Texas Comptroller of Public Accounts STAR System
SOAH DOCKET NO. 304-09-5249.26
CPA HEARING NO. 101,289
TAXPAYER NO.: **************
AUDIT OFFICE: Sales Tax Refunds Verification **************
AUDIT PERIOD: December 1, 2007 THROUGH December 31, 2007
Limited Sales, Excise, And Use Tax/RFD
BEFORE THE COMPTROLLER
OF PUBLIC ACCOUNTS
OF THE STATE OF TEXAS
Texas Comptroller of Public Accounts
DEANNE Z. CUMMINGS-SCOTT
Representing Tax Division
************** (“Claimant”) appeals the denial of her sales tax refund claim by
the Texas Comptroller of Public Accounts (“Comptroller”). Claimant contends
she is entitled to a refund of taxes she paid on the purchase of an all-terrain
vehicle (“ATV”). Comptroller Staff (“Staff”) contends Claimant does not
qualify for the agriculture exemption she seeks to utilize, because she does
not sell an agricultural product in the regular course of business. In his
proposal for decision the Administrative Law Judge (“ALJ”) recommends the
denial of refund be upheld.
I. PROCEDURAL HISTORY, NOTICE & JURISDICTION
The hearing convened on August 4, 2009, before ALJ Victor John Simonds at the
William P. Clements Building, 300 West 15th Street, Austin, Texas. Petitioner
appeared and was represented by **************. Staff appeared and was
represented by Assistant General Counsel DeAnne Cummings-Scott. The ALJ closed
the record at the conclusion of the hearing.
There are no issues of notice or jurisdiction in this proceeding. Therefore,
these matters are set out in the Findings of Fact and Conclusions of Law
without further discussion here.
II. REASONS FOR DECISION
A. Facts Demonstrated by Evidence & Issue Presented
From time to time non-profit and governmental organizations are forced to seize
abused horses. On occasion the animals are turned over to responsible
individuals. Claimant is such a person. She has several of these previously
abused horses living on a 25-acre tract of land she owns in CITY, Texas.
Claimant’s use of the land allows her to qualify for an agricultural appraisal
by the ************** County Appraisal District.
On December 15, 2007, Claimant purchased a new Yamaha Rhino ATV. The
four-wheel-drive vehicle can carry up to 400 pounds in a rear dump bed, and has
a towing capacity of over 1,200 pounds. Claimant uses the vehicle exclusively
to help her complete various tasks as she cares for the horses. Claimant
prefers using the ATV in lieu of her tractor because it requires less physical
strength to operate, and reduces her “carbon footprint.” The ATV’s purchase
price included $************** in sales tax.
On February 20, 2008, Claimant wrote to the Comptroller. [ENDNOTE: (1)]
Comptroller Staff in the Revenue Accounting Division wrote to Claimant and
stated that her correspondence could not be considered a refund claim because,
though it alleged an overpayment of sales tax, it failed to state fully and in
detail each reason or ground on which the claim was based. [ENDNOTE: (2)]
Claimant responded several days later with a letter that explained that she had
purchased an ATV that was used on her 25-acre tract of land. [ENDNOTE: (3)] She
also provided an End User Signed Statement for Purchasing Tax-Free Dyed Diesel
Fuel, and the seller’s assignment of right to refund. [ENDNOTE: (4)]
Approximately three weeks later, the Revenue Accounting Division denied
Claimant’s refund because she was not eligible for the exemption for
agricultural items. Claimant timely asked for a refund hearing.
On July 14, 2009, the matter was referred to the State Office of Administrative
Hearings. Claimant contends she erroneously paid tax on the ATV purchase
because the vehicle is used exclusively to help her complete various tasks
related to caring for abused horses living on her 25-acre tract of land.
