refund. See Tex. Tax Code Ann.

§§ 112.151-.155 (West 2008). It also asserted a claim under section 2001.038 of the administrative

procedures act for a declaration that the Comptroller’s interpretation of its rule defining “industrial

solid waste” was itself a “rule” under the APA and invalid because the Comptroller had failed

to comply with the APA’s rulemaking requirements in adopting it. See Tex. Gov’t Code Ann.

§ 2001.038 (West 2008).

               Southern Plastics and the Comptroller1 filed cross-motions for summary judgment

under the “traditional” standard that joined issue on whether Southern Plastics was entitled to a

refund. In its motion, Southern Plastics also sought summary judgment on its declaratory-judgment

claim under the APA. The district court granted the Comptroller’s summary-judgment motion,

denied Southern Plastics’s motion, and rendered final judgment for the Comptroller as to all of

Southern Plastics’s claims. This appeal followed.




       1
         Because the interests of the Comptroller and the Attorney General in the litigation align,
we hereafter refer to them collectively as the “Comptroller.” See Tex. Tax Code Ann. § 112.053
(West 2008) (requiring the Comptroller and the Attorney General to be named as defendants in suit
brought pursuant to chapter 112 of the tax code).

                                                  3
                                            ANALYSIS

               In three issues on appeal, Southern Plastics contends that the district court erred in

rendering summary judgment for the Comptroller on Southern Plastics’s refund and APA claims

and in denying it summary judgment on those claims.


Standard of review

               We review the district court’s summary judgment de novo. Valence Operating Co.

v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005); Provident Life & Accident Ins. Co. v. Knott,

128 S.W.3d 211, 215 (Tex. 2003). Summary judgment is proper when there are no disputed issues

of material fact and the movant is entitled to judgment as a matter of law. Tex. R. Civ. P. 166a(c).

When reviewing a summary judgment, we take as true all evidence favorable to the non-movant, and

we indulge every reasonable inference and resolve any doubts in the non-movant’s favor. Valence

Operating Co., 164 S.W.3d at 661; Knott, 128 S.W.3d at 215.

               When parties file cross-motions for summary judgment on overlapping issues and

the trial court grants one motion and denies the other, an appellate court should review the summary-

judgment evidence supporting both motions and determine all questions presented. FM Props.

Operating Co. v. City of Austin, 22 S.W.3d 868, 872 (Tex. 2000). The appellate court “should

render the judgment that the trial court should have rendered.” Id.

               Our review of the district court’s summary-judgment rulings turns on construction

of the tax code and the Comptroller’s rules. Statutory construction presents 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 statutory construction is to give effect to the legislature’s intent. Id. We seek that intent “first

                                                  4
and foremost” in the statutory text. Lexington Ins. Co. v. Strayhorn, 209 S.W.3d 83, 85 (Tex. 2006).

We rely on the plain meaning of the text, unless a different meaning is supplied by legislative

definition or is apparent from context, or unless such a construction leads 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) (“[w]ords and phrases shall be read in context and construed according to the rules

of grammar and common usage”). However, with regard to a statute that an agency is charged

with enforcing, we give “serious consideration” to the agency’s construction of it, so long as that

construction is reasonable and consistent with the statutory language, and this is particularly

true when the statute involves complex subject matter within the agency’s area of expertise. See

First Am. Title Ins. Co. v. Combs, 258 S.W.3d 627, 632 (Tex. 2008); cf. Rylander v. Fisher Controls

Int’l, Inc., 45 S.W.3d 291, 302 (Tex. App.—Austin 2001, no pet.) (courts “do not defer to

administrative interpretation in regard to questions which do not lie within administrative expertise

or deal with a nontechnical question of law”).

               “We construe administrative rules, which have the same force as statutes, in the

same manner as statutes.” Rodriguez v. Service Lloyds Ins. Co., 997 S.W.2d 248, 254 (Tex. 1999).

“Unless the rule is ambiguous, we follow the rule’s clear language.” Id. However, we defer to an

agency’s interpretation where there is vagueness, ambiguity, or room for policy determinations in

the regulation—i.e., unless the administrative interpretation is “plainly erroneous or inconsistent with

the regulation.” See id. at 254-55 (quoting Public Util. Comm’n v. Gulf States Util. Co., 809 S.W.2d

201, 207 (Tex. 1991)).




