GATX Terminal Corporation v. Carole Keeton Rylander, Comptroller of Public Accounts of the State of Texas And John Cornyn, Attorney General of the State of Texas

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

NO. 03-01-00537-CV

GATX Terminals Corporation, Appellant

v.

Carole Keeton Rylander, Comptroller of Public Accounts of the State of Texas; and John
Cornyn, Attorney General of the State of Texas, Appellees1

FROM THE DISTRICT COURT OF TRAVIS COUNTY, 201ST JUDICIAL DISTRICT
NO. 96-10815, HONORABLE W. JEANNE MEURER, JUDGE PRESIDING

GATX Terminals Corporation (GATX) operates two facilities on the Houston ship

channel, referred to as “tank farms,” where petroleum and petrochemical products are unloaded from

transport vehicles and stored in large, steel tanks until they are ready to be loaded again for

distribution. The Comptroller assessed taxes against GATX for services performed at its Galena Park

facility during audit periods from April 1989 through August 1992, and from September 1992

through June 1996. GATX sought a redetermination of the taxes and a refund from the Comptroller.

See Tex. Tax Code Ann. §§ 111.009, .105 (West 2001). After the Comptroller denied the request,

1
The attorney general is a necessary party to a taxpayer suit. Tex. Tax Code Ann. § 112.053
(West 2001). The interests of the Comptroller and the Attorney General coincide in this cause.
Therefore, we will refer to appellees as the Comptroller for convenience.
GATX paid the deficiency under protest and subsequently filed suit in district court seeking a refund.

See id. §§ 112.051, .052, .151.

The Tax Code designates “real property repair and remodeling” as a taxable service.

Id. § 151.0101(a)(13) (West 2002). The Comptroller has implemented a rule which describes the

types of services that are subject to tax and classifies as non-taxable two activities: “maintenance” and

“new construction.” See 34 Tex. Admin. Code § 3.357 (2001) (Comptroller of Public Accounts,

Labor Relating to Nonresidential Real Property Repair, Remodeling, Restoration, Maintenance, New

Construction, & Residential Property) (“Rule 3.357”). GATX argued to the Comptroller and the

district court that repainting its tanks is non-taxable maintenance, and that work performed to bring

the facility into compliance with environmental regulations is non-taxable new construction. The

district court tried the issues de novo. See Tex. Tax Code Ann. § 112.054 (West 2001).

After awarding certain refund amounts stipulated to by the parties, the district court

denied the balance of GATX’s claims for a refund.2 GATX presents compelling arguments for why

the disputed services should not be classified as taxable repair and remodeling. After closely

reviewing the definitions set forth in the statute and in the Comptroller’s rules and decisions,

however, we find that the evidence is sufficient to uphold the trial court’s judgment denying the

refunds.

2
GATX filed two separate suits which were consolidated for trial and disposition. The
parties stipulated that GATX was entitled to recover a refund of $64,967.31 in sales taxes paid for
tank cleaning and vacuum truck services from 1989 to 1991 and a refund of $142,944.22 in City of
Houston sales taxes paid from 1989 to 1992, plus statutory interest pursuant to sections 112.060 and
112.155 of the tax code. See Tex. Tax Code Ann. §§ 112.060, .155.

2
 DISCUSSION

Standard of Review

As the parties disagree over the appropriate standard of review, we will clarify our

level of review over this matter. Repair and remodeling services that are performed on real property

are made taxable by statute. Id. § 151.0101(a)(13) (West 2002). The Comptroller has the exclusive

jurisdiction to interpret whether services fall in this category. Id. § 151.0101(b). In this capacity, the

Comptroller has implemented Rule 3.357. GATX did not challenge the rule on the grounds that it

contravened or was otherwise inconsistent with the legislative intent as expressed in section

151.0101(a) of the tax code. Indeed, the trial court expressly found that GATX had challenged

neither the validity or application of Rule 3.357.3 The only issue before the trial court, then, was

whether the facts of this case established that the disputed services constitute taxable repair and

remodeling as determined by the definitions promulgated in Rule 3.357.

