W. Robert Brown v. Glenn Hegar, Comptroller of Public Accounts of the State of Texas And Ken Paxton, Attorney General of the State of Texas
03-14-00492-CV
| Tex. App. | Dec 3, 2015Background
- Brown bought an aircraft from CMB in April 2003; no sales or use tax was paid by Brown or CMB at the time.
- CMB filed a quarterly sales-tax return for Q2 2003 reporting zero taxable sales; CMB later dissolved in 2004.
- In October 2007 the Comptroller assessed tax, interest, and penalty against Brown for the purchase; Brown requested redetermination and lost; Comptroller adopted the proposed decision.
- Brown paid the assessed amount under protest and sued in district court for refund; the district court granted the Comptroller’s summary-judgment motion and denied Brown’s.
- On appeal Brown argued (1) the four-year statute of limitations barred the assessment and (2) the transaction qualified as an "occasional sale" exemption.
- The Court of Appeals reversed the district court’s grant for the Comptroller and remanded, finding fact issues on both the limitations and exemption issues.
Issues
| Issue | Plaintiff's Argument (Brown) | Defendant's Argument (Comptroller) | Held |
|---|---|---|---|
| Whether the 4-year statute of limitations bars the tax assessment | Limitations expired July 31, 2007; CMB filed a sales-tax return for Q2 2003 so the "no report" exception (§111.205(a)(2)) does not apply | The sale triggered use tax liability for Brown (purchase outside TX or use in TX); Brown did not file a use-tax report, so the "no report" exception applies and tolls limitations | Reversed as to Comptroller: genuine fact issues exist about whether Brown had to file a use-tax report (disputed where sale occurred); summary judgment inappropriate |
| Whether the Comptroller can rely on seller’s filed sales return to defeat the no-report exception | The filing of any tax report (by seller) prevents the exception from applying | The statute contemplates the taxpayer’s failure to file; a third-party report that misstates or omits the taxable event should not bar assessment against the actual taxpayer | Court adopted Comptroller’s reasonable construction: the exception applies when the taxpayer fails to file; but fact issues remain, so summary judgment denied |
| Whether CMB’s sales return was false/fraudulent such that the fraud exception (§111.205(a)(1)) tolls limitations | If CMB’s report were false, any tolling should apply only as to CMB, not Brown; no evidence CMB acted with intent to evade tax | If the seller’s report was false with intent to evade, the fraud exception applies to toll the limitations | Court found no conclusive evidence of intent to evade by CMB; genuine fact issue exists, so summary judgment inappropriate |
| Whether the airplane sale qualified as an "occasional sale" exemption (operating-asset sale) | The plane was CMB’s only operating asset and sale was an occasional sale exempt from tax | The plane was inventory or an item held for resale (or not used exclusively in providing a product/service), so no exemption; Comptroller’s rule defining "operating assets" is reasonable | Court held there are disputed facts about whether the plane was an operating asset/inventory or leased/used in business; summary judgment inappropriate on exemption issue |
Key Cases Cited
- Valence Operating Co. v. Dorsett, 164 S.W.3d 656 (Tex. 2005) (summary-judgment standards)
- Quorum Sales, Inc. v. Sharp, 910 S.W.2d 59 (Tex. App.—Austin 1995) (sales tax imposed at time of sale)
- TGS-NOPEC Geophysical Co. v. Combs, 340 S.W.3d 432 (Tex. 2011) (deference to agency construction when reasonable)
- Texas Citizens for a Safe Future & Clean Water v. Railroad Comm’n, 336 S.W.3d 619 (Tex. 2011) (statutory construction principles)
- AHF-Arbors at Huntsville I, LLC v. Walker Cnty. Appraisal Dist., 410 S.W.3d 831 (Tex. 2012) (tax exemptions construed against claimant)
- Davis v. State, 904 S.W.2d 946 (Tex. App.—Austin 1995) (both sellers and buyers may be liable for sales taxes)