Texas Comptroller of Public Accounts    STAR System


201003637H



SOAH DOCKET NO. 304-09-4173.26
CPA HEARING NO. 102,508

RE: *************
TAXPAYER NO.: *************
AUDIT OFFICE: *************
AUDIT PERIOD: March 1, 1998 THROUGH July 31, 2007

Limited Sales, Excise, And Use Tax/RFD

BEFORE THE COMPTROLLER
OF PUBLIC ACCOUNTS
OF THE STATE OF TEXAS

SUSAN COMBS
Texas Comptroller of Public Accounts

STANLEY K. COPPINGER
Representing Tax Division

*************
Representing Claimant


COMPTROLLER’S DECISION

************* (Claimant) seeks from the Texas Comptroller of Public Accounts 
(Comptroller) a refund of state and local sales tax that members of the class 
paid on purchases made at LOCATION stores operated by ************* (COMPANY).  
The class members received a cash rebate on their purchases from COMPANY, but 
were not refunded the sales and use tax paid on the rebated portion of the 
purchase price.  Comptroller Staff (Staff) denied the refund claim primarily on 
the grounds that Claimant lacked standing to file the refund claims for the 
individual class members.  Claimant appealed the denial.  Staff rejected the 
appeal and referred the matter to the State Office of Administrative Hearings 
(SOAH).  In his Proposal for Decision (PFD) the Administrative Law Judge (ALJ) 
recommends that the denial be upheld. 

I.  PROCEDURAL HISTORY, NOTICE & JURISDICTION

The case was submitted for hearing based on the written submissions of the 
parties.  The notice of filing was issued by the Comptroller on May 12, 2009.  
The Comptroller was represented by Assistant General Counsel Stanley Coppinger. 
 Claimant was represented by *************.

The ALJ initially closed the record on May 27, 2009, at the request of the 
parties, who expressed a desire to expedite the issuance of a PFD, without the 
need to submit any additional pleadings or evidence, beyond that already 
included in the administrative record submitted by Staff.  The parties waived 
the statutory 20-day notice of hearing mandated by TEX. TAX CODE ANN. Section 
111.009.  The ALJ, however, subsequently discovered that exhibits referenced in 
Claimant’s pleadings were missing or omitted from the administrative record.  
The ALJ extended the record close date to June 1, 2009, to allow the parties to 
either supplement the record and introduce the missing exhibits or elect to 
have the hearing proceed without the missing or omitted exhibits.  On June 1, 
2009, Claimant submitted the missing or omitted exhibits. 

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 Facts and Issues Presented

COMPANY offered mail-in rebates to its customers on certain items sold in its 
LOCATIONS or via the Internet or by telephonic order.  Certain of these 
customers filed for the advertised retailer rebate from COMPANY.  The customers 
received their cash rebates from COMPANY, but were not refunded the sales tax 
paid on the rebated amount.  A lawsuit was filed in 2002 against COMPANY, 
seeking both individual relief and to certify a class. [ENDNOTE: (1)]  The 
district court dismissed the class action claims.  An appeal was filed with the 
Third Court of Appeals, which held that the appellants could compel an 
assignment of a refund claim from the retailers.  The district court 
provisionally certified the class for purposes of assigning the refund claims, 
and for representation of the individual refund claims of the class members.

On April 16, 2008, Claimant filed a single refund claim [ENDNOTE: (2)] on 
behalf of the CLAIMANT, asserting that the refund is due for the sales tax that 
was paid on the rebated portion of the purchase price that was not refunded by 
COMPANY. [ENDNOTE: (3)]  The Comptroller’s Audit Processing Section issued a 
letter dated July 2, 2008, denying the refund claim primarily on the grounds 
that Claimant did not have a perfected right to file the assessed claim and, 
alternatively, on the grounds that, even if the claim is ultimately perfected, 
the documentation provided is not adequate and some of the individual claims 
are barred by the statute of limitations. [ENDNOTE: (4)] Claimant requested a 
refund hearing and raised the following contentions:

1.  Claimant contends that it has the authority to file the asserted claim and 
a valid assignment in accordance with TEX. TAX CODE ANN. Section 111.104 
because a district court order authorized Claimant’s representative to pursue 
the class members’ refund claims with the Comptroller.

