NuStar Energy, L.P v. Glenn Hegar, Comptroller of Public Accounts of the State of Texas And Ken Paxton, Attorney General of the State of Texas

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

NO. 03-21-00669-CV

NuStar Energy, L.P, Appellant

v.

Glenn Hegar, Comptroller of Public Accounts of the State of Texas; and Ken Paxton,
Attorney General of the State of Texas, Appellees

FROM THE 98TH DISTRICT COURT OF TRAVIS COUNTY
NO. D-1-GN-19-000793, THE HONORABLE MARIA CANTÚ HEXSEL, JUDGE PRESIDING

OPINION

This permissive appeal involves the construction of Section 171.103(a) of the Tax

Code, which governs the apportionment of gross receipts for calculating a business’s franchise

tax obligation. See Tex. Tax Code § 171.103 (“Determination of Gross Receipts from Business

Done in This State for Margin”). Appellant NuStar Energy, L.P., filed a taxpayer refund suit

against appellees Glenn Hegar, Comptroller of Public Accounts of the State of Texas, and Ken

Paxton, Attorney General of the State of Texas (collectively, the “Comptroller”), seeking to

recover certain franchise tax payments made under protest. The parties filed competing motions

for partial summary judgment addressing the narrow issue of whether the Comptroller had

adopted a facially invalid rule that was contrary to Section 171.103(a). See 34 Tex. Admin.

Code § 3.591(e)(29)(A), (C), (H), (31) (Comptroller of Public Accounts, Margin:

Apportionment) (amended 2021) (current version at 34 Tex. Admin Code § 3.591(e)(29)(A), (C),

(H), (e)(32)) (the “Comptroller Rule”). The district court granted the Comptroller’s motion and
denied NuStar’s motion, concluding that the Comptroller Rule was facially valid. For the

following reasons, we affirm the trial court’s summary judgment order.

BACKGROUND

Texas levies a franchise tax on all businesses chartered, organized, or conducting

business within Texas. See Tex. Tax Code § 171.001(a). The franchise tax is levied on those

businesses “for the privilege of doing business in this State,” with the goal that the amount of tax

levied “should approximate the value of this privilege.” General Dynamics Corp. v. Sharp,

919 S.W.2d 861, 863 (Tex. App.—Austin 1996, writ denied). Because a business may operate

across multiple states, countries, or jurisdictions, Texas applies the franchise tax on the

business’s “taxable margin,” multiplied by the applicable tax rate. See Tex. Tax Code § 171.002

(“Rates; Computation of Tax”); see also Hegar v. Sirius XM Radio, Inc., 660 S.W.3d 277, 280

(Tex. App.—Austin 2022, no pet.). The business’s “taxable margin” is calculated using a

three-step process: (1) the business’s margin is calculated based on a statutorily directed

percentage of its total revenue; (2) the margin is then apportioned to its business done in Texas;

and (3) allowable deductions are subtracted from the apportioned margin to derive the business’s

“taxable margin.” See Tex. Tax Code §§ 171.101 (“Determination of Taxable Margin”),

171.106 (“Apportionment of Margin to this State”); see also Sirius XM, 660 S.W.3d at 280.

The parties’ dispute centers on the second step, apportioning of NuStar’s taxable

margin for the tax years 2011 through 2013. 1 Apportionment is accomplished by “multiplying a

1
As alleged in NuStar’s petition, NuStar challenges the apportionment of its gross
receipts from the sale of certain types of fuel transported to oceangoing foreign vessels. NuStar
alleges that although the vessels received the fuel at a Texas port, the fuel could not be used,
sold, or otherwise disposed of within Texas. That is, the vessels received the NuStar bunker
2
business’s total margin by an apportionment factor.” See Hallmark Mktg. Co. v. Hegar,

488 S.W.3d 795, 796 (Tex. 2016). That is, the business’s total margin is multiplied by the

percentage of the business’s gross receipts from its business done only in Texas divided by its

total gross receipts from its business everywhere (including Texas). See Tex. Tax Code §

171.106(a); Hallmark Marketing, 488 S.W.3d at 796 (explaining that numerator of

apportionment factor “consists of receipts from business done in Texas and the denominator

consists of receipts from all business”). The more business done in Texas, the higher the

apportionment factor, and the higher the Texas franchise taxes. See Sirius XM, 660 S.W.3d at

280. Thus, determining a business’s gross receipts from its business done in Texas is critical to

apportioning the business’s taxable margin.

