200907439H



SOAH DOCKET NO. 304-09-3328.26
CPA HEARING NO.   101,712

RE: **************
TAXPAYER NO.: **************
AUDIT OFFICE: **************
AUDIT PERIOD: June 1, 2004 THROUGH June 30, 2004

Limited Sales, Excise, And Use Tax/RDT

BEFORE THE COMPTROLLER
OF PUBLIC ACCOUNTS 
OF THE STATE OF TEXAS

SUSAN COMBS
Texas Comptroller of Public Accounts

DEANNE Z. CUMMINGS-SCOTT
Representing Tax Division

**************
Representing Petitioner


COMPTROLLER’S DECISION

The Texas Comptroller of Public Accounts (Comptroller) assessed sales tax 
against **************. (Petitioner) on Petitioner’s purchase of an aircraft.  
Petitioner is claiming the purchase was exempt because the aircraft was used 
for flight instruction.  Comptroller Staff (Staff) rejects Petitioner’s claim 
and asserts that Petitioner does not meet the criteria for exemption.  The 
Administrative Law Judge (ALJ) recommends that the assessment be upheld, 
subject to Staff’s agreement to refund the interest assessed.

I.  PROCEDURAL HISTORY, NOTICE & JURISDICTION

On March 27, 2009 the case was referred to the State Office of Administrative 
Hearings for a written submission hearing.  The Comptroller was represented by 
Assistant General Counsel DeAnne Z. Cummings-Scott.  Petitioner proceeded pro 
se.  Administrative Law Judge Peter Brooks set a record closing date of May 20, 
2009.

There are no issues of notice or jurisdiction in this proceeding.  Therefore, 
those matters are set out in the Findings of Fact and Conclusions of Law 
without further discussion here.

II. REASONS FOR DECISION

A. Background and Issues Presented

Comptroller’s Business Activity Research Team (BART) on September 4, 2007, 
contacted Petitioner inquiring about its purchase of a 1992 Taylorcraft F22C 
aircraft.  BART requested that Petitioner either remit the tax due on the 
purchase price of the aircraft or show that the purchase was exempt.  
Petitioner responded claiming that the purchase was exempt because the aircraft 
was used exclusively for flight instruction approved by the ************** 
(AGENCY).  BART denied the exemption on the grounds Petitioner was not 
permitted at the time of purchase and a Notification of Exam Results was issued 
on January 24, 2008, assessing a deficiency of $**************, consisting of 
tax in the amount of $************** and interest of $************** accrued 
through the date of notification.  Petitioner timely requested a 
redetermination hearing, paid the assessed deficiency, and claims it is 
entitled to a refund based on the following contentions [ENDNOTE: (1)]:

1.  Petitioner contends that the purchase is exempt because the aircraft was 
purchased for flight instruction.

2.  Petitioner contends that it was misled by the Comptroller about the 
requirements for purchasing a used aircraft tax free.  Petitioner complains 
that a Comptroller employee did not advise that the purchaser had to be 
permitted in order to qualify for the flight instruction exemption.

3.  Petitioner contends that it is unfair to be charged interest and penalty. 
[ENDNOTE: (2)]

4.  Petitioner also contends that, until the recent enforcement actions by 
BART, it was common knowledge that tax was not due on the purchase of used 
aircraft, especially when possession was taken outside of Texas.

Staff, on the other hand, rejects Petitioner’s contentions.  Staff asserts that 
Petitioner is not entitled to the exemption under TEX. TAX CODE ANN. Section 
151.328(a) because it did not have a sales tax permit when the aircraft was 
purchased.  Staff also rejects the balance of Petitioner’s contentions.

B. Evidence Submitted

Staff submitted the following documents:

1.  An AGENCY Aircraft Bill of Sale dated July 21, 2004, for a Taylorcraft 
F22C.  The seller is ************** (INDIVIDUAL A, owner).  Petitioner is the 
purchaser with a stated address of **************, Texas.

2.  An AGENCY Aircraft Bill of Sale for the subject aircraft dated June 30, 
2005.  Petitioner is the seller and the purchaser is INDIVIDUAL B.

3.  A Texas Notification of Exam Results dated January 24, 2008. 

Petitioner produced the following documents which Staff forwarded as part of 
the written submission record:

1.  A letter from the seller, INDIVIDUAL A, attesting to Petitioner’s expressed 
intention to purchase the aircraft as a “trainer for future pilots.”

2.  Sworn statements from three of Petitioner’s flight students affirming that 
they received flight instruction from Petitioner on the Taylorcraft airplane. 