2.  Claimant contends that the documentation is adequate because (1) it has 
actually provided the documentation requested, (2) some of the requested 
documentation is immaterial, or (3) it will present testimonial and additional 
documentary evidence sufficient to document the claim to the satisfaction of an 
independent fact finder.

3.   Claimant contends that any class members whose claims arise more than four 
years before a refund claim was filed are protected by the due process clauses 
of the United States and Texas Constitutions, and complains that the 
Comptroller failed to provide “a clear and certain remedy” for taxpayers facing 
retailers unwilling to refund sales tax paid in error. 

B.  Evidence Presented

Staff offered a copy of the certified refund denial letter as well as the 
pleadings filed by both parties with the Comptroller.  Claimant submitted the 
following:  copies of petitions filed with and orders issued by the 53rd 
District Court in Tara Levy v. OfficeMax, Inc; the CLAIMANT; the CLAIMANT 
Assignment of Right to Refund; original and corrected affidavit of INDIVIDUAL 
A, employed by COMPANY A., attorneys for COMPANY, attesting to the attached 
data disks that contain data from the rebate fulfillment houses and COMPANY he 
reformatted; affidavit of INDIVIDUAL B, attesting that, using a data disk 
provided by COMPANY, he had prepared a series of subfiles regarding the covered 
purchases made at the CLAIMANTS; affidavit of INDIVIDUAL C, attesting that, 
using the data disks provided by INDIVIDUAL B, she prepared additional files 
eliminating exempt taxpayers and adding taxpayer ID numbers; affidavit of 
INDIVIDUAL D, an employee of COMPANY, attesting that he had compiled files 
containing data regarding uncashed rebate checks that had been escheated and 
uncashed checks that had not been escheated; affidavit of INDIVIDUAL E, an 
employee of COMPANY, attesting to his examination of store location data and 
his determination that purchases were made in Texas CLAIMANTS; affidavit of 
INDIVIDUAL F, an employee of COMPANY B, that provides rebate fulfillment 
services to COMPANY, attesting to the data maintained by COMPANY B regarding 
the CLAIMANT rebate program; affidavit of INDIVIDUAL H, an employee of COMPANY 
C, that provided rebate fulfillment services for COMPANY, attesting to the data 
maintained by COMPANY C regarding the COMPANY rebate program; affidavit of 
INDIVIDUAL G, an employee of COMPANY, attesting to the data provided to COMPANY 
A.; affidavit of INDIVIDUAL J, an employee of COMPANY, attesting to data he 
prepared regarding store numbers and store addresses; affidavit of INDIVIDUAL 
K, an employee of COMPANY, attesting to mail-in rebate program information he 
received from COMPANY C; and affidavit of INDIVIDUAL L, an
 employee of COMPANY, attesting to mail-in rebate information she received from 
COMPANY C and COMPANY B.

C.  Analysis

1.  Standing and Statutory Authority

The Comptroller initially denied the refund claim on the grounds that the 
settlement class lacked the authority to file the refund claim. [ENDNOTE: (5)]  
Staff argues that, while there is authority to bring a class action suit for 
tax paid under protest in district court under TEX. TAX CODE ANN. Section 
112.055, there is no such authority for the Comptroller to grant a refund 
directly to a class.  Staff concedes that the Comptroller recognizes the 
CLAIMANT, insofar as they are assignees of COMPANY.  However, as assignees, 
they have stepped into the shoes of COMPANY.  Therefore, Staff argues, just as 
COMPANY, in order to seek a refund, is required under TEX. ADMIN. CODE Section 
3.325(b)(1)(B) to first show that it had refunded the tax to its customers, the 
settlement class must also show that the refund had already been refunded to 
the customers.  Staff concludes with the assertion that in order to overcome 
this requirement the class would have to acquire a power of attorney from each 
and every member of the class for whom a refund is sought.  Staff views the 
power of attorney granted by the district court as limited to the individual 
class representatives.

