Articles Posted in Tax Law

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At issue in this case was whether the Commerce Clause’s limitations on a state’s power to tax interstate commerce bar property taxes levied on natural gas held in Texas without a destination while awaiting future resale and shipment to out-of-state customers. The court of appeals found the tax in this case valid. The Supreme Court affirmed, holding (1) a nondiscriminatory tax on surplus gas held for future resale does not violate the Commerce Clause; and (2) the tax levied in this case withstands constitutional scrutiny, and because it does not violate the Commerce Clause, neither does it violate Tex. Tax Code 11.12, which provides a state-law exemption for taxes that would otherwise violate federal law. View "Etc Marketing, Ltd. v. Harris County Appraisal District" on Justia Law

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Southwest Royalties, Inc, an oil and gas exploration company, filed a tax refund claim with the Comptroller asserting that its purchases of casing, tubing, other well equipment, and associated services were exempt from sales taxes under a statutory exemption. The Comptroller denied relief. In response, Southwest sued the Comptroller and the Attorney General. After a bench trial, the trial court rendered judgment for the State, concluding that Southwest failed to meet its burden of proving the exemption applied. The court of appeals affirmed. The Supreme Court affirmed, holding that Southwest was not entitled an exemption from paying sales taxes on purchases of the equipment. View "Southwest Royalties, Inc. v. Hegar" on Justia Law

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Southwest Royalties, Inc., an oil and gas exploration company, filed a tax refund claim with the Comptroller, arguing that it was entitled to a tax exemption for some of its equipment related to oil and gas production operations such as casing, tubing, and pumps, together with associated services. The Comptroller denied relief. Southwest subsequently sued the Comptroller and the Attorney General, asserting that the equipment for which it sought refunds was used in separating oil, gas, and associated substances (collectively, hydrocarbons) into their different components. The trial court rendered judgment for the State, concluding that Southwest failed to meet its burden of proving that the exemption applied. The Supreme Court affirmed, holding that Southwest was not entitled to an exemption from paying sales taxes on purchases of the equipment because it did not prove that the equipment for which it sought a tax exemption was used in “actual manufacturing, processing, or fabricating” of hydrocarbons within the meaning of Tex. Tax Code Ann. 151.318(2), (5), or (10). View "Southwest Royalties, Inc. v. Hegar" on Justia Law

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The Texas Tax Code provides that “only the net gain” from the sale of investments should be included in a key component of the statutory franchise-tax formula. In implementing Texas’ statutory franchise-tax liability scheme, the state comptroller adopted a rule requiring businesses to include net gains or net losses. Hallmark Marketing Company filed a franchise-tax protest suit against the state comptroller seeking a refund of more than $200,000 in taxes it paid, arguing that the comptroller’s rule conflicts with the very statute it purports to enforce. The trial court and court of appeals ruled in favor of the comptroller. The Supreme Court reversed, holding that Tex. Tax Code 171.105(b) does not require Hallmark to include a net loss from the sale of investments. Remanded. View "Hallmark Marketing Co., LLC v. Hegar" on Justia Law

Posted in: Tax Law

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The Texas Student Housing Authority (TSHA) had title to the Cambridge at College Station, a student-residential facility near two college campuses. In the summers of 2005 to 2008, TSHA provided lodging at the Cambridge to non-college students attending university-sponsored instructional programs. The Brazos County Appraisal District (BCAD) voided TSHA’s property-tax-exempt status for the years 2005 to 2008 and assessed millions of dollars of back taxes. The trial court affirmed, concluding that TSHA forfeited the exemption once the Cambridge hosted people who were not students, faculty or staff members of an institution of higher learning. The court of appeals affirmed. The Supreme Court reversed, holding that TSHA did not forfeit its exemption under Tex. Educ. Code Ann. 53.46 by housing summer program participants at the Cambridge because the statute imposes no conditions but rather declares the property-tax exemption in absolute terms. View "Tex. Student Housing Auth. v. Brazos County Appraisal Dist." on Justia Law