Section 171.103 of the Texas Tax Code governs which of a business’s gross

receipts should be apportioned as business done in Texas. See Tex. Tax Code § 171.106(a)

(calculating “the taxable entity’s gross receipts from business done in this state, as determined

under Section 171.103”); see also id. § 171.103 (“Determination of Gross Receipts from

Business Done in This State for Margin”). Relevant here, Section 171.103(a)(1) provides that

the following gross receipts are counted as business done within Texas:

(a) Subject to Section 171.1055, in apportioning margin, the gross receipts of a
taxable entity from its business done in this state is the sum of the taxable entity’s
receipts from:

(1) each sale of tangible personal property if the property is delivered or
shipped to a buyer in this state regardless of the FOB point or another
condition of the sale;

fuels at a Texas port, and the fuel was then transported outside of Texas waters before it was
used for oceangoing travel.
3
Id. § 171.103(a)(1) (emphasis added). The Comptroller has adopted rules governing the

computation and sourcing of a business’s gross receipts in a variety of commercial contexts. See

34 Tex. Admin. Code § 3.591 (Comptroller of Public Accounts, Margin: Apportionment).

NuStar challenges several provisions of Rule 3.591 that apply to the sales of tangible personal

property at issue in the underlying dispute:

(29) Tangible personal property. Examples of transactions that involve the sale of
tangible personal property and result in Texas receipts include, but are not limited
to, the following:

(A) the sale of tangible personal property that is delivered in Texas to a
purchaser. Delivery is complete upon transfer of possession or control of
the property to the purchaser, an employee of the purchaser, or
transportation vehicles that the purchaser leases or owns. FOB point,
location of title passage, and other conditions of the sale are not relevant to
the determination of Texas gross receipts;

...

(C) the sale and delivery in Texas of tangible personal property that is
loaded into a barge, truck, airplane, vessel, tanker, or any other means of
conveyance that the purchaser of the property leases and controls or owns.
The sale of tangible personal property that is delivered in Texas to an
independent contract carrier, common carrier, or freight forwarder that a
purchaser of the property hires results only in gross receipts everywhere if
the carrier transports or forwards the property to the purchaser outside this
state;

...

(H) the drop shipment of tangible personal property in Texas. A drop
shipment is a shipment of tangible personal property from a seller directly
to a purchaser’s customer, at the request of the purchaser, without passing
through the hands of the purchaser. This results in Texas gross receipts for
the seller and the purchaser.

4
 ...

(31) Texas waters. Revenues from transactions that occur in Texas waters are
Texas receipts. Texas waters are considered to extend to 10.359 statute miles, or
nine nautical miles, from the Texas coastline.

34 Tex. Admin. Code § 3.591(e)(29)(A), (C), (H), (31). 2

After paying the disputed franchise taxes relating to those sales, NuStar filed the

present tax refund suit against the Comptroller, seeking among other things a declaratory

judgment that the disputed subsections of the Comptroller Rule are facially invalid under the

Administrative Procedure Act (APA). See Tex. Gov’t Code § 2001.038(a) (providing for

declaratory judgment to challenge rule validity). The parties filed cross motions for partial

summary judgment on the narrow issue of the rule’s facial validity. On November 5, 2021, the

trial court entered a partial summary judgment order, granting the Comptroller’s cross motion for

partial summary judgment, denying NuStar’s motion, and concluding that the Comptroller Rule

is facially valid.

NuStar filed an unopposed motion to amend the partial summary judgment order,

and the district court thereafter amended its order to grant permission for a permissive

interlocutory appeal to address whether the Comptroller’s Rule is a valid construction of Section

171.103(a)(1) of the Texas Tax Code. This Court then granted NuStar’s petition for permissive

appeal. See NuStar Energy, L.P. v. Hegar, No. 03-21-00669-CV, 2022 WL 1158634, at *1 (Tex.

App.—Austin Apr. 20, 2022, order); see also Tex. Civ. Prac. & Rem. Code § 51.014(d), (f); Tex.

2
Rule 3.591 has been amended twice since the underlying litigation began, but neither of
those amendments made any substantive changes to the portions of the Comptroller Rule at issue
in this appeal.

5
R. App. P. 28.3; Elephant Ins. Co. v. Kenyon, 644 S.W.3d 137, 146–47 (Tex. 2022) (explaining

that “permissive appeals are resolved according to the same principles as any other appeal”).

STANDARD OF REVIEW

When both parties move for partial summary judgment on the same issue and the

trial court grants one motion and denies the other, we conduct a de novo review, considering the

evidence presented, determining all questions presented, and if we determine that the trial court

erred, rendering the ruling the trial court should have rendered. Valence Operating Co.

v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005).