Claimant posits that it has the authority to seek the refund on behalf of the 
members of the class because it has a valid assignment in accordance with TEX. 
TAX CODE ANN. Section 111.104, a court order appointing Claimant’s 
representative as counsel for the members of the class in pursuing their 
individual claims for refund, and, the Third Court of Appeals decision holding 
that Taxpayers may file a refund claim with the Comptroller once an assignment 
has been procured from the retailers.

There is no statutory authority for a refund to be granted to a class, pursuant 
to a class action.  (Pursuant to Tax Code Section 111.104, the Comptroller 
would consider an individual refund claim filed by a person who directly paid 
the tax to the state, or a refund claim filed by an individual who has procured 
an assignment of the right to file a refund claim, and who has met all 
applicable statutory and rule requirements.)  In Tax Code Chapter 112, the 
Legislature provided taxpayers with a judicial remedy for taxation disputes.  
In Subchapter B, Section 112.055, the Legislature authorized taxpayers to bring 
class action lawsuits.  Chapter 112, Subchapter B, specifically applies to 
lawsuits concerning tax assessments, fees, penalty, and interest, which was 
paid under protest.  It does not apply to refunds.  Judicial remedies for 
refunds are provided for in Subchapter D of Tax Code Chapter 112.  However, 
unlike suits on tax assessments, the Legislature did not give taxpayers the 
right to file class action refund claims in court.  The Legislature has the 
authority to establish the jurisdiction of the Texas court system, including 
providing for whether class action lawsuits can be filed on various matters.  
The Legislature did not provide a judicial remedy for class action lawsuits 
concerning refund claims.  Nor did the Legislature provide an administrative 
remedy for class action refund claims.  The lack of language authorizing such 
suit indicates that the Texas Legislature, while explicitly granting and 
recognizing such a right with regard to redeterminations, did not grant a 
comparable right for class action refunds.  Absent an explicit provision of 
authority in Chapter 111, the lack of a right to seek redress in a court of law 
in Chapter 112, as well as Tax Code Section 111.104(b) for administrative 
remedies, can only mean that the Texas Legislature did not intend for the 
Comptroller to have the authority to administer and grant class action refund 
claims.

In Levy v. OfficeMax, Inc., 228 S.W.3d 846 (Tex. App. – Austin 2007), the Third 
Court of Appeals concludes that the appellants (Tara Levy, et al.) may file a 
refund claim with the Comptroller once they procure an assignment from the 
retailers.  When the court issued its opinion in Levy, the appellants were not 
certified as a class.  (The district court subsequently provisionally certified 
the appellants as a class.)  As such, the appellate court’s ruling does not 
grant the certified class standing to file a refund claim with the Comptroller.

Having considered the arguments of Claimant and the Tax Division, along with 
the applicable tax statutes, it is clear that Claimant does not have standing 
to be granted a refund, and the Comptroller does not have the authority to 
grant a refund to a class.

2.  Refund Verification

The Comptroller has considerable discretion in requiring that the refund claim 
be verified.  Under 34 TAC Section 3.325(a)(4)(D) a person requesting a refund 
from the Comptroller must “submit supporting documentation required by the 
Comptroller.”  Staff in its initial letter denying the refund claim, in 
addition to finding that Claimant lacked standing, also dismissed the refund 
claim on the grounds that the documentation provided was not adequate and 
asserted that, at a minimum, the following information was required:

1.  the customer’s name, address, city, state and zip code,
2.  the store identification, address, city, state and zip code,
3.  the original purchase date,
4.  the rebate designation, amount and date,
5.  rebate check and date rebate check cleared,
6.  refund amount requested by transaction, and
7.  breakdown of refund amounts by jurisdiction (i.e., state, city, MTA, etc.).