There being no challenge to the rule as implemented, the rule as applied depended on

findings made by the trier-of-fact. After a de novo trial of the issues, the trial court found that the

Comptroller had met its burden of proof and that GATX failed to establish that the services were non-

taxable activities. The court supported its judgment with findings of fact and conclusions of law.

Findings of fact in a case tried to the court have the same force and effect as a jury verdict. Catalina

v. Blasdel, 881 S.W.2d 295, 297 (Tex. 1994); Starcrest Trust v. Berry, 926 S.W.2d 343, 352 (Tex.

3
The trial court’s conclusions of law include number thirty-one: “The application and validity
of Comptroller Rule 34 Tex. Admin. Code § 3.357 has not been contested and the rule applies to the
facts of this case.” The findings of fact include number twenty-five: “GATX does not contest the
application or validity of 34 Tex. Admin. Code § 3.357.”

3
App.—Austin 1996, no writ). Likewise, findings of fact are reviewable for factual and legal

sufficiency according to the same standards as jury findings. Catalina, 881 S.W.2d at 297. To reach

a different result, GATX must establish the lack of evidentiary support for these findings.

GATX conceded at oral argument that in light of the trial court’s findings of fact and

conclusions of law on the controlling issues, its appeal was limited to legal and factual sufficiency of

the evidence challenges. It has also asserted, however, that this Court can determine the disputed

issues as a matter of law because the material fact findings are, in effect, conclusions of law. While

we agree with GATX that the ultimate issue—whether the services are taxable—presents a question

of law, this legal issue depends on the trier-of-fact’s resolution of the underlying factual issues.

Moreover, we reject appellant’s characterization of the instant case as one requiring statutory

interpretation. As we have stated, GATX does not challenge the Comptroller’s administrative rule

which, with the statute and the decisions of the Comptroller, govern this appeal.

GATX alternatively asserts that we can decide the issues as a matter of law because

the material facts are undisputed. Contrary to GATX’s assertion, the record reflects that the facts

were disputed at trial. 4 The trial court weighed the evidence presented by both sides and decided in

the Comptroller’s favor. We will review the sufficiency of the evidence to support the trial court’s

ultimate findings that the activities were taxable.

4
Moreover, the cases on which GATX relies are distinguishable as each involved patently
legal determinations. See, e.g., United Servs. Auto. Ass’n v. Keith, 970 S.W.2d 540, 541-42 (Tex.
1998) (discussing whether plaintiff can recover on a “bystander” cause of action); Richey v.
Brookshire Grocery Co., 952 S.W.2d 515, 518 (Tex. 1997) (discussing probable cause determination
in a malicious prosecution case); Wise v. Complete Staffing Servs., Inc., 56 S.W.3d 900, 902 (Tex.
App.—Texarkana 2001, no pet.) (discussing existence of duty in negligent hiring case).

4
 At the outset, however, we must determine which party had the burden of proof

below. The Comptroller has the burden to make a prima facie case regarding a taxpayer’s alleged

deficiency in taxes; once it has done so, the burden shifts to the taxpayer to present evidence

controverting the Comptroller’s prima facie showing. See Tex. Tax Code Ann. § 111.013 (West

2001) (a certificate by the Comptroller that shows a delinquency is prima facie evidence of the stated

tax); see also Big Country Club, Inc. v. Humphreys, 511 S.W.2d 315, 317 (Tex. Civ.

App.—Beaumont 1974, writ ref’d n.r.e.); Smith v. State, 418 S.W.2d 893, 896 (Tex. Civ.

App.—Austin 1967, no writ). The taxpayer, however, bears the burden of showing that he comes

within a statutory exemption from tax. Southwest Airlines Co. v. Bullock, 784 S.W.2d 563, 567

(Tex. App.—Austin 1990, no writ) (taxpayer has burden to prove he comes within exemptions

provided by statutory scheme, which includes the rules promulgated by the agency charged with

enforcement of the relevant statute).

The exemptions at issue are not created by statute, but by the Comptroller’s rule

excepting maintenance and new construction from taxable services. See 34 Tex. Admin. Code

§ 3.357(a)(4), (a)(5). The Comptroller’s decisions indicate that if the taxpayer raises either of these

exceptions, the Comptroller must initially establish that the services qualify as maintenance or new

construction. Tex. Comptroller of Pub. Accounts, Taxpayer Hearing on Disputed Audit, Docket No.