The sole issue on appeal is a rule validity challenge, which tests an agency rule

adopted under the APA “on procedural and constitutional grounds.” CenterPoint Energy Houst.

Elec., LLC v. Public Util. Comm’n, 354 S.W.3d 899, 902 (Tex. App.—Austin 2011, no pet.).

We presume the rule is valid and constitutional, and therefore the challenging party bears the

burden of overcoming that presumption. Texas State Bd. of Exam’rs of Marriage & Fam.

Therapists v. Texas Med. Ass’n, 511 S.W.3d 28, 33 (Tex. 2017). When, as here, the challenging

party contends that the rule is facially invalid, we determine “whether the rule is contrary to the

relevant statute.” DuPont Photomasks, Inc. v. Strayhorn, 219 S.W.3d 414, 420 (Tex. App.—

Austin 2006, pet. denied). That is, the challenging party must show that the rule either

(1) contravenes specific statutory language; (2) runs counter to the general objectives of the

statute; or (3) imposes additional burdens, conditions, or restrictions in excess of or inconsistent

with the relevant statutory provisions. Office of Pub. Util. Counsel v. Public Util. Comm’n,

131 S.W.3d 314, 321 (Tex. App.—Austin 2004, pet. denied); see also Exam’rs of Marriage &

Fam. Therapists, 511 S.W.3d at 33.

6
 Whether the challenged subsections of the Comptroller Rule are facially invalid

turns on the construction of that rule and Section 171.103(a)(1), matters of law that we review de

novo. Bridges v. Texas State Bd. of Veterinary Med. Exam’rs, No. 03-18-00010-CV,

2019 WL 639151, at *2 (Tex. App.—Austin Feb. 15, 2019, no pet.) (mem. op.) (citing Texas

Mun. Power Agency v. Public Util. Comm’n, 253 S.W.3d 184, 192 (Tex. 2007) and Rodriguez

v. Service Lloyds Ins., 997 S.W.2d 248, 254 (Tex. 1999)). “Our primary concern in construing a

statute is the express statutory language.” Hegar v. Autohaus LP, 514 S.W.3d 897, 902 (Tex.

App.—Austin 2017, pet. denied). We therefore read the statute as a whole, interpret it to give

effect to every part, and construe the text according to its plain and common meaning “unless a

contrary intention is apparent from the context or unless such a construction leads to absurd

results.” Id. (quoting Presidio Indep. Sch. Dist. v. Scott, 309 S.W.3d 927, 930 (Tex. 2010)). If

the statute is unambiguous, we adopt the construction supported by its plain language. See

TGS-NOPEC Geophysical Co. v. Combs, 340 S.W.3d 432, 439 (Tex. 2011) (describing statutory

construction); Similarly, we “construe administrative rules, which have the same force as

statutes, in the same manner as statutes.” Rodriguez, 997 S.W.2d at 254. That is, agency

deference “has no place” if the statute is unambiguous. Texas Dep’t of Fam. & Protective Servs.

v. Grassroots Leadership, Inc., 665 S.W.3d 135, 144 (Tex. App.—Austin 2023, pet. filed)

(quoting TracFone Wireless, Inc. v. Commission on State Emergency Commc’ns, 397 S.W.3d 173,

182 (Tex. 2013)). If the statute is ambiguous, we generally then defer to the agency’s

construction, giving “serious consideration” to the agency’s construction of the statute and

upholding that construction if it is reasonable. CenterPoint Energy, 354 S.W.3d at 903 (quoting

Railroad Comm’n v. Texas Citizens for a Safe Future & Clean Water, 336 S.W.3d 619, 624

(Tex.2011)). But when interpreting an ambiguous tax statute, however, we apply a presumption

7
in favor of a taxpayer. See Hegar v. Health Care Serv. Corp., 652 S.W.3d 39, 43 (Tex. 2022);

see also Morris v. Houston Indep. Sch. Dist., 388 S.W.3d 310, 313 (Tex. 2012) (“Taxing statutes

are construed strictly against the taxing authority and liberally for the taxpayer.”).

DISCUSSION

NuStar’s sole issue on appeal contends that the subsections of the Comptroller’s

Rule are facially invalid because they are contrary to Section 171.103(a) of the Tax Code.

NuStar contends that Section 171.103(a) applies the franchise tax on the sale of personal

property only where the buyer is located in Texas (sometimes called a “place of market,”

“location of buyer,” or “ultimate destination” approach), but the challenged portions of the

Comptroller Rule apply the franchise tax on transactions where the seller ships or delivers the

property to the buyer in Texas, regardless of whether the buyer is located in state or out of state

(sometimes called a “place of transfer” or “location of delivery” approach).3 The Comptroller, in

contrast, argues that Section 171.103(a) sources receipts using a “place of transfer” approach,

and therefore the Comptroller Rule is consistent with that statute.