Claimant, in its submission dated July 31, 2008, responded to Staff’s 
criticisms of the lack of adequate documentation, asserting that it had either 
provided the requested documentation, that the documentation was not required, 
or that it would provide the requested documentation.  The response is fairly 
detailed.  Claimant contends that much of the information is contained in the 
data disks and affidavits submitted into the record, such as the customer name 
and full address (including city, state and zip code), the amounts of the 
refunds, and the rebate amounts.  Claimant states that it has provided the 
store indentifying information where it is requesting a refund of the local 
sales tax.  Claimant promised, if necessary, to provide testimonial or 
documentary evidence as to the local tax rates collected and remitted to the 
Comptroller.  Claimant also insists that the taxpayer identification number is 
not required, because the identification number is not needed to determine 
whether individual taxpayers owe money to the state.  Claimant explains that it 
is standing in the shoes of a taxpayer who, when it refunds the tax to its 
customers, is not first required to determine whether the permitted customer 
owes tax.  Alternatively, Claimant offered to provide the taxpayer number in a 
supplemental submission.  Claimant also indicated it would provide documentary 
and testimonial evidence that each assignee’s rebate check cleared.

Staff in its Position Letter again raised evidentiary and verification 
objections but the Position Letter is not fully responsive to the answers and 
contentions advanced in Claimant’s July 31st submission.  For example, Staff 
continues to insist that the information identifying the store location is 
critical because the correct local tax amount is at issue, even though Claimant 
has stated that its refund is limited to the state portion of the sales tax.  
Staff also complains that Claimant makes the assumption that customers with a 
Texas mailing address purchased the items in Texas.

Staff does raise new verification objections to Claimant’s documentation.  
Staff contends that the data submitted by Claimant must be reconciled with 
COMPANY’s books to verify that the refund sought had originally been reported 
by COMPANY.  Staff also asserts that the refund claim must be reduced by bad 
debts taken by COMPANY and/or its third-party creditors.  According to Staff, 
the Comptroller has processed very large bad debt refunds on behalf of COMPANY 
and, therefore, it would be appropriate that the percentage of bad debts 
claimed should also reduce refund claims by that same percentage.

The Comptroller has long taken the position that a bad debt deduction, for an 
account written off as worthless, may be claimed by only one entity.  However, 
if a retailer claims a bad debt deduction the assignee may not subsequently 
claim a refund of the tax on the same transaction.  State Tax Automated 
Research (STAR) Accession Document No. 200106351L (June 1, 2001).  Clearly, it 
is necessary to reconcile the bad debt deductions claimed by COMPANY before 
proceeding to process the refund claims on behalf of the CLAIMANT.

The parties’ positions on this contention are somewhat murky.  Claimant elected 
not to respond to the additional verification concerns raised by Staff in its 
Position Letter. [ENDNOTE: (6)] The result is that the parties’ respective 
positions on the documentation needed to verify the refund claims are 
disjointed and disconnected, with neither party fully responding to the other’s 
position. Consequently, it is not clear whether Staff accepted any of the 
responses raised in Claimant’s submission of July 31, 2008, or whether Claimant 
rejects the objections raised in Staff’s Position Letter.  However, ultimately, 
the burden rests on Claimant to prove that it is entitled to the refund claim 
and that Staff erred in denying the refund claim.  34 TEX. ADMIN. CODE Section 
1.40(2)(b).  Claimant has failed to meet this burden.  Claimant did not 
indicate that it agreed that the bad debt deduction reconciliation was required 
or that it would make available the information needed to carry out the 
reconciliation.  Claimant also failed to indicate whether it agreed that 
COMPANY’s books had to be reviewed in order to verify that the refund sought 
had actually been reported to the Comptroller.  Similarly, Claimant has not 
rejected Staff’s complaint that the documentation it provided did not 
necessarily establish that the purchases were necessarily made in Texas stores. 
 In addition, Claimant, in its July 31, 2008, letter, stated that it would 
submit the necessary documentary and testimonial evidence to establish the 
rebate designation number, that the rebate checks cleared for each assignee, 
and the local tax rates collected and remitted to the Comptroller.  Claimant, 
however, rather than submit the information, elected to truncate the proceeding 
and expedite the issuance of a PFD.