C.  Analysis and Recommendation

What is in dispute is whether the purchase was exempt under TEX. TAX CODE ANN. 
Section 151.328(a)(2)(B), which provides that neither sales nor use tax is due 
on an aircraft purchased by a person who uses the aircraft to provide flight 
instruction that is recognized by the AGENCY, under the direct or general 
supervision of a flight instructor certified by the AGENCY and designed to lead 
to a pilot certificate or rating issued by the AGENCY or otherwise required by 
an AGENCY rule or regulation. [ENDNOTE: (3)]  However, even if the aircraft is 
purchased to provide flight instruction that satisfies the fore-mentioned 
statutory criteria, the purchase is not exempt unless the purchaser holds a 
valid sales tax permit.  Tax Code Section 151.328(a)(2)(A).  The Comptroller 
will deny the exemption if the purchaser is not permitted.  Comptroller’s 
Decision No. 43,207 (2004). 

Petitioner does not deny that it was not permitted when it purchased the 
aircraft.  Petitioner quite freely acknowledges that it had not complied with 
what it characterizes as a “technicality.”  Petitioner, in fact, does not 
dispute that its purchase is “technically” taxable under the Tax Code and 
Comptroller’s rules, but rather insists that is unfair and immoral to subject 
the purchaser to tax given that it received incomplete advice from the 
Comptroller’s office regarding the requirements of the Section 151.328(a)(2) 
exemption and that the Comptroller has failed to educate the public regarding 
the taxability of used aircraft purchased for flight instruction.  

Although Petitioner has not explicitly raised a claim under the Comptroller’s 
detrimental reliance policy, Staff has correctly characterized the contention 
as such.  However, Staff argues Claimant is not entitled to relief under the 
policy, because it has not provided evidence that allows Staff to confirm that 
Comptroller personnel dispensed misinformation upon which Petitioner relied.  
The necessary elements of a valid detrimental reliance claim are: (1) a 
taxpayer was given incorrect advice by a Comptroller employee, when the 
taxpayer provided sufficient information to have led the employee to give 
correct advice; (2) the substance of the advice is satisfactorily established; 
(3) the taxpayer followed the advice; and (4) the taxpayer will suffer harm 
unless the Comptroller adheres to the advice.  See, e.g., Comptroller’s 
Decision No. 44,450 (2004).  There must usually be written proof of the alleged 
incorrect advice.  The Comptroller has recognized that a detrimental reliance 
claim on the basis of advice that is not written would be susceptible to abuse 
and, consequently, has adopted a very strict policy.  A claim based on oral 
representations is accepted only if there is corroboration that the erroneous 
advice was given and that the Comptroller employee had complete knowledge of 
the facts such that correct information could have been given.  Comptroller’s 
Decision Nos. 20,547 (1987), 24,559 (1989).  Unfortunately, Petitioner has 
neither identified the employee nor even the particular Comptroller division, 
section, or office that dispensed the misinformation.  Petitioner has also 
failed to provide written evidence documenting any of the details of its 
conversation with the Comptroller employee.  Absent any corroborating evidence 
there is no basis for extending relief under the Comptroller’s policy of 
detrimental reliance.  The ALJ recommends rejection of this contention.

Petitioner argues that the Comptroller has somehow failed to properly educate 
the public regarding the terms and conditions under which the purchase of a 
used aircraft for use in flight instruction is not taxable.  Although no 
evidence has been submitted regarding what measures the Comptroller has or has 
not taken to publicize tax information of this nature, “the law recognizes that 
there is no duty to inform others of the law because all persons are presumed 
to know the law.”  Greater Houston Transportation v. Phillips, 801 S.W.2d 523, 
at 525 (Tex. 1990).  Thus, taxpayers are responsible for compliance, 
“regardless of any action or inaction by an enforcement agency.”  Comptroller’s 
Decision No. 45,642 (2005).  The consequences of this principle may seem harsh, 
but ignorance of the law does not provide a basis for granting tax relief

D. Recommendation

The ALJ recommends that the assessment be affirmed in its entirety, subject to 
Staff’s agreement to refund the interest portion of the deficiency.

III. FINDINGS OF FACT

1. The Texas Comptroller of Public Accounts (Comptroller) assessed sales and 
use tax against **************, on Petitioner’s purchase of an aircraft.

2. Petitioner timely requested a redetermination.

3. Petitioner paid the liability and requests a refund.

4. On March 27, 2009, the case was referred to the State Office of 
Administrative Hearings. 

5. Comptroller Staff provided a notice of hearing to Petitioner that contained 
a statement of the nature of the hearing; a statement of the legal authority 
and jurisdiction under which the hearing was to be held; a reference to the 
particular sections of the statutes and rules involved; and a short, plain 
statement of the matters asserted. 