30,911 (Dec. 6, 1999) (final decision upholding audit as amended); id. Docket No. 31,904 (May 12,

1994) (final decision upholding audit in part and amending it in part). Once it has done so, the burden

shifts to the taxpayer to prove that the services qualify for one of the exceptions to taxation. Id.

Docket Nos. 30,911 & 31, 904; see also North Alamo Water Supply Corp. v. Willacy County

5
Appraisal Dist., 804 S.W.2d 894, 899 (Tex. 1991) (burden of proof to establish statutory exemption

on the taxpayer); Southwest Airlines Co., 784 S.W.2d at 567.

I. Tank Repainting

To prevent its steel storage tanks on the coast from rusting, GATX paints them with

a three-coat application. The environmental forces that are present on the ship channel—harsh sun,

salt, and rain—cause the paint to deteriorate and the metal to rust. Over time as the paint is exposed

to these forces, the top layer of paint wears down to expose the intermediate layer, which in turn

eventually wears down to expose the bottom layer until the steel itself is exposed. As these

intermediate layers of paint become visible, GATX can gauge how much longer the paint will remain

on a particular tank and approximately when it will need to be repainted. GATX then arranges to

have certain tanks repainted, which requires that the tanks be taken out of service.

In the absence of Rule 3.357, one might assume that repainting the tanks meets the

common-sense definition of maintenance performed to prevent the tanks from rusting. Under that

rule, however, repainting is presumed to be a taxable activity unless the taxpayer affirmatively shows

that the repainting meets the specific requisites of maintenance as set out in the rule. 34 Tex. Admin.

Code § 3.357(b)(8). Rule 3.357 defines maintenance as follows:

For operational and functioning improvements to realty, maintenance means
scheduled, periodic work necessary to sustain or support safe, efficient, continuous
operations, or to prevent the decline, failure, lapse, or deterioration of the
improvement. Taxable real property services covered by § 3.356 of this title (relating
to Real Property Service) do not qualify as maintenance.

6
Id. § 3.357 (a)(4). The rule further defines “scheduled” and “periodic.” “Scheduled” work is that

which is “anticipated and designated to occur within a given time period or production level.” Id. §

3.357(a)(4)(A). “Periodic” activity for purposes of Rule 3.357 is “ongoing or continual or at least

occurring at intervals of time or production which are generally predictable.” Id. § 3.357(a)(4)(B).

The Comptroller’s previous decisions in this area have clarified both of these terms.5

These decisions have held that scheduled work is arranged in advance rather than on an as-needed

basis. See Tex. Comptroller of Pub. Accounts, Taxpayer Hearing on Disputed Audit, Docket No.

28,468 (Nov. 2, 1992) (Comptroller’s final decision amending audit). As-needed work does not

qualify as scheduled because it is not performed until someone directs that it be done. Id. Docket No.

30,911. The Comptroller’s administrative decisions have held that periodic service is that which is

performed in repeated cycles or at regular intervals; work that is prompted by a subjective judgment

is not periodic. Id. Docket No. 28,468. In other words, the condition that maintenance be periodic

requires the performance of some task at regular intervals, not when someone exercises a judgment

call. Id. Docket No. 30,911.

The trial court made the following findings of fact:

• The tank repainting in issue was neither “scheduled” nor “periodic.”

5
These decisions are available to the public. See Tex. Gov’t Code Ann. § 2001.004(3)
(West 2000) (“agency shall . . . index, cross-index to statute, and make available for public
inspection all final orders, decisions, and opinions”). The decisions are relevant to show the
Comptroller’s interpretation of its rules. See Southwest Airlines Co. v. Bullock, 784 S.W.2d 563,
567 (Tex. App.—Austin 1990, no writ) (relying in part on what is now section 2001.004(3) to
conclude that in an appropriate case the Comptroller’s decisions are admissible as official
interpretations of the agency’s own rules).

7
 • GATX failed to rebut the presumption that the tank repainting was a restoration
or remodeling activity.