The denial of Claimant’s refund claims should be affirmed due to its failure to 
provide the documentation needed to verify the claims.

Statute of Limitations

Claimant states that, under the Comptroller’s policy of tolling limitations 
only when a refund claim is filed, [ENDNOTE: (7)] many of the class members 
will lose their claims for refund because the refund claim was not filed until 
April 16, 2008.  Claimant argues that this result is unfair and penalizes the 
taxpayers.  Claimant insists that the lawsuit originally filed in 2002 should 
be treated as tantamount to filing a refund claim.  Although the lawsuit 
seeking refund claims was filed in 2002, it was not until 2008 that COMPANY 
issued a refund assignment.  Claimant complains that the long delay resulted 
from the fact that the Tax Code failed to provide a “clear and certain remedy” 
for unpermitted taxpayers. [ENDNOTE: (8)]  According to Claimant, the Tax Code 
does not make it clear whether an unpermitted taxpayer could sue a retailer to 
force an assignment and also made no provision in the event a retailer failed 
to provide an assignment.  Thus, if the Comptroller adheres to her position and 
the limitations are not tolled from when the lawsuit was originally filed in 
2002, many of the assignees will lose their refund claims.

The statute of limitations governing the timeliness of refund claims is fairly 
straightforward.  Unless the limitations period is otherwise tolled, a taxpayer 
may request a refund during the same four-year period the Comptroller has to 
make an assessment.  TEX. TAX CODE ANN. Section 111.107(a) and 111.201.  The 
four-year limitations period starts running on the date the tax was due and 
payable.  Tax Code Section 111.201.  The original filing of the lawsuit in 2002 
did not toll the limitations period under TEX. TAX CODE ANN. Section 111.207.  
None of the tolling events described in Tax Code Section 111.207 occurred 
between the filing of the original lawsuit on April 17, 2002, and the filing of 
the request for a refund hearing on July 31, 2008.  Consequently, the 
limitations period will have run on any claims for taxes that were due and 
payable more than four years before the refund claim was filed on April 16, 
2008.

Claimant’s contention fundamentally involves issues of fairness and equity.  
Claimant complains that due to the absence of a method under the Tax Code for 
compelling a retailer to issue refund assignments, the non-permitted customers 
who had to resort to litigation will have been denied their rightful refunds 
due to the expiration of the statute of limitations.  However, as a matter of 
law, Claimant’s request for equitable relief must be denied.  Claimant’s remedy 
rests with the Legislature.  See S&H Marketing Group v. Sharp, 951 S.W.2d 265 
(Tex. App. – Austin 1997, no writ), and COMPTROLLER’S DECISION NO. 41,470 
(2007).

D.  Ruling

Claimant’s refund claim should be denied.  Claimant lacks standing to pursue 
its refund claim with the Comptroller.  Similarly, the Comptroller also lacks 
the statutory authority to grant the refund to Claimant.  Claimant has failed 
to provide the documentation required to verify the refund claims, and the 
statute of limitations bars those claims involving tax due and payable more 
than four years before the claim was filed on April 16, 2008.

III.  FINDINGS OF FACT

1.  Mr. and Mrs. INDIVIDUAL M purchased a taxable item from ************* 
(COMPANY) and subsequently received a cash mail-in rebate for the purchase, but 
were not refunded the sales tax paid on the rebated amount.

