Combs v. Health Care Services Corp.
401 S.W.3d 623
Tex.2013Background
- HCSC contracted with the federal government to administer Medicare and the Federal Employees Health Benefits Program, incurring reimbursable expenses.
- HCSC paid sales and use tax on some contract expenses and sought refunds under the sale-for-resale exemption.
- The products and services claimed included tangible personal property, taxable services, and leases of tangible personal property.
- The Comptroller denied refunds, leading to consolidated appeals in which the court reviewed the exemption’s scope.
- The court held the exemption covers tangible personal property and taxable services but not leases, and it addressed reimbursement documentation requirements.
- The court remanded on the lease issue for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Scope of sale-for-resale for tangible property | HCSC’s purchases qualify due to automatic title transfer under the contract. | Exemption requires resale in form acquired; primary purpose matters (essence of transaction). | Exemption applies to tangible property despite consumption in a nontaxable service. |
| Scope of sale-for-resale for taxable services | Taxable services resold to the government by performance for consideration. | Resale limited to property; services cannot be resold. | Sale-for-resale includes performance of taxable services resold for consideration. |
| Leases of tangible property treated under exemption | Leases qualify as sale-for-resale of tangible property. | Leases are not resales of property; not within exemption. | Leases fall outside the exemption; not entitled to refunds. |
| Documentation of reimbursements requirement | No requirement to show the government did not reimburse taxes. | Refunds require the recipient not to have collected/been reimbursed. | HCSC need not prove non-reimbursement; statute applies to not having collected tax. |
Key Cases Cited
- Day & Zimmermann, Inc. v. Calvert, 519 S.W.2d 106 (Tex. 1975) (automatic title transfer supports resale exemption)
- Fiess v. State Farm Lloyds, 202 S.W.3d 744 (Tex. 2006) (statutory interpretation in tax context)
- R.R. Comm’n of Tex. v. Tex. Citizens for a Safe Future & Clean Water, 336 S.W.3d 619 (Tex. 2011) (statutory interpretation and deference considerations)
- Hercules Inc. v. United States, 292 F.3d 1378 (Fed. Cir. 2002) (Federal Acquisition Regulations and tax refund considerations)