Posted in: Education Law, Tax Law

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A Foundation, a nonprofit corporation, completely controlled an LLC, which owned and controlled a LP, which owned apartments. The Foundation was a community housing development organization (CHDO), but the LLC and LP were not. The day the LLC acquired the LP, it applied for a tax exemption under Tex. Tax Code Ann. 11.182, which provides exemptions for properties that a CHDO owns. The Galveston Central Appraisal District denied the exemption because the LLC did not own the property. The Foundation and the LP then sued for a declaration that they were entitled to the exemption. The trial court granted summary judgment for the District. The court of appeals reversed, concluding that a CHDO’s equitable ownership of property qualifies for an exemption under section 11.182(b) and that Plaintiffs’ application for an exemption was timely. The Supreme Court affirmed, holding (1) under AHF-Arbors at Huntsville I, LLC v. Walker County Appraisal District, equitable title to property was sufficient for the CHDO in this case to qualify for the tax exemption under section 11.182; and (2) The Foundation’s application was timely. View "Galveston Cent. Appraisal Dist. v. TRQ Captain’s Landing" on Justia Law

Posted in: Tax Law

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A government contractor (HCSC) contracted with the federal government to administer two health insurance programs. HCSC incurred expenses while performing the contracts that were reimbursed by the government. After the Comptroller denied HCSC's request for a refund for some of the sales and use taxes it paid on the expenses, HCSC brought tax-refund suits, claiming the purchases it made to administer the health-insurance programs qualified for the Tax Code's sale-for-resale exemption, which grants purchasers of taxable goods and services a sales-tax exemption if they resell the items. The lower courts determined HCSC was entitled to the claimed refunds. The Supreme Court affirmed on all but one issue, holding (1) the exemption applied to HCSC's requested refunds for tangible personal property and taxable services; but (2) the exemption did not apply to HCSC's requested refunds for leases of tangible of personal property. Remanded. View "Combs v. Health Care Servs. Corp." on Justia Law

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The Texas legislature enacted two distinct "e911 fee" statutes to help fund the State's 911 emergency networks. The first statute, enacted in 1997, imposed on wireless subscribers a monthly emergency service fee, collected on the customer's bill. The second statute, enacted in 2010, imposed on prepaid wireless subscribers a flat fee collected by the retail seller when a consumer buys prepaid service. Before 2005, prepaid providers paid $2.3 million in e911 fees under the 1997 law. When the prepaid providers concluded that tax-preparation errors caused them erroneously to remit millions, they sought refunds of the amounts already paid. The Commission on State Emergency Communications (CSEC) initiated a case against the providers to determine the 1997 law's applicability to prepaid services. The CSEC adopted the ALJ's proposal for decision, which construed the 1997 law as imposing the e911 fee on prepaid wireless. After the legislature enacted the 2010 statute, the prepaid providers sought review. The trial court ordered refunds, holding that prepaid wireless was not covered by the 1997 law. The court of appeals reversed. The Supreme Court reversed, holding that the pre-2010 statute does not tax prepaid service. View "TracFone Wireless, Inc. v. Comm'n on State Emergency Commc'ns" on Justia Law

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Roark Amusement & Vending owned and leased coin-operated amusement crane machines found in supermarkets, restaurants, and shopping malls. Roark sought a refund of the sales taxes it paid on the plush toys it purchased to stock its machines for a three-and-a-half year period, arguing that the toys were exempt under the Tax Code's sale-for-resale exemption. The Comptroller of Public Accounts disputed that the exemption applied. The trial court granted the Comptroller's motion for summary judgment and denied Roark's refund request. The court of appeals reversed, concluding that the toys were exempt, and remanded the case for a determination of the refund amount due Roark. The Supreme Court affirmed, holding the toys were "tangible personal property" acquired by Roark "fore the purpose of transferring" the toys "as an integral part of a taxable service", and therefore, Roark qualified for a sales-tax exemption on the toys that filled its crane machines. View "Combs v. Roark Amusement & Vending, LP" on Justia Law

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A school district (District) obtained an in rem delinquent property tax judgment against an oil and gas lease that Respondent owned and operated. Respondent did not appeal, and the District foreclosed its judgment lien on the leasehold, taking ownership. The Railroad Commission ordered Respondent to plug a well on the lease. Respondent did not comply, and the Commission plugged the well and brought an enforcement action in court to recover the costs of the operation and the penalty. Respondent and the Commission settled. Respondent then sued the District, alleging in part that the District's actions had resulted in a taking of his property requiring compensation. The trial court dismissed Respondent's action for want of jurisdiction, but the court of appeals reversed and remanded with respect to the takings claim. The Supreme Court reversed and dismissed the case, holding that the trial court correctly dismissed Respondent's case, as Respondent did not assert on appeal that the District took his property without compensation. View "W. Hardin County Consol. Indep. Sch. Dist. v. Poole" on Justia Law