2.  On April 17, 2002, Mr. and Mrs. INDIVIDUAL M filed a lawsuit against 
COMPANY individually and as a class action.  INDIVIDUAL N, Mr. and Mrs. 
INDIVIDUAL M, individually and on behalf of all others similarly situated v. 
OfficeMax, Inc. and Best Buy Co., Inc., Cause No. GN201252 ( 53rd District 
Court April 17, 2002).

3.  The district court dismissed the class action claims.  An appeal was filed 
with the Third Court of Appeals, which held that the appellants in the case 
could file a refund claim with the Comptroller once an assignment had been 
secured from COMPANY.

4.  The class was certified by the Travis County 53rd District Court in its 
Order Granting Preliminary Approval to the CLAIMANT Proposed Settlement (Order) 
issued on April 17, 2008, in Levy v. OfficeMax.

5.  The District Court appointed INDIVIDUAL O and INDIVIDUAL P to represent the 
CLAIMANT members in the presentation of their individual claims for refund to 
the Comptroller and to pursue any and all necessary administrative appeals.

6.  The representative members’ counsel was given full power of attorney to 
represent CLAIMANT members in their individual claims against the Comptroller.

7.  CLAIMANT members consist of Texas customers who redeemed a mail-in retailer 
rebate for a taxable purchase made on or after March 1, 1998, and before July 
16, 2007, at a Texas ******** store or via Internet or telephonic order shipped 
to a Texas address.

8.  COMPANY issued to Claimant an Assignment of Right to Refund (Assignment) to 
file and to receive the refund for sales tax collected on the rebated portion 
of the class members’ purchases.

9.  On April 16, 2008, ************* members (Claimant) filed a refund claim 
with the Texas Comptroller of Public Accounts (Comptroller) on behalf of the 
members of the class. 

10.  The refund period covers purchases made on or after March 1, 1998, and 
before July 16, 2007.

11.  The Comptroller’s Audit Processing Section issued a letter dated July 2, 
2008, denying the refund claim.

12.  Claimant appealed the denial and filed a timely request for a refund 
hearing.

13.  On May 12, 2009, the case was referred to the State Office of 
Administrative Hearings for a hearing on written submission.

14.  The notice of filing dated May 12, 2009, 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.

15.  The record closed on June 1, 2009.

16.  Claimant failed to provide the taxpayer numbers for the class members; 
failed to provide evidence that the rebate checks cleared for each of the class 
members; failed to provide evidence establishing the tax rates collected and 
remitted to the Comptroller; failed to show that the amounts ought to be 
refunded had been reported to the Comptroller; and failed to provide the 
documentation reconciling the bad debt deductions taken by COMPANY with the 
refund claims. 

17.  None of the events described in TEX. TAX CODE ANN. Section 111.207 
occurred between the filing of the lawsuit on April 17, 2002, and the filing of 
Claimant’s request for a refund hearing on July 31, 2008.

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 ANN. ch. 2001.

4.  Claimant has the burden to prove by a preponderance of the evidence that 
the refund claim was erroneously denied.  34  TEX. ADMIN. CODE SECTION 
1.40(2)(B).

5.  A tax refund claim may be filed with the Comptroller by the person who 
directly paid the tax to this state or by the person's assignee.  TEX. TAX CODE 
ANN. Section 111.104(b).

6.  The Tax Code, Chapters 111 and 112, does not authorize a class to file a 
refund claim with the Comptroller.

7.  The Tax Code, Chapters 111 and 112, does not give the Comptroller the 
statutory authority to grant a class action refund.

8.  Claimant must submit the supporting documentation required by the 
Comptroller to verify the refund claim.  34 TEX. ADMIN. CODE  Section 
3.325(a)(3)(D).

9.  The Third Court of Appeals has held that a district court has the 
jurisdiction to consider an unpermitted taxpayer’s claims against a retailer to 
compel an assignment of refund rights and to consider whether a class should be 
certified.  Levy v. OfficeMax, Inc., 228 S.W.3d 846 (Tex. App. – Austin 2007).