In construing statutes, we begin with the plain language of the statute itself. See

Exxon Corp. v. Emerald Oil & Gas Co., 331 S.W.3d 419, 422 (Tex. 2010). Under Section

171.103(a)(1), the portion of the taxable entity’s gross receipts attributable to “its business done

in this state” includes the following:

3
NuStar implies that the Texas Supreme Court’s opinion in Lockheed Martin Corp.
v. Hegar, 601 S.W.3d 769 (Tex. 2020), demonstrates that the “place of market” should control
our construction of Section 171.103(a). However, the Supreme Court expressly declined to
address the statutory construction issue because the stipulated facts in Lockheed Martin
prevented apportionment of the sales to Texas “under either party’s interpretation of the
apportionment statute.” 601 S.W.3d at 779.
8
 (1) each sale of tangible personal property if the property is delivered or shipped
to a buyer in this state regardless of the FOB point or another condition of the
sale;

Tex. Tax Code § 171.103(a)(1) (emphasis added).

This statute is not ambiguous. Although the parties dispute how to interpret the

phrase “the property is delivered or shipped to a buyer in this state,” a statute is not necessarily

ambiguous because that phrase in isolation may be amenable to multiple constructions. See

Health Care Serv., 652 S.W.3d at 43 (“Words that in isolation are amenable to two textually

permissible interpretations are often not ambiguous in context.”). Instead, a statutory text is

ambiguous only “if the words yield more than one reasonable interpretation” or “multiple

understandings” within the broader context of the statute. Southwest Royalties, Inc. v. Hegar,

500 S.W.3d 400, 405–06 (Tex. 2016); see also Gabriel Inv. Grp. v. Texas Alcoholic Beverage

Comm’n, 646 S.W.3d 790, 797 (Tex. 2022). In context, Section 171.103(a)(1) yields a single

reasonable construction: that sales of tangible personal property are apportioned based on where

that property is delivered or shipped. See Southwest Royalties, 500 S.W.3d at 406 (concluding

statutory language is not ambiguous “[b]ecause, in context, the statutory language is not subject

to multiple understandings”). That is, under the plain and common meaning of this statutory

language, whether a receipt counts as business done in Texas turns on where the buyer received

the property, not where the buyer is ultimately located when they plan to use, sell, or otherwise

dispose of the property.4 See Autohaus, 514 S.W.3d at 902.

4
The Comptroller argues that this Court has already held that Texas is a place-of-
delivery state by “rejecting” the place-of-market approach in Bullock v. Enserch Exploration,
Inc., 614 S.W.2d 215, 217 (Tex. App.—Austin 1981, writ ref’d n.r.e.). Although this Court
expressed agreement that the sale of natural gas was completed within Texas “in spite of the
fact” that the natural gas was subsequently delivered to third parties outside of Texas, we also
9
 NuStar, relying on the “last antecedent” canon of statutory construction, contends

that the phrase “in this state” only and exclusively modifies “buyer,” and therefore

Section 171.103(a)(1) should only apply to in-state buyers. See Spradlin v. Jim Walter Homes,

Inc., 34 S.W.3d 578, 580 (Tex. 2000) (“That canon of construction states that a qualifying phrase

in a statute or the Constitution must be confined to the words and phrases immediately preceding

it to which it may, without impairing the meaning of the sentence, be applied.”). However, we

do not apply canons of construction when a statute is unambiguous and cannot use such canons

to create ambiguity. See Texas Health Presbyterian Hosp. of Denton v. D.A., 569 S.W.3d 126,

133 n.8 (Tex. 2018) (rejecting reliance on last-antecedent canon “because the statutory language

is unambiguous” and extrinsic aids cannot create ambiguity).5

Even assuming we could apply the last-antecedent canon to an unambiguous

statute, that canon is inapposite here because it renders portions of the statute meaningless. If “in

this state” modifies only the word “buyer” (thereby making only the location of the buyer

relevant for apportioning under the franchise tax), then the phrase “if the property is delivered or

shipped” becomes superfluous. See Columbia Med. Ctr. of Las Colinas, Inc. v. Hogue,

