December 10, 1999
FOR IMMEDIATE RELEASE
Texas Supreme Court Creates Substantial Potential Tax Refund Opportunity for Texas Taxpayers.
The Texas Supreme Court in Fleming Foods of Texas, Inc. v. Rylander,
6 S.W.2d 278 (Tex. 1999), recently closed a trap for unwary taxpayers
and created a substantial potential refund opportunity.
Fleming is a wholesale grocer that purchased various products and paid
sales tax to its vendors, who in turn remitted the tax to the State. Fleming
was audited by the Comptroller and agreed to several extensions of the
four year limitations period so that the Comptroller could complete the
audit. The Comptroller ultimately assessed a deficiency, denying a number
of refund claims on the grounds that Fleming’s refund rights were
derived from its vendors, who actually paid the tax to the State. Because
the four year statute of limitations had run on the right of Fleming’s
vendors to claim a refund, Fleming was also barred from seeking a refund.
The Comptroller further held that the extension agreements signed by Fleming
did not extend the limitations period for Fleming’s vendors. Thus,
the Comptroller’s ruling created a one way street - the Comptroller
could continue to assess taxes against Fleming for the same period that
Fleming was barred from claiming a refund.
The Court of Appeals noted that the express language of Tax Code §
111.104(b) (emphasis added) supported Fleming’s right to a refund:
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A tax refund claim may be filed with the comptroller by the person
who paid the tax or by the person’s attorney, assignee,
or other successor.
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The Comptroller contended that when this section was re-codified in 1981,
it incorrectly stated the law. However, the Supreme Court held that taxpayers
"must be able to accept and to rely upon the words written by the
Legislature if they are clear and unambiguous, their meaning is plain
when the code in which they appear is read in its entirety, and they do
not lead to absurd results." The Court also rejected the Comptroller’s
contention that the Legislature had accepted the Comptroller’s interpretation
of the statute. The Court held that the doctrine of legislative acceptance
only applies when the statute is ambiguous and in this case, it was not.
It is the statute of limitations for the purchaser, not the vendor, that
controls (eliminating the need for refund assignment forms) for purposes
of determining when a refund claim may be filed; and 2. An indirect taxpayer
(who pays the tax to a vendor) may properly file a claim for refund directly
with the Comptroller. Taxpayers should also be aware of similar statutory
changes made duing the last legislative session. See taxcode § 151.430.
Please
contact a Ryan & Company professional
for more information.
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