10.  Under TEX. TAX CODE ANN. Section 111.207, the limitations period is tolled 
during the following periods: the period following the date of a tax payment 
made under protest, the period during which a judicial proceeding is pending in 
a court of competent jurisdiction to determine the amount of the tax due, and 
the period during which an administrative proceeding is pending before the 
Comptroller for a redetermination of the tax liability.

11.  Based on Finding of Fact No. 17, and Conclusion of Law No. 10, the 
limitations period was not tolled between April 17, 2002, when the lawsuit was 
originally filed and July 31, 2008, when the refund hearing was requested.

12.  The members of the class had four years from the date the tax became due 
and payable within which to file their refund claims.  TEX. TAX CODE ANN. 
Section 111.201 and 111.107.

13.  Based on Findings of Fact Nos. 2, 7, 9, 10, and 17 and Conclusions of Law 
Nos. 10, 11, and 12, the statute of limitations expired for claims arising from 
tax that was due and payable more than four years before the refund claim was 
filed on April 16, 2008.

14.  Based on Findings of Fact Nos. 1 - 9 and Conclusions of Law Nos. 6 and 7, 
Claimant was not authorized to file a class action refund claim and receive a 
single refund on behalf of the class members.

15.  Based on Finding of Fact No. 16 and Conclusions of Law Nos. 4 and 8, 
Claimant failed to meet its burden of proof that it was entitled to the refund 
claim and that the refund claim was denied in error.

16.  Based on the foregoing Findings of Fact and Conclusions of Law, the denial 
of the refund claim should be affirmed.


Hearing No. 102,508

ORDER OF THE COMPTROLLER

On June 25, 2009, the State Office of Administrative Hearings’ (SOAH) 
Administrative Law Judge (ALJ), 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. 

The Comptroller has determined that the ALJ’s Proposal for Decision should be 
adopted with changes in accordance with TEX. GOV’T. CODE ANN. Section 
2003.101(e)(1)(a), because the ALJ made findings of fact not supported by a 
preponderance of the evidence and did not properly apply applicable law.  
Specifically, the ALJ incorrectly found that Claimant has standing and was 
authorized to file a class action refund claim and receive a single refund on 
behalf of class action members.  In addition, the ALJ did not sufficiently 
address the Tax Division’s argument that the Comptroller lacks the authority to 
grant the refunds to a class, certified or not.  Accordingly, the following 
Findings of Fact and Conclusions of Law are modified as follows and for the 
following reasons:

Finding of Fact No. 3 has been modified to delete the word “class” and replace 
it with “appellants in the case” because the appellants were not certified as a 
class when the opinion of the Third Court of Appeals was issued, and the ruling 
applies to the appellants as individuals, not as a class.

A new Conclusion of Law No. 6 has been added and reads as follows:  The Tax 
Code, Chapters 111 and 112, does not authorize a class to file a refund claim 
with the Comptroller.  This additional conclusion of law is necessary, because 
the ALJ improperly concluded that the Court of Appeals ruling granted the class 
the right to pursue a refund claim with the Comptroller.  The Tax Code 
establishes the standing of persons to file refund claims and to seek judicial 
review in connection with those claims.  The Tax Code contains a specific 
authorization for a class to seek judicial review in a redetermination case.  
No such authorization exists for a class action refund.  Based on this lack of 
language authorizing judicial review in the case of a refund claim by a class, 
the only reasonable conclusion is that the Texas Legislature did not grant a 
class standing to file a refund claim with the Comptroller.  Existing 
Conclusions of Law have been renumbered accordingly.