                                                   5
Refund claim

                As the plaintiff in a tax refund case, Southern Plastics had the burden of proving,

by a preponderance of the evidence, that it is entitled to a refund of the sales tax it paid on the

City’s waste removal services because those services were not subject to tax. GATX Terminals

Corp. v. Rylander, 78 S.W.3d 630, 634-35 (Tex. App.—Austin 2002, no pet.). In its first issue,

Southern Plastics argues that it is entitled to summary judgment on its refund claim “[b]ecause the

uncontroverted evidence shows that all but a de minimis portion of Appellant’s waste meets the

Comptroller’s definition of industrial solid waste.” Alternatively, in its third issue, Southern Plastics

contends that the Comptroller did not establish her entitlement to summary judgment on that claim.

                Section 151.0101, subsection (a) of the tax code enumerates the “taxable services”

that are subject to the Texas sales and use tax. See Tex. Tax Code Ann. § 151.0101(a) (West 2008).

Subsection (b) of that section provides that “[t]he comptroller shall have exclusive jurisdiction

to interpret Subsection (a) of this section.” Id. § 151.0048(b). Among the “taxable services” listed

in subsection (a) are “real property services.” See id. § 151.0101(a)(11). The tax code defines

“real property services” to include such services as landscaping, lawn or tree care, surveying,

janitorial services, and:


        the removal or collection of garbage, rubbish, or other solid waste other than

        (A)     hazardous waste;

        (B)     industrial solid waste;

        (C)     waste material that results from an activity associated with the exploration,
                development, or production of oil, gas, geothermal resources, or any other



                                                   6
               substance or material regulated by the Railroad Commission of Texas under
               Section 91.101, Natural Resources Code;

       (D)     domestic sewage or an irrigation return flow, to the extent the sewage
               or return flow does not constitute garbage or rubbish; and

       (E)     industrial discharges subject to regulation by permit issued pursuant to
               Chapter 26, Water Code. . . .


Id. § 151.0048(a)(3) (West 2008) (emphasis added).

               Comptroller rule 3.356 addresses the taxability of real property services. See

34 Tex. Admin. Code § 3.356. Rule 3.356 defines “garbage or other solid waste” and “industrial

solid waste” as follows:


       (3)     Garbage or other solid waste—Waste; refuse; sludge from a waste treatment
               plant, a water supply treatment plant, or an air pollution control facility; and
               other discarded material, including solid, liquid, semisolid, or contained
               gaseous material, resulting from residential, industrial, municipal,
               commercial, mining, and agricultural operations, and resulting from
               community and institutional activities. The term does not include any of the
               following:

                                                ***

                (E)     industrial solid waste, as that term is defined in Health and Safety
                        Code, Chapter 361, with the exception of industrial solid waste
                        which meets the definition of garbage or municipal solid waste.


Id. § 3.356(a)(3)(E). Chapter 361 of the health and safety code is the Solid Waste Disposal Act. See

Tex. Health & Safety Code Ann. § 361.001 (West 2001). The Solid Waste Disposal Act defines

“industrial solid waste” as:




                                                  7
       solid waste resulting from or incidental to a process of industry or manufacturing, or
       mining or agricultural operations.


Id. § 361.003(16) (West 2001). The parties’ dispute centers primarily on the proper interpretation

of “resulting from or incidental to a process of industry or manufacturing,” as incorporated into

rule 3.356(a)(3)(E).2 See id. (emphasis added).


        2
           There is no dispute that Southern Plastics’s waste during the audit period was “solid
waste.” The Act’s definition of “solid waste” generally includes “garbage, rubbish, refuse, sludge
from a waste treatment plant, water supply treatment plant, or air pollution control facility, and other
discarded material, including solid, liquid, semisolid, or contained gaseous material resulting
from industrial, municipal, commercial, mining, and agricultural operations and from community
and institutional activities.” Tex. Health & Safety Code Ann. § 361.003(34), (35) (West 2001).
“Garbage” under the Act is defined much more narrowly than in rule 3.356(a)(3): “solid waste that
is putrescible animal and vegetable waste materials from the handling, preparation, cooking,
or consumption of food, including waste materials from markets, storage facilities, and the handling
and sale of produce and other food products.” Id. § 361.003(10). Beyond that distinction, the
Act’s definition of “solid waste” is largely identical to rule 3.356(a)(3)’s definition of “garbage or
other solid waste.” Thus, rule 3.356(a)(3) implies that “industrial solid waste” is a subcategory of
“garbage or other solid waste.”