• The tank repainting in issue is not real property maintenance.

As a taxpayer challenging the taxability of repainting services, GATX had the ultimate

burden to prove that the repainting occurs as part of periodic and scheduled maintenance. 34 Tex.

Admin. Code § 3.357(b)(8); Tex. Comptroller of Pub. Accounts, Taxpayer Hearing on Disputed

Audit, Docket No. 30,908 (July 28,1995) (final decision by the Comptroller amending, upholding,

audit). In reviewing the legal sufficiency of an adverse finding on which the party had the burden of

proof, we must first examine the record for evidence that supports the finding, ignoring any evidence

to the contrary. Sterner v. Marathon Oil Co., 767 S.W.2d 686, 690 (Tex. 1989); Holley v. Watts,

629 S.W.2d 694, 696 (Tex. 1982). We will uphold the finding if more than a scintilla of evidence

supports it. Burroughs Wellcome Co. v. Crye, 907 S.W.2d 497, 499 (Tex. 1995). More than a

scintilla exists where the evidence supporting the finding, as a whole, rises to a level that would

enable reasonable people to differ in their conclusions. Id. at 499. If we find that no evidence

supports the finding, then we must examine the entire record to determine if a contrary proposition

is established as a matter of law. Sterner, 767 S.W.2d at 690.

To prevail in a factual sufficiency challenge, a party who had the burden of proof at

trial must demonstrate that the adverse finding is against the great weight and preponderance of the

evidence. Croucher v. Croucher, 660 S.W.2d 55, 58 (Tex. 1983). In reviewing the finding, we must

first examine the record to determine whether there is some evidence to support the finding, and then

we determine, in light of the entire record, whether the finding is so contrary to the overwhelming

8
weight and preponderance of the evidence as to be clearly wrong and manifestly unjust. See Cain

v. Bain, 709 S.W.2d 175, 176 (Tex. 1986).

The Evidence at Trial

Based on the evidence GATX presented at trial, the trial court failed to find that the

tank repainting was scheduled or periodic. GATX challenges this failure to find and points to the

testimony of Alan Muyskens, who was the regional engineering manager for the GATX facility in

Houston, 6 to support its position that its tank repainting activities were both scheduled and periodic.

Mr. Muyskens testified that the average lifetime for a paint job on one of the tanks in the Gulf Coast

area is about ten years. Based on the average lifetime of a paint job, Mr. Muyskens concluded that

the GATX tanks would need to be repainted about every ten years. He estimated that the tanks,

which each have a useful life of up to sixty years, are painted multiple times during the period they

are in service. GATX argues that Mr. Muyskens’s testimony establishes that the tank repainting

services are periodic.

It also relies on Mr. Muyskens’s testimony to show that the painting is scheduled. The

witness testified that the repainting activity is a “formal budgeted scheduled maintenance program.”

The company schedules a certain number of tanks for painting at the beginning of each year. Once

the initial list of tanks is determined, GATX considers various factors to decide whether it is feasible

to take a certain tank out of service for repainting: (1) the contents of the tank, (2) who the leasing

customer of the tank is, and (3) how the customer is utilizing the particular tank. GATX argues that

6
Mr. Muyskens now holds this position with Kinder Morgan Terminals, which was formerly
GATX Terminals in Houston.

9
the repainting is “scheduled” because it is anticipated that it will occur approximately every ten years

and because some repainting is included on the tank farm’s maintenance schedule at the beginning

of each year.

The Comptroller counters that the evidence is legally and factually sufficient to

support the court’s failure to find the tank repainting was scheduled or periodic and to uphold the

affirmative finding that it was not. The Comptroller points out that the timing of repainting any

particular tank is contingent upon various factors other than the condition of the paint. At trial, Mr.

Muyskens testified that other factors, such as the customer’s contract, affect the company’s decision

when to repaint the tank. The Comptroller called as its witness the purchasing manager for GATX,

Frances Yvonne Moore, who agreed with Mr. Muyskens that several variables affect whether a tank

is repainted. She also testified that the decision to paint a tank lies with the terminal manager, the

terminal engineer, and the maintenance manager. Ms. Moore described the company’s tank

repainting as an on-going project, but one without a formal written policy or any documented

schedule.