Claimant also contends the Comptroller should grant the refund because it has
allowed her to reduce her carbon footprint. [ENDNOTE: (5)]
B. Authorities and Analysis
A sales tax is imposed on each sale of a taxable item in this state. [ENDNOTE:
(6)] A Yamaha ATV is tangible personal property, and its sale is taxable,
unless an exemption applies. [ENDNOTE: (7)] If tax is paid, but not due, then
any person, his attorney, assignee, executor, or administrator can request a
refund of tax that the person remitted to the state. [ENDNOTE: (8)] For
example, the Tax Code provides an exemption for machinery and equipment used or
employed on a farm or ranch in the building or maintaining of roads or water
facilities or in the production of: food for human consumption; grass; feed for
animal life; or other agricultural products to be sold in the regular course of
business. [ENDNOTE: (9)]
The work Claimant does to help abused horses is admirable, and if Claimant is
reducing her carbon footprint by using the ATV instead of her tractor, then she
is to be commended for that as well. However, the Comptroller may only refund
tax if the tax was paid in error. [ENDNOTE: (10)]
Since Claimant is contending tax was paid in error because she is entitled to
an exemption, she is required to prove she is eligible for the claimed
exemption by clear and convincing evidence. [ENDNOTE: (11)] This is a rather
stringent burden, and not easily attained. As stated by the Texas Supreme
Court, statutory exemptions from taxation are subject to strict construction
since they are the antithesis of equality and uniformity and because they place
a greater burden on other taxpaying businesses and individuals. [ENDNOTE: (12)]
An exemption cannot be raised by implication, but must affirmatively appear,
and all doubts are resolved in favor of the taxing authority and against
Claimant. Simply stated, the burden of proof is on the Claimant to clearly
show that it comes within the statutory exemption. [ENDNOTE: (13)]
Claimant noted that her land is designated by the local appraisal district for
special agricultural appraisal. [ENDNOTE: (14)] The Property Code defines
“agricultural use” to include producing crops for animal feed or raising or
keeping livestock, provided the land is not used for a residential purpose or a
purpose inconsistent with agricultural use. Claimant’s land is used to keep
horses and produce grass for feed, which fits the Property Code definition.
Therefore, the land is entitled to an agricultural appraisal. But the sales
tax exemption at issue is not triggered by qualifying for the special
The Tax Code defines “farm or ranch” to include one or more tracts of land
used, in whole or in part, in the production of crops, livestock, or other
agricultural products held for sale in the regular course of business.
[ENDNOTE: (15)] Longstanding Comptroller policy has been that items of
equipment that are used exclusively on a ranch in the production of horses held
for sale in the regular course of business or used on mares or stallions used
as breeding stock is exempt. [ENDNOTE: (16)] However, equipment used at horse
shows or other non-ranch locations (such as a veterinarians’ office) will not
qualify for exemption. [ENDNOTE: (17)] For example, stall mats are exempt when
exclusively used on a farm or ranch in the production of horses held for sale
in the regular course of business, or for mares or stallions used as breeding
stock. [ENDNOTE: (18)] The mats are exempt because they are considered
equipment used in the production of agricultural products, i.e., horses, for
sale. The exemption is not available for mats used at a location other than a
farm or ranch, such as a race track, or for a purpose other than producing
horses for sale or maintaining breeding stock.
Claimant does not sell horses, or any other agricultural product. Therefore,
under the Comptroller’s policy, she does not fit within the requirements of the
exemption she seeks to utilize. A Comptroller policy that is a reasonable
interpretation of the statute is entitled to deference. [ENDNOTE: (19)] The
Comptroller’s interpretation of the agricultural machine and equipment
exemption is reasonable, because the Legislature repeats the language “sold in
the regular course of business” throughout the exemption, which indicates its
intent was to establish an exemption for agricultural businesses. Though
Claimant husbands horses, there is no evidence she sells any agricultural
product. Therefore, Staff’s denial of Claimant’s refund claim should be
III. FINDINGS OF FACT
1. On March 28, 2009, ************** (“Claimant”) filed a claim for a refund of
sales tax that she asserts was erroneously paid.