           For this reason, rule 3.356(a)(3)’s provision making taxable “industrial solid waste” that
“meets the definition of garbage or municipal solid waste” presumably cannot refer to the preceding
definition of “garbage or other solid waste” from which “industrial solid waste” is excluded;
otherwise, the “industrial solid waste” exclusion would be a circular nullity. See Fleming Foods of
Tex., Inc. v. Rylander, 6 S.W.3d 278, 284 (Tex. 1999) (statutes are construed according to their plain
language unless doing so would lead to absurd results). Southern Plastics argues that the provision
necessarily incorporates the Act’s narrower definition of “garbage” and its definition of “municipal
solid waste,” further observing that rule 3.356 contains no definition of “municipal solid waste”
while the Act does. See Tex. Health & Safety Code Ann. § 361.003(20) (“‘Municipal solid waste’
means solid waste resulting from or incidental to municipal, community, commercial, institutional,
or recreational activities, and includes garbage, rubbish, ashes, street cleanings, dead animals,
abandoned automobiles, and other solid waste other than industrial solid waste.”). In several prior
rulings, the Comptroller has agreed that rule 3.356(a)(3)(E)’s reference to “garbage” incorporates
the Act’s definition of that term. See, e.g., Tex. Comptroller of Pub. Accounts, STAR Document
No. 200312389L (effective Dec. 30, 2003) (“It is the definition of garbage in Chapter 361 of the
Health and Safety Code which the Tax Division maintains controls the taxability of waste removal
services in this case.”); Hearing No. 42,854, STAR Document No. 200404692H (Apr. 16, 2004)

                                                   8
                Southern Plastics argues that the plain meaning of waste “resulting from” or

“incidental to” its manufacturing process encompasses not only its waste from the actual

manufacturing of plastic closures and liners,3 but also discarded wrapping and packaging from

its incoming and outgoing shipments, and even its office waste. It cites definitions from dictionaries

and case law to the effect that “resulting from” means a “consequence” or “effect of,” or “arising

from,” while “incidental to” means “closely related to” or even “peripheral.”4 In Southern Plastics’s

view, “waste generated by [its] process of sorting, segregating, storing and using its raw materials

and supplies and waste generated by its process of wrapping and packaging finished products for

shipping to customers” fall within those definitions. Additionally, Southern Plastics observes that

the Texas Commission on Environmental Quality—the state agency charged with enforcing

and implementing the Solid Waste Disposal Act—apparently considers all waste from a

manufacturing plant to be “industrial solid waste” that must be classified according to TCEQ

regulations. See 30 Tex. Admin. Code § 335.508(3) (2009) (Tex. Comm’n on Envtl. Quality) (all

“plant trash,” including trash from “facility offices” and “cafeteria,” constitutes Class 2 industrial

solid waste); Tex. Comm’n on Envtl. Quality, Instructions for Completing the Notification for


(“[i]n Rule 3.356(a)(3)(E), the Comptroller has adopted for sales tax purposes the statutory definition
of industrial solid waste in Tex. Health and Safety Code, Chapter 361 [“Solid Waste Disposal
Act”]”). Although the Comptroller cites rule 3.356(a)(3)(E)’s “garbage” exclusion to emphasize that
she has not unqualifiedly adopted the Act’s definition of “industrial solid waste” in her rule, we do
not understand her to be contending that Southern Plastics’s waste, if “industrial solid waste,”
is nonetheless taxable because it is also “garbage.” Instead, she joins issue with Southern Plastics
regarding the breadth of “industrial solid waste” under rule 3.356(a)(3)(E).
        3
            E.g., scrap plastic, remnants of pulp, and liner “webbing.”
        4
         Merriam-Webster’s Collegiate Dictionary 587, 999 (10th ed. 1994); Bryan A. Garner,
A Dictionary of Modern Legal Usage 430 (2d ed. 1995).