In addition, the Comptroller takes issue with appellant’s characterization of Mr.

Muyskens’s testimony and notes that he contradicted GATX’s earlier assertions that the tanks are

repainted every ten years “whether they need it or not.” At trial, Mr. Muyskens acknowledged that

the tanks are actually repainted on an as-needed basis, depending on the various factors that the

company takes into account. The Comptroller relies on several of its previous decisions which hold

that repainting on an as-needed basis does not constitute scheduled work.

As additional evidence, the Comptroller notes that GATX classifies its maintenance

projects as either (1) base plant maintenance or (2) other maintenance projects. Base plant projects

10
include maintenance that is routine and that has consistent year-to-year expenses. One example

includes soil sterilization at the facilities. Maintenance projects, on the other hand, include services

that are performed regularly but not necessarily daily, monthly, or quarterly. Ms. Moore testified that

the expenses associated with these “special projects” are not consistent because of variables such as

the size and the number of tanks involved. Ms. Moore testified that tank repainting is classified in

the second category.

Based on our review of the record, the evidence supports the trial court’s failure to

find that the repainting activities at issue are scheduled and periodic. To overcome the presumption

that repainting is a taxable service, GATX was required to “substantiate by way of maintenance

schedules or work orders or other evidence that the services meet the definition” of maintenance on

real property. See 34 Tex. Admin. Code § 3.357(c)(2). Such evidence is necessary to show that the

work was not done on an as-needed or as-recommended basis. Tex. Comptroller of Pub. Accounts,

Taxpayer Hearing on Disputed Audit, Docket No. 30,908. GATX failed to make this showing;

indeed, the record is replete with evidence that indicates that the tanks are repainted only as needed.

The decision to repaint a tank is largely made at the discretion of GATX managers

and not by strictly objective standards. The tanks are not placed on arbitrary maintenance schedules.

Subjective factors, independent of the condition of the paint, play a significant role in determining the

frequency of repainting the tanks. Moreover, the work is not done periodically as that term has been

interpreted in real property services cases. GATX has no written document or formal policy outlining

the frequency of tank repainting. The only “period” GATX points to is the average duration of a

11
paint job in the Gulf Coast area; the average lifetime of a paint job, however, is not evidence that

GATX actually schedules and paints its tanks at ten-year intervals.7

Given this evidence, reasonable minds could reach differing conclusions as to whether

the tank repainting at the GATX facility constitutes periodic and scheduled maintenance under Rule

3.357. Having found that more than a scintilla of evidence supports the failure to find that the tank

repainting is maintenance, we find that GATX failed to rebut the presumption that repainting is repair

or remodeling. We therefore uphold as legally sufficient the finding that the manner in which GATX

repaints its tanks is a taxable activity. See Crye, 907 S.W.2d at 499. Furthermore, based upon our

review of the record in its entirety, the trial court’s finding is not so contrary to the overwhelming

weight and preponderance of the evidence as to be clearly wrong and manifestly unjust. See

Croucher, 660 S.W.2d at 58. As the trial court’s finding is both legally and factually sufficient, we

overrule appellant’s first issue.

II. Installation of Vapor Recovery Equipment

In its second issue, GATX contends that the construction done to comply with federal

environmental regulations constitutes non-taxable new construction, not taxable modification or

restoration. Mr. Muyskens testified that the purpose of a vapor recovery system is to collect vapors

that are emitted when the petroleum and petrochemical products are transported between the loading

vehicle and the tanks. According to his testimony, vapors are displaced as the tank fills with liquid.

The recovery system collects the vapors and conveys them to an incinerator or “flare” which burns

7
We note that there was testimony regarding an industry standard published by the American
Petroleum Institute that governs some types of maintenance. The testimony is conflicting and
unclear; as such it does not provide support for either party’s position and we do not rely on it.

12
the vapors to prevent their absorption into the atmosphere. Federal and state regulations that were

implemented in 1990 required GATX to modify its recovery of vapors. After GATX installed

equipment to meet the new mandates, the Comptroller assessed taxes on the cost of the services as

repair or remodeling.