2. The refund claim was denied by the Texas Comptroller of Public Accounts
3. Claimant timely requested a hearing.
4. On July 14, 2009, the case was referred to the State Office of
Administrative Hearings for a proposal for decision, and Staff issued a Notice
of Hearing to Claimant.
5. The Notice of Hearing contained a statement of the time, place, and 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
6. The hearing convened August 4, 2009, before Administrative Law Judge Victor
John Simonds, at the William P. Clements Building, 300 West 15th Street,
Austin, Texas. Staff appeared and was represented by Assistant General Counsel
De’Anne Cummings-Scott. Petitioner appeared and was represented by attorney
7. The record closed at the conclusion of the hearing.
8. On December 15, 2007, Claimant purchased a Yamaha Rhino all-terrain vehicle
(“ATV”). The purchase price included $************** in sales tax.
9. Claimant obtained an assignment of right to refund from the ATV seller.
10. Claimant uses the ATV exclusively to help her complete various tasks
related to caring for horses living on a 25-acre tract of land she owns.
11. Claimant does not sell horses, or any other agricultural product.
IV. CONCLUSIONS OF LAW
1. The Comptroller has jurisdiction over this matter pursuant to TEX. TAX CODE
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 ch. 2003.
3. The Comptroller provided proper and timely notice of the hearing pursuant to
TEX. GOV’T CODE ch. 2001.
4. Any person, his attorney, assignee, executor, or administrator may request a
refund of sales tax that the person remitted to the state if the tax was not
due. TEX. TAX CODE Section 111.104.
5. Items of equipment used exclusively on a ranch in the production of horses
held for sale in the regular course of business are exempt. TEX. TAX CODE
Section 151.316(a)(7). See also State Tax Automated Research Accession No.
9903288L, March 29, 1999.
6. Claimant’s ATV purchase was not exempt from sales tax.
7. Based upon the above Findings of Fact and Conclusions of Law, Staff’s denial
of Claimant’s refund should be upheld.
Hearing No. 101,289
ORDER OF THE COMPTROLLER
On August 6, 2009, the State Office of Administrative Hearings’ (SOAH)
Administrative Law Judge, Victor John Simonds, 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 is approved and adopted in all respects. This decision
becomes final twenty days after the date Claimant 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 Claimant 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 21st day of October 2009.
Texas Comptroller of Public Accounts
by: Martin A. Hubert
1. Claimant’s February 20, 2008 letter is not in evidence.
2. Refund Accounting Division letter, March 25, 2008; Claimant Oral Hearing
Exhibit No. 13.
3. Claimant letter, March 28, 2009; Claimant Oral Hearing Exhibit No. 12.
4. Claimant’s Oral Hearing Exhibit No. 11.
5. Claimant also states that it has taken far too long to reach a resolution in
this matter, a fact Staff acknowledged and apologized for at the hearing.
6. TEX. TAX CODE Section 151.051.
7. TEX. TAX CODE Section 151.009.
8. TEX. TAX CODE Section 111.104.
9. TEX. TAX CODE Section 151.316(a)(7). See also 34 TEX. ADMIN. CODE Section
10. TEX. TAX CODE Section 111.104.
11. 34 TEX. ADMIN. CODE Section 1.40(2)(A).
12. See Bullock v. National BancShares Corp., 584 S.W.2d 268 (Tex., 1979).
14. TEX. CONS’T Art. VIII, SECTION 1-d-1. See also TEX. PROP. TAX CODE Section
15. TEX. TAX CODE Section 151.316(c)(1).
16. State Tax Automated Research Accession No. 9903288L (March 29, 1999).
19. See, e.g., TEX. GOV’T CODE ANN. Section 311.023(6).
ACCESSION NUMBER: 200910517H
DOCUMENT TYPE: H
TAX TYPE: SALES