                                                  9
Hazardous or Industrial Waste Management Form (TCEQ-00002) 22 (2009) (available at

www.tceq.state.tx.us/assets/public/permitting/rrr/forms/0002inst.pdf) (“all wastes . . . even office

trash” produced by a facility that “make[s] a product for wholesale according to an organized plan

and with a division of labor, change[s] materials by processing them, or substantially support[s] either

of those activities” are “industrial waste.”). Thus, Southern Plastics reasons, these wastes are all non-

taxable “industrial solid waste.” Southern Plastics concedes, however, that food waste from its

employee break room was taxable because it constituted “garbage” under the Solid Waste Disposal

Act. See Tex. Health and Safety Code Ann. § 361.003(10) (West 2001); 34 Tex. Admin. Code

§ 3.356(a)(3)(E).5 This taxable waste can be disregarded, Southern Plastics asserts, because the

summary-judgment evidence conclusively establishes that it was de minimis—less than one percent

of the plant’s total waste stream during the audit period.6

                 The Comptroller counters, first, that Southern Plastics failed to comply with the

administrative or recordkeeping requirements for claiming that any portion of its waste during

the audit period was non-taxable. Rule 3.356 generally requires persons providing “garbage or

other solid waste” services to obtain a tax permit and collect and remit sales and use taxes on all

charges for such services. 34 Tex. Admin. Code § 3.356(b). Subsection (h) of the rule sets forth the

procedure for taxpayers to assert their rights against having sales tax assessed on collection of waste

that is wholly or partly non-taxable:




         5
             See supra note 2.
         6
         See Tex. Comptroller of Pub. Accounts, Hearing No. 39,987, STAR Document
 No. 200208491H (Aug. 21, 2002).

                                                   10
       (h) Garbage collection services that may be excluded from tax. Persons providing
       collection services for customers having waste excluded from the definition of
       “garbage or other solid waste” may accept an exemption certificate from the customer
       in lieu of tax. The exemption certificate must state the type of waste being excluded,
       and that either the waste to be collected is totally excludable or that the customer has
       both taxable and nontaxable waste and the customer will be responsible for accruing
       tax on that portion of the charge which represents taxable services. The customer may
       use any reasonable allocation for reporting tax on taxable services which is
       supportable by books and records.


Id. § 3.356(h). The Comptroller points out that Southern Plastics did not present the City with an

exemption certificate, but paid sales tax on the entirety of the waste removal services the City

provided during the audit period. See id. The Comptroller further asserts that Southern Plastics

cannot, as a matter of law, “show how much of the waste it generated during the audit period was

industrial solid waste and how much was not” (i.e., a “reasonable allocation” under 3.356(h)) because

the summary-judgment evidence conclusively establishes that Southern Plastics did not maintain any

“books and records” that could support its proposed tax treatment of the City’s waste removal

services. See id.; see also Tex. Tax Code Ann. § 111.0041 (West 2008) (requiring taxpayer to retain

records for inspection by the comptroller or the attorney general for period of four years).7




        7
          In some of her pleadings, including her summary-judgment motion, the Comptroller refers
to the asserted failure of Southern Plastics to comply with rule 3.356(h)’s recordkeeping requirement
as a failure to meet its “burden” to recover a sales tax refund. In its third issue, Southern Plastics
characterizes these statements as misplacing the Comptroller’s burden in her traditional summary-
judgment motion, requiring Southern Plastics to prove its entitlement to a refund rather than
requiring the Comptroller to conclusively negate its entitlement. We understand the Comptroller’s
position instead to be that Southern Plastics cannot, as a matter of law, recover on its refund claim
because the summary-judgment evidence conclusively establishes that it did not maintain or provide
“books and records” that could support its desired tax treatment of its waste, as required by
rule 3.356(h).

                                                 11
                Additionally, the Comptroller asserts that Southern Plastics’s office waste and

packaging waste from incoming or outgoing shipments are not “resulting from” or “incidental to” the

plant’s manufacturing processes as she has interpreted rule 3.356(a)(3)(E).8 In several prior

rulings and policy statements, the Comptroller has interpreted “industrial solid waste” under

rule 3.356(a)(3)(E) to be limited to waste generated by the “actual manufacturing process” and

to exclude shipping refuse or office waste.9 The Comptroller explains that her interpretation is

based on what she perceives as the public policy underlying the statutory exclusion of “industrial solid

waste,” “hazardous waste,” and other exclusions from taxable “garbage, rubbish, or other