6. The Administrative Law Judge closed the record on May 20, 2009.

7. Petitioner purchased a 1992 Taylorcraft F22C from a vendor located in Texas. 
 

8. On January 24, 2008, the Comptroller issued a tax assessment against 
Petitioner based on the purchase price of the aircraft.

9. Petitioner did not hold a Texas sales tax permit at that time it purchased 
the aircraft.

10. Petitioner did not identify the Comptroller employee who provided the 
alleged incomplete information regarding the requirements of the TEX. TAX CODE 
ANN. Section 151.328(a)(2).

11. Petitioner did not provide evidence corroborating its claim that it 
received incomplete information regarding the requirements of the TEX. TAX CODE 
ANN. Section 151.328(a)(2).

IV. CONCLUSIONS OF LAW

1. The Comptroller has jurisdiction over this matter pursuant to TEX. TAX CODE 
ANN. ch. 111.

2. The State Office of Administrative Hearings has jurisdiction over matters 
related to the hearing in this matter, including the authority to issue a 
proposal for decision with findings of fact and conclusions of law, pursuant to 
TEX. GOV’T CODE ANN. ch. 2003.

3. The Comptroller provided proper and timely notice of the hearing pursuant to 
TEX. GOV’T CODE ch. 2001.

4. Aircraft purchased to provide flight instruction is not exempt under Tax 
Code Section 151.328(a)(2)(A) unless the purchaser holds a valid sales tax 
permit. 

5. Based on Findings of Fact Nos. 7-9 and Conclusion of Law No. 4, 	
Petitioner did not meet its burden of proof under 34 TEX. ADMIN. CODE Section 
1.40(2)(A) to show that the purchase of the aircraft was exempt.

6. The Comptroller has no legal duty to inform others of the law because all 
persons are presumed to know the law.  Greater Houston Transportation v. 
Phillips, 801 S.W.2d 523 (Tex. 1990).

7. The necessary elements of a valid detrimental reliance claim are: (1) a 
taxpayer was given incorrect advice by a Comptroller employee, when the 
taxpayer provided sufficient information to have led the employee to give 
correct advice; (2) the substance of the advice is satisfactorily established; 
(3) the taxpayer followed the advice; and (4) the taxpayer will suffer harm 
unless the Comptroller adheres to the advice.  See, e.g., Comptroller’s 
Decision No. 44,450 (2004). 

8. Based on Findings of Fact Nos. 10 and 11 and Conclusion of Law No. 7, 
Petitioner failed to prove that he is entitled to relief based on detrimental 
reliance.

9. Based on the foregoing Conclusions of Law, the assessment should be upheld, 
subject to Staff’s agreement to refund the interest portion of the deficiency.


Hearing No. 101,712

ORDER OF THE COMPTROLLER

On May 21, 2009, the State Office of Administrative Hearings’ (SOAH) 
Administrative Law Judge, Peter Brooks, issued a Proposal for Decision in the 
above referenced matter.  The parties were given fifteen days from the date of 
the Decision to file exceptions with SOAH.  No exceptions were filed, and the 
Comptroller has determined that the Administrative Law Judge’s Proposal for 
Decision, except for minor changes to correct typographical or clerical errors, 
should be adopted as written. 

The above decision resulting in a credit to Taxpayer as set out in “Attachment 
A,” which is incorporated by reference, is approved and adopted in all 
respects.  This decision becomes final twenty days after the date Petitioner 
receives notice of this decision.  If either party desires a rehearing, that 
party must file a Motion for Rehearing, which must state the grounds for 
rehearing, no later than twenty days after the date Petitioner receives notice 
of this decision.  Notice of this decision is presumed to occur on the third 
day after the date of this decision.

Signed on this 22nd day of July 2009.


SUSAN COMBS
Texas Comptroller of Public Accounts


by: Martin A. Hubert
Deputy Comptroller


ENDNOTE(S)
(1) Staff has stated that the interest portion of the deficiency will be 
refunded because the liability was paid within 30 days of the Notification of 
Exam Results.  See Staff’s Position Letter and memo dated May 18, 2009.
(2) Given that Staff has agreed to refund the interest and that Petitioner was 
not assessed penalty, this contention will not be addressed.
(3) Neither the parties’ pleadings nor the documents admitted into the record 
establish whether the assessment is for sales or use tax or whether the 
aircraft was purchased within or outside of Texas.  However, as neither party 
has raised these issues, there is no need to address them.  




ACCESSION NUMBER: 200907439H
SUPERSEDED: N
DOCUMENT TYPE: H
DATE: 07/22/2009
TAX TYPE: SALES