At trial, the Comptroller argued that the work came within the definition of

“remodeling or modification,” which is a category of taxable services under Rule 3.357. See 34 Tex.

Admin. Code § 3.357(a)(8). The rule defines the category as follows:

Remodeling or modification—To make over; rebuild, replace, or upgrade existing
real property. However, the replacement of an item within an operating and
functioning unit in accordance with paragraph (4) of this subsection [“maintenance”]
is not taxable remodeling or modification. Finish out work performed after initial
finish out has been done is remodeling even though the improvement has not been
occupied. An example would be a shopping complex completely finished by the
developer prior to renting to tenants. A prospective tenant wants a different color
scheme before taking possession. The repainting by the developer is remodeling.

Id. (emphasis added). The Comptroller specifically argued that the new vapor recovery and metering

equipment fit the description of an upgrade or rebuild. GATX responded that the work instead was

new construction as defined by section (a)(5) of the rule. See id. § 3.357 (a)(5). That section reads

as follows:

New construction—All new improvements to real property including initial finish out
work to the interior or exterior of the improvement. An example would be a multiple
story building which has only had its first floor finished and occupied. The initial
finishing out of each additional floor prior to initial occupancy will be considered new
construction. New construction also includes the addition of new footage to an
existing structure.

Id.

13
 The issue trial was whether the work was a taxable upgrade or rebuild, as urged by

the Comptroller, or new construction as urged by GATX. The Comptroller had the initial burden to

prove that the services constituted an upgrade or rebuild. When GATX raised the new construction

exception, the Comptroller was also compelled to prove that the services did not meet the conditions

of new construction under the rule. In this situation, Rule 3.357 does not create a presumption in

favor of classifying the services as repair or remodeling; therefore, the burden of proof remained with

the Comptroller. See id. § 3.357.

After hearing the evidence, the trial court made the following findings of fact:

• GATX’s conversion from an “open” loading system to a “closed” loading system
and the related electrical and metering work made over, rebuilt, replaced and
upgraded existing real property improvements.

• GATX’s conversion from an “open” loading system to a “closed” loading system
and the related electrical and metering work was not new construction. 8

The trial court determined that the Comptroller had met its burden on both issues and concluded that

the conversion from an “open” to a “closed” loading system was a repair and remodeling activity,

subject to taxation. GATX challenges the evidentiary support in the record for the underlying

findings of fact to support this conclusion.

A challenge to the legal sufficiency of an adverse finding on an issue on which the

appellant did not have the initial burden of proof at trial requires a party to demonstrate that there is

8
Rule 3.357 separately defines taxable repairs. See 34 Tex. Admin. Code § 3.357(a)(9)
(2001). We note that the trial court made findings of fact that the converted system and metering
device were repairs as defined by the rule. We do not address these findings of fact, however, as the
parties have directed their arguments on appeal to the court’s finding that the services were an
upgrade as defined by the rule.

14
no evidence to support the adverse finding. Croucher, 660 S.W.2d at 58 (Tex. 1983). In reviewing

a no-evidence point, we consider all the evidence in the light most favorable to the prevailing party,

indulging every reasonable inference in that party’s favor. Associated Indem. Corp. v. CAT

Contracting, Inc., 964 S.W.2d 276, 285-86 (Tex. 1998). If there is more than a scintilla of evidence

to support the finding then the no-evidence challenge fails. See Price Pfister, Inc. v. Moore &

Kimmey, Inc., 48 S.W.3d 341, 347 (Tex. App.—Houston [14th Dist.] 2001, pet. denied). In a

challenge to the factual sufficiency of an adverse finding on an issue on which the appellant did not

have the burden of proof at trial, we weigh and consider all of the evidence that supports the finding

and that which is contrary to it. Plas-Tex, Inc. v. U.S. Steel Corp., 772 S.W.2d 442, 445 (Tex.

1989). We will set aside the finding only if it is so contrary to the overwhelming weight of the

evidence as to be clearly wrong and unjust. Cain, 709 S.W.2d at 176.