         8
           The Comptroller does not appear to dispute that Southern Plastics’s waste generated
 by the manufacturing process itself would be “industrial solid waste.” However, she contends that
 Southern Plastics’s failure to comply with the recordkeeping requirements of rule 3.356(h) forecloses
 its claim to a refund of any portion of the sales taxes it paid on waste removal during the
 audit period.
         9
           See Tex. Comptroller of Pub. Accounts, STAR Document No. 9201L1162A01 (effective
 Jan. 30, 1992) (even while “manufacturers must package and ship their products,” “shipping
 refuse relating to . . . manufacturing operations (i.e, packing and unpacking material, broken pallets,
 etc.)” is not “industrial solid waste”); Tex. Comptroller of Pub. Accounts, STAR Document
 No. 9209L1193F12 (effective Sept. 25, 1992) (“Industrial solid waste, as that term is used in
 Rule 3.356, means waste products resulting from the actual manufacturing process, such as sawdust
 from lumber mills, slag from a steel manufacturing process, or waste lumber [at a plant that
 manufactures wooden doors and shingles]. ‘Industrial solid waste’ does not mean empty paint cans
 or the discarded shipping refuse in which raw materials were received. Manufacturers can have
 much more taxable waste than just the paper generated by the administrative staff.”); Hearing
 No. 33,600, Tex. Comptroller of Pub. Accounts, STAR Document No. 9601H1390B11 (Jan. 16,
 1996) (cardboard cores used to support aluminum coils in shipment to plant that used coils as raw
 material in manufacturing “are not waste products from an actual manufacturing process [but] fit into
 the category of shipping refuse, and the collection of those cores is a taxable real property service.”);
 Hearing No. 43,049, Tex. Comptroller of Pub. Accounts, STAR Document No. 200610888H
 (Apr. 20, 2004) (citing Hearing No. 33,600 in ruling that “discarded packaging and wrapping
 material, including aluminum bandings, cardboard boxes, and plastic sheeting” was not “industrial
 solid waste”). See also Tex. Comptroller of Pub. Accounts, STAR Document No. 200104170L
 (effective Apr. 11, 2001) (food leftovers generated by office employees are not industrial solid
 waste).

                                                   12
solid waste”—to avoid imposing a tax disincentive against desirable waste clean-up activities. See

Tex. Tax Code Ann. § 151.0048(a)(3). The core legislative concern reflected in these provisions, in

the Comptroller’s view, was with hazardous, potentially hazardous, or other waste perceived to create

pronounced environmental threats, as is frequently true of manufacturing waste. See House Research

Organization, Bill Analysis, Tex. H.B. 1814, 72d Leg., R.S. (1991) (“[T]o avoid imposing a tax

disincentive on desirable waste-disposal activities,” taxable waste removal does not include removal

of “hazardous waste, industrial solid waste, domestic sewage and certain other wastes”). By contrast,

the Comptroller maintains, the legislature manifested its intent in section 151.0048(a)(3) that ordinary

“garbage” and “rubbish” be taxed. The Comptroller also emphasizes that section 151.0048(b) of the

tax code grants her “exclusive jurisdiction” to construe the provisions defining taxable services, and

that her construction of statutory or rule language defining taxable services should control over that

of the TCEQ in the event of a conflict.

               Besides condemning the Comptroller’s interpretation of “industrial solid waste” as

inconsistent with the plain text of rule 3.356(a)(3)(E), Southern Plastics questions both the

consistency with which the Comptroller has applied her interpretation and her underlying rationales.

It cites language from some of the Comptroller’s policy statements and rulings suggesting an

erroneous view that the Solid Waste Disposal Act does not regulate any waste from manufacturing

facilities other than hazardous waste and industrial solid waste resulting from actual manufacturing

activities.10 As for the Comptroller’s “exclusive jurisdiction” to construe the definitions of “taxable


        10
           See Tex. Comptroller of Pub. Accounts, STAR Document No. 9201L1162A01 (effective
 Jan. 30, 1992) (“Packaging or shipping refuse is free from regulation” under the Solid Waste
 Disposal Act); Tex. Comptroller of Pub. Accounts, STAR Document No. 9209L1193F12 (effective

                                                  13
services,” Southern Plastics contends that the Comptroller has exercised her jurisdiction to adopt

a statutory definition of “industrial solid waste” from the Solid Waste Disposal Act that the TCEQ

or its predecessors have interpreted and administered for decades. Having opted to adopt this

definition, Southern Plastics suggests, the Comptroller is bound to follow it. See Rodriguez,

997 S.W.2d at 255 (agency is bound to follow its own rules and procedures).

               Regarding rule 3.356(h)’s record-keeping requirement, Southern Plastics cites

summary-judgment evidence of invoices and receipts it received in connection with the City’s

waste removal services during the audit period. However, these documents reflect only that Southern