A new Conclusion of Law No. 7 has been added and reads as follows:  The Tax 
Code, Chapters 111 and 112, does not give the Comptroller the statutory 
authority to grant a class action refund.  This additional conclusion of law is 
necessary, because the ALJ improperly concluded that the Court of Appeals 
ruling granted the Comptroller the authority to grant a class action refund.  
The Tax Code establishes authority of the Comptroller to grant refund claims 
and to persons to seek judicial review in connection with those claims.  The 
Tax Code contains a specific authorization for a class to seek judicial review 
in a redetermination case.  No such authorization exists for a class action 
refund.  Based on this lack of language authorizing judicial review in the case 
of a refund claim by a class, the only reasonable conclusion is that the Texas 
Legislature did not provide the Comptroller with the authority to grant a class 
action refund.  Existing Conclusions of Law have been renumbered accordingly.

Conclusion of Law No. 12 has been renumbered and modified to add the word “not” 
immediately before the word “authorized” because the ALJ did not properly apply 
applicable law in concluding that a class has standing to seek a refund claim 
from the Comptroller.  Additional clarifying modifications have also been 
implemented.

Corresponding provisions in the Analysis section and other sections have been 
modified accordingly.

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 23rd day of March 2010.


SUSAN COMBS
Texas Comptroller of Public Accounts

by: Martin A. Hubert
Deputy Comptroller

ENDNOTE(S)

(1)  INDIVIDUAL N, Mr. and Mrs. INDIVIDUAL M, individually and on behalf of all 
others similarly situated v. OfficeMax, Inc. and Best Buy Co., Inc., Cause No. 
GN201252 (53rd District Court, April 17, 2002).

(2)  Claimant originally requested a refund in the amount of $*************, 
plus interest, but subsequently, in a letter dated April 25, 2008, decreased 
the amount to $*************, plus local tax where Claimant has the necessary 
records to properly quantify the amount of local tax.  See Claimant’s letter of 
April 25, 2008.

(3)  The covered transactions are limited to the purchases made during the 
refund period by persons or entities that were Texas residents at the time and 
not previously refunded with retailer rebates. The purchases were made during 
the period of March 1, 1998 through July 16, 2007.

(4)  Staff does not substantively contest Claimant’s underlying contention that 
sales tax was not due on the rebated portion of the purchase price.  In fact, 
the District Court on April 16, 2004, issued an order granting in part the 
Plaintiffs’ motion for partial summary judgment against COMPANY, holding that 
the rebate amounts at issue are cash discounts allowed on sale and, therefore, 
are not included in the determination of the sales price under TEX. TAX CODE 
ANN. SECTION 151.007. 

(5)  See July 2, 2008 denial letter.

(6)  Claimant filed its reply to Staff’s Position Letter via a letter dated 
April 8, 2009, in which it limited its reply to a statement adopting its 
previous filings as responses to the Position Letter.  Staff, in its response 
dated April 13, 2009, limited its response to a statement resting on the 
arguments previously raised in its Position Letter.  

(7)  This is a misstatement of current Comptroller policy.  Effective June 20, 
2003, the statute of limitations is not tolled while a refund claim is being 
informally reviewed.  See STAR Accession Document No. 200508239L (August 9, 
2005) and TEX. TAX CODE ANN. Section 111.1042(d).

(8)  Claimant is citing a Supreme Court decision, McKesson Corp. v. Division of 
Alcoholic Beverages & Tobacco Dept. of Business Regulation of Florida, 496 U.S. 
18 (1990).  The full quote used by Claimant reads as follows:

[I]n refund actions, the state must provide taxpayers with a clear and certain 
remedy for any erroneous or unlawful tax collection, so as to insure that the 
opportunity to contest the tax was a meaningful one Claimant does not offer any
context for citing this decision and does not venture to provide the underlying
facts or legal principles relied on by the Supreme Court from which an informed
conclusion can be made whether the case is actually relevant to the instant
case.




ACCESSION NUMBER: 201003637H
SUPERSEDED: N
DOCUMENT TYPE: H
DATE: 03/23/2010
TAX TYPE: SALES