The Evidence at Trial

At trial, GATX introduced photographs of the tank farm to show the appearance of

the area before and after installation of the additional equipment. GATX presented as its only witness

Mr. Muyskens, who was the initial project manager for the installation of the new metering and vapor

recovery equipment. He testified regarding the construction project, its purpose, and its effect on

other facets of the tank farm.

Mr. Muyskens described the vapor collection system at the facility prior to 1992 as

an incinerator with a “vapor header” that went to three truck racks to which vapor hoses were

connected. To comply with governmental regulations, GATX replaced the old undersized incinerator

and constructed a new flare. GATX also put new hoses on each truck rack. As a result of the new

15
hoses and other changes, the delivery of the liquid from the loading vessel to the tanks was

accomplished by a completely sealed process to prevent the escape of vapors.

According to Mr. Muyskens, the new closed collection system required GATX to

change the way it measured products loaded into the tanks. Prior to 1992, a man would stand on top

of the loading vessel and put a graduated stick into the tank opening. Mr. Muyskens explained that

as the liquid was filling up the tank, the man would look at the stick to gauge how much liquid was

in the container and when to stop the loading process. After sealing the opening on top of the tank,

GATX had to install a metering device to gauge the amount of liquid entering the tank; this device

was connected to a flow computer. To emphasize the scale of the installation, Mr. Muyskens testified

that where there had been only “dirt” before, a concrete slab now stood on which the flare and new

piping were installed. He also testified that “there was more square footage of flare . . . of piping .

. . of equipment . . . [and] of blowers” and that “cubic footage” was added.

The Comptroller insisted that the new recovery system and metering device

constituted an “upgrade [to] existing real property.” See 34 Tex. Admin. Code § 3.357(a)(8).

During cross-examination, Mr. Muyskens acknowledged that the reason GATX installed the new

vapor recovery system was to comply with governmental regulations. This fact, in the Comptroller’s

view, supported the finding that the work was a rebuild or upgrade legally required for GATX to

continue operations; it did not enhance the storage capacity of the tank farm or otherwise improve

the facility’s business. On cross-examination, Mr. Muyskens acknowledged that while the product

is loaded differently, no new loading spots were added, and the same amount of product is loaded as

before. The Comptroller emphasized that while GATX had modified the way in which it delivers its

16
product into the tanks to more efficiently collect vapors, because the same amount of product was

loaded, the work could only be classified as an upgrade.

In a previous decision of the Comptroller cited by GATX, the replacement of old

equipment with new was held not to constitute new construction, but was classified as an upgrade

or remodeling. See Tex. Comptroller of Pub. Accounts, Taxpayer Hearing on Disputed Audit,

Docket No. 29,296 (Feb. 8, 1994) (Comptroller’s final decision amending audit). Similarly, a

decision cited by the Comptroller held that an electric utility company’s construction of a new

transmission line incorporating some new equipment with pre-existing equipment was remodeling.

See id. Docket No. 27,509 (Jan. 20, 1993) (Comptroller’s final decision upholding audit as amended).

That decision concluded that because the end result was a rebuilt structure that continued to function

as an electric power line, albeit at increased capacity, the work was taxable remodeling. See id.

Previously, the Comptroller has ruled that the installation of a more efficient vapor

recovery system at a gas station was an upgrade or modification to real property rather than new

construction. See id. Docket No. 36,044 (July 29, 1998) (Comptroller’s final decision upholding

deficiency as indicated in audit). An accompanying finding of fact to that administrative decision

noted that while the new system increased the amount of collected vapors, it did not improve the

principal business of the gas station, i.e., the dispensing of fuel from the pump to customers’ cars.

See id. The decision concluded that the installation should be viewed as a modification and upgrade

because it modified the manner in which the fuel was dispensed but did not otherwise change the

station’s business. Id.9

9
GATX points out that the Comptroller’s decision in Tex. Comptroller of Pub. Accounts,
Taxpayer Hearing on Disputed Audit, Docket No. 36,044 (July 29, 1998) (Comptroller’s final

17
 Based on the record, previous decisions, and the unchallenged definitions contained

in Rule 3.357, we find that the evidence is both legally and factually sufficient to support the trial

court’s finding that the work at issue was an upgrade or rebuild and not new construction. The

Comptroller presented more than a scintilla of evidence to support the finding. See Moore &

Kimmey, Inc., 48 S.W.3d at 347. Moreover, the finding is not so contrary to the overwhelming

weight of the evidence as to be clearly wrong and unjust. See Cain, 709 S.W.2d at 176.