Plastics periodically paid a fee to the City or its subcontractors for waste removal services, but do not

indicate the composition of the plant’s waste stream. The Comptroller presented summary-judgment

evidence that, during her audit, Southern Plastics was unable to provide her auditor any other books

or records regarding its waste stream other than some photographs of its waste.11 As evidence of the

composition of its waste stream during the audit period, Southern Plastics has relied primarily on two

separate one-week studies performed by company employees several years after the audit period. The


 Sept. 25, 1992) (“Shipping refuse, empty paint, glue, and varnish containers are not regulated” under
 the Act). Cf. 30 Tex. Admin. Code § 335.508(3) (Tex. Comm’n on Envtl. Quality) (all “plant trash,”
 including trash from “facility offices” and “cafeteria,” constitutes Class 2 industrial solid waste).
         11
            The Comptroller presented the affidavit of Robert H. Krahn, the auditor who performed
 the Comptroller’s sales tax audit of Southern Plastics’s Kilgore plant. Krahn testified that he
 “examined the books and records of Southern Plastics” and that “[d]uring the audit, Southern
 Plastics did not show me books and records documenting or classifying its waste stream for the audit
 period [or] . . . show me any documentation showing that the waste generated during the audit period
 was industrial solid waste.” Krahn explained that “[t]he only documentation I recall seeing were two
 pictures showing office trash, broken pallets, paper, or laminate skeletons resulting from the
 manufacturing process.” Krahn further testified that he examined the invoices for the waste removal
 services Southern Plastics purchased from the City during the audit period. These invoices, as noted,
 do not reflect the composition of Southern Plastics’s waste stream.

                                                   14
first of the studies was performed by Ed Casto, Maintenance and Process Engineer for Southern

Plastics. Casto summarized his findings in an affidavit dated May 23, 2005. The second study, which

covered a period between December 4 and 12, 2006, was performed by Ron Smith, Logistics Manager

for Southern Plastics. Smith summarized his findings in an affidavit dated February 23, 2007.

According to these affidavits, each study determined that, during the period of the study, less than

one percent of the Southern Plastics waste removed by the City came from the office, administrative,

or break room areas. Smith further determined that less than three percent of total waste collected

by the City during his study came from discarded packaging or wrapping from in-bound raw

materials. Both Castro and Smith averred that the processes Southern Plastics used to manufacture

plastic closures during their study was “substantially” the same as or similar to that used during

the audit period.

               Southern Plastics also presented the May 2007 deposition testimony from John Steven

Clarke, another employee who was familiar with Southern Plastics’s manufacturing processes,

as well as Smith’s deposition. Clarke testified that waste generated from the packaging of

outgoing shipments comprises about one-half of one percent of Southern Plastics’s total waste. He

added—considering that office or administrative waste accounts for less than one percent of waste,

and waste from incoming shipments accounted for three percent—that waste from the manufacturing

process itself accounts for over ninety-five percent of Southern Plastics’s total waste. Clarke further

testified that Southern Plastics had substantially the same volume of business, nearly the same number

of employees, and the same number of machines in operation during the audit period and the one-

week studies as it did at the time of his deposition. On the other hand, Clarke and Smith both



                                                  15
acknowledged that the volume and composition of Southern Plastics’s waste stream varies somewhat

from week-to-week and seasonally.

               The Comptroller points out that Southern Plastics’s refund claim hinges not on proof

of what its waste stream actually was during the audit period, per se, but whether Southern Plastics’s

proposed tax treatment of its waste removal is “reasonable” and “supportable by books and records”

as required by rule 3.356(h). See 34 Tex. Admin. Code § 3.356(h). As for the two studies on which

Southern Plastics primarily relies, the Comptroller urges that “all these studies prove is what type and

how much waste Southern Plastics generated during the two weeks that were studied”—which, she

adds, were conducted years after the audit period. She characterizes the studies as narrow “single

point in time checks” that provide no objective means of verifying the actual waste stream at that

time, much less during the audit period, further observing that both Smith and Clarke admitted that

Southern Plastics’s waste stream had weekly and seasonal variations.