As the Comptroller initially proved the taxability of the service, the burden shifted to

GATX to prove that the installation fell within the exception. The court found that the work did not

constitute new construction under Rule 3.357. GATX challenges the sufficiency of the evidence to

support this finding. GATX argues that the extensive nature of the work done to comply with the

environmental standards demonstrates that this was more than an upgrade, contrary to the trial

court’s finding. It also contends that the additional equipment now in place constitutes additional

square footage as envisioned by the definition of new construction. That definition, however, speaks

in terms of the addition of “new footage to an existing structure.” See 34 Tex. Admin. Code

§ 3.357(a)(5) (emphasis added). This phrase contemplates adding a new room to an existing building,

not the addition of new equipment. See Tex. Comptroller of Pub. Accounts, Taxpayer Hearing on

Disputed Audit, Docket No. 31,904.

decision upholding deficiency as indicated in audit) was reversed on appeal to the district court and
urges this Court to view the district court’s decision as authority. We acknowledge that the
Comptroller’s decision in Docket No. 36,044 was overturned on appeal; the case remains helpful for
our purposes merely as a reflection of the Comptroller’s previous interpretation of its rule. We are
not bound by a decision of a district court but only by courts of superior jurisdiction. See 16 Tex.
Jur. 3d Courts § 141 (1997).

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 GATX cites Docket No. 31,904 for the proposition that the installation of a stamping

press at a facility was new construction because it added new footage to an existing structure. The

decision does not support this view. The facts of that case established that to house new equipment,

the taxpayer created a sixteen by sixteen foot concrete room, approximately ten feet below the

ground floor of an existing building. The decision states that “[t]his new room constituted ‘the

addition of new footage to an existing structure.’” Id. (emphasis added). It was the new room, not

the installation of new equipment, that constituted additional footage and hence met the definition of

new construction. The additional footage of equipment and of the concrete slab on which it was

mounted at the tank farm is distinguishable; it did not create additional space as did the underground

room.

Another decision on which GATX relies is likewise distinguishable. See id. Docket

No. 29, 296. There, an underground pit was dug so that a scale could be installed at the taxpayer’s

lime-mining site where no scale had previously existed. Id. The decision stated that

the initial underground installation of the scale, here, constitutes “the addition of new
footage to an existing structure.” That is to say, just as the attic built onto the top of
the flat-roofed structure created additional footage in Hearing #27,223, so also does
this underground installation create new footage for the Petitioner’s lime mining
site—exactly as a new basement would do for a commercial building.

Id. Again, the facts of the decision can be distinguished: the pit, like the underground room, new

basement, or new attic, constituted additional space to hold the scale. The Comptroller’s decisions

make clear that additional footage to an existing structure contemplates something more than the

replacement or addition of equipment.

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 An appellant attacking the legal sufficiency of an adverse finding on an issue on which

it had the burden of proof at trial must demonstrate on appeal that the evidence conclusively

established all vital facts in support of the issue. Sterner, 767 S.W.2d at 690; Holley, 629 S.W.2d

at 696. GATX has not met its burden to show that the evidence conclusively established all vital facts

in support of its contention that installation of the new vapor recovery system was new construction

under Rule 3.357(8). See Sterner, 767 S.W.2d at 690. Therefore, we conclude that the trial court’s

failure to find that the installation constituted new construction is both legally and factually sufficient

and appellant has failed to prove that the evidence is insufficient to support the court’s affirmative

finding to the contrary. Accordingly, we overrule appellant’s second issue.

CONCLUSION

Because the evidence is legally and factually sufficient to uphold the trial court’s denial

of the disputed claims for a refund of sales tax, we affirm the judgment.

Bea Ann Smith, Justice

Before Chief Justice Aboussie, Justices B. A. Smith and Yeakel

Affirmed

Filed: April 18, 2002

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