               The Comptroller’s construction of the “books and records” requirement of

rule 3.356(h) to preclude reliance on Southern Plastics’s two after-the-fact, one-week studies (or

similar attempts to replicate the composition of Southern Plastics’s waste stream during the audit

period) is not plainly erroneous or inconsistent with the regulation. The Comptroller has construed

“supportable by books and records” to require a more contemporaneous, precise and objective record

of Southern Plastics’s waste stream during the audit period that would enable her to verify the basis

for the company’s claims that all or part of its waste was non-taxable. The Comptroller acted within

her discretion here in determining that Southern Plastics’s documentation was insufficient to satisfy

the rule’s requirements. See Gulf States Utils. Co., 809 S.W.2d at 207 (agency’s interpretation of its



                                                  16
own rules is entitled to deference unless it is plainly erroneous); see also Tex. Tax Code Ann.

§ 111.0041 (four-year record retention requirement).

               On the other hand, we conclude that Southern Plastics has raised a fact issue as to

whether “books and records” exist, or existed during the audit period, that would demonstrate that

all waste from its Kilgore plant during the audit period was classified as Class 2 industrial solid waste

by the TCEQ. Southern Plastics presented the affidavit of Mark Galliardt, its Environmental Health

and Safety Manager. Galliardt explained that his job responsibilities had included ensuring that

Southern Plastics’s Kilgore plant complied with all state environmental regulations during the audit

period. Galliardt testified that, in compliance with the Solid Waste Disposal Act and related rules,

Southern Plastics filed a “Notice of Registration” (NOR) with the TCEQ before the audit period and

periodically updated it to reflect any changes in its waste stream. According to Galliardt, the waste

removed by the City was “classified as Class 2 industrial solid waste under TCEQ regulations and

guidelines.”12 He elaborated that the plant also generated other types of waste, some classified as


        12
             Attached to Galliardt’s affidavit was an excerpt from Southern Plastics’s NOR, albeit
 dated May 24, 2006. Beside “Description from Generator,” the NOR indicated “General office,
 cafeteria/breakroom, and misc. nonhaz plant waste/Generated through normal daily plant
 activities/initial generation began on or after 8/24/92.” Galliardt and the NOR do not elaborate
 further on the relative proportions of each type of source of waste in Southern Plastics’s total
 waste stream.

           Southern Plastics also presented a two-page spreadsheet entitled “Southern Waste
 Inventory,” filed with TCEQ, that indicates it was last revised in April 2006. It lists various
 categories of “Class 2” non-hazardous waste products :

 •       “Waste cardboard” generated “during packaging of final product prior to shipment.”




                                                   17
hazardous waste, that were removed or disposed of by entities other than the City. Galliardt added

“Because of the relatively small amount of hazardous waste generated by [Southern Plastics] at this

plant, it is designated as a ‘conditionally exempt small quantity generator’ under TCEQ regulations.

As such, it is not required to submit regular reports to TCEQ regarding its waste disposal activities”

or “to maintain records regarding its Class 2 industrial solid waste disposal activities.”13


•       “Plant Trash” generated in “Office, Lunchrooms.” The chart further states, “Any class 2
        waste originating in the facility offices, laboratory, plant production area, or food service area
        that is composed of cardboard, paper, linings, wrappings, paper and/or wooden packaging,
        uncontaminated food waste, aluminum foil, aluminum scrap, empty containers with a
        holding capacity of less than 5 gallons, uncontaminated food sweepings.”

•       “Off Spec Product, Plant refuse” from “General Plant.” It further states, “Supplemental Plant
        Refuse: Any class 2 waste from production, manufacturing or laboratory operations as long
        as the total amount of the supplemental plant production refuse does not exceed
        twenty percent of the total plant trash . . . volume or weight, whichever is less. This could
        include, but is not limited to, such things as metal parts, floor sweepings, and off
        specification material.”
        13
            The Comptroller has previously suggested that taxpayers who generate industrial
solid waste will ordinarily be required to file documentation with the TCEQ that will suffice
“to establish what portion of the waste is nontaxable hazardous waste, nontaxable industrial
solid waste, and taxable garbage or municipal solid waste.” See Tex. Comptroller of Pub. Accounts,
STAR Document No. 200104170L (effective Apr. 11, 2001). However, if for some reason such
documentation is not required, the Comptroller emphasized that “the waste generator must still
establish what portion of their waste stream is nontaxable industrial solid waste versus taxable
garbage or municipal waste.” Id. She further explained:

        The waste generator can do this by identifying and documenting in writing those
        processes that produce the various types and amounts of wastes. For example, a
        waste generator that is a manufacturer determines that there are 150 office employees
        and other employees that generate 100 pounds of office trash or garbage (e.g., food
        leftovers, etc.) that is disposed of on a weekly basis. The incoming purchases of raw
        materials and other supplies produce another 100 pounds of boxes and other
        packaging waste for disposal each week. The actual output of industrial solid waste
        from the manufacturing process is determined to be 200 pounds for disposal each
        week. Therefore, the waste generator can show in this example that 50 percent of the
        waste that is disposed of is nontaxable industrial solid waste and 50 percent is taxable

                                                   18
               For these reasons, our disposition of Southern Plastics’s challenge to summary

judgment on its refund claim turns on whether the status of its waste during the audit period as

Class 2 industrial solid waste under TCEQ regulations controls whether the waste is non-taxable

“industrial solid waste” under Comptroller rule 3.356(a)(3)(E). In that regard, rule 3.356(a)(3)(E)’s

reference to “industrial solid waste, as that term is defined in Health and Safety Code, Chapter 361

. . . ,” is susceptible to at least two interpretations. It could mean that the definition of “industrial

solid waste” under rule 3.356(a)(3)(E) tracks whatever the term means in the health and safety code,

as interpreted and applied in the context of state environmental regulation. This is the construction

advocated by Southern Plastics. Alternatively, “industrial solid waste, as that term is defined in

Health and Safety Code, Chapter 361 . . . ,” could mean that the Comptroller intended to incorporate

the language of that statutory definition, which she would then interpret and apply, as a matter of

tax policy and administration, and potentially in a manner diverging from its application in the

environmental regulatory arena. This is essentially the construction advanced by the Comptroller.

We cannot conclude that the Comptroller’s construction is plainly erroneous or inconsistent with

the regulation, especially against the backdrop of tax code section 151.0048(b)’s mandate that the

Comptroller have “exclusive jurisdiction” to interpret the statutory definitions of taxable services.

See Tex. Tax Code Ann. § 151.0048(b). Although rule 3.356(a)(3)(E) may reflect the Comptroller’s



         garbage or municipal solid waste by using process knowledge of the business
         operation. Additional documentation that further supports the claim of exemption
         can be kept; such as photographs of the amount and types of waste that are generated.

 Id. However, the Comptroller stressed, “A single point in time ‘check’ of the contents of a dumpster
 by a waste generator or consultant is not verifiable and is insufficient information to establish what
 portion of the waste is taxable waste versus nontaxable waste.” Id.

                                                   19
desire for guidance from the environmental regulatory arena concerning the types of waste for

which removal should be incentivized by tax policy,14 its language does not plainly disclaim authority

over the ultimate question of whether that waste is taxed. Similarly, we cannot conclude that the

Comptroller’s interpretation that not all of Southern Plastics’s Class 2 industrial solid waste “results

from” or is “incidental to” the plant’s manufacturing processes under rule 3.356(a)(3)(E) is plainly

erroneous or inconsistent with the regulation. At a minimum, the Comptroller does not exceed her

authority in concluding that Southern Plastics’s office waste and break room waste does not fall

within this definition.

                Accordingly, the district court did not err in granting summary judgment for the

Comptroller as to Southern Plastics’s tax refund claim. We overrule Southern Plastics’s first and

third issues.


Section 2001.038 claim

                In its second issue, Southern Plastics argues that it is entitled to a declaration

under the Administrative Procedure Act that the Comptroller invalidly attempted to amend

Comptroller Rule 3.356. Southern Plastics, however, alleged no controversy beyond whether it is

entitled to a refund for taxes paid during the audit period. The district court did not err in granting

summary judgment on this claim. See Universal Painting Co. v. Premier Victorian Homes, Inc.,

73 S.W.3d 283, 296 (Tex. App.—Houston [1st Dist.] 2001, pet. denied) (“There is no basis for




         14
           See Hearing No. 44.501, Tex. Comptroller of Pub. Accounts, STAR Document
 No. 200506292H (June 23, 2005).

                                                  20
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 explicit or express in a final judgment for

the enforceable remedy.”).

                We overrule Southern Plastics’s second issue.


                                         CONCLUSION

                Having overruled Southern Plastics’s issues on appeal, we affirm the judgment of

the district court.




                                             __________________________________________

                                             Bob Pemberton, Justice

Before Justices Patterson, Pemberton and Waldrop

Affirmed

Filed: July 1, 2009




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