271 S.W.3d 238, 256 (Tex. 2008) (“The Court must not interpret the statute in a manner that

clarified in that same opinion that the stipulated facts in that case made it “self-evident” that the
taxpayers “are not sellers of natural gas to out-of-state buyers.” Id.; see also Lockheed Martin,
601 S.W.3d at 776 (describing Enserch as holding that “a sale of goods to a Texas purchaser is
not transformed into a sale to an out-of-state buyer merely because the Texas purchaser resells
the goods to that out-of-state buyer”).
5
NuStar also contends that considering the last-antecedent canon is “necessary” to
determine whether the statute is unambiguous, but it has failed to cite any example of any court
applying the canon in that context. See, e.g., City of Rockwall v. Hughes, 246 S.W.3d 621, 626
(Tex. 2008) (“When a statute’s language is clear and unambiguous, it is inappropriate to resort to
rules of construction or extrinsic aids to construe the language.”).
10
renders any part of the statute meaningless or superfluous.”); see also PlainsCapital Bank

v. Martin, 459 S.W.3d 550, 556 (Tex. 2015) (“Similarly, we presume the words in a statute are

selected with care and we interpret them in a manner that gives meaning to all of them without

disregarding some as surplusage.”). We must presume “the legislature chose a statute’s language

with care,” Hallmark Marketing, 488 S.W.3d at 798, and that the phrase “if the property is

delivered or shipped” was “chosen for a purpose,” id. Relying on the last-antecedent canon in

the way advanced by NuStar would work to create an ambiguity in the statute, not resolve one.

See In re Zook, No. 03-21-00180-CV, 2021 WL 2964264, at *2 (Tex. App.—Austin July 15,

2021, orig. proceeding) (mem. op.) (“That is, construction canons may be relied on to help

interpret ambiguous language but cannot be used to create ambiguity.”) (citing Texas Health

Presbyterian, 569 S.W.3d at 133 n.8); see also Exam’rs of Marriage & Fam. Therapists,

511 S.W.3d at 41.

NuStar also contends that the apportionment statute is derived from model

language in the Uniform Division of Income for Tax Purposes Act (UDITPA) and the 1967

Multistate Tax Compact, and therefore, we should follow the approach of other states who have

interpreted that statute. NuStar is correct that the apportionment statute is based on similar

language in the Multistate Tax Compact. See Tex. Tax Code § 141.001 (Adoption of Multistate

Tax Compact); see also U.S. Steel Corp. v. Multistate Tax Comm’n, 434 U.S. 452, 457 & n.6

(1978) (noting that UDITPA is “contained” in article IV of Multistate Tax Compact and “allows

multistate taxpayers to apportion and allocate their income under formulae and rules set forth in

the Compact or by any other method available under state law”). The Multistate Tax Compact

also established the Multistate Tax Commission (MTC) and authorized the MTC to adopt

advisory uniform administrative regulations. See U.S. Steel Corp., 434 U.S. at 456–57; see also

11
Tex. Tax Code § 141.001, art.VI (establishing MTC), art. VII (empowering MTC to adopt

uniform regulations “for any phase of the administration of” certain uniform tax laws). The

MTC has adopted model regulations construing UDITPA to “attribute[] sales to the state in

which they are ‘delivered . . . to a purchaser,’ whether or not that is the ultimate destination of

the goods.” Jerome R. Hellerstein et al., 1 State Taxation: Constitutional Limitations and

Corporate Income and Franchise Taxes ¶ 9.18[1][a], at 9-252 (3d ed. 2011); see also Model

Gen. Allocation & Apportionment Regulations Reg.14.16(a)(4) (Multistate Tax Comm’n 2018)

(defining “purchaser within this state” to include “the ultimate recipient of the property if the

taxpayer in this state, at the designation of the purchaser, delivers to or has the property shipped

to the ultimate recipient within this state”). Other states have implemented statutory schemes

consistent with this “place of delivery” approach. See, e.g., Colo. Rev. Stat. § 39-22-303.5(b)(I)

(apportioning sales of tangible personal property to Colorado if “property is delivered or shipped

to a purchaser in Colorado regardless of the f.o.b. point or other conditions of the sale”); 1 Colo.

Code Regs. § 201-2:39-22-303.6-6 (explaining administrative rules “are intended to conform to

the Multistate Tax Commission’s model statute and regulation except when those model

provisions are inconsistent with Colorado statute”); N.M. Stat. § 7-5-1 (adopting Multistate Tax

Compact); N.M. Admin. Code 3.5.17.8 (adopting administrative rules consistent with MTC

model regulations); see also Tex. Gov’t Code § 311.028 (“A uniform act included in a code shall

be construed to effect its general purpose to make uniform the law of those states that enact it.”

(emphases added)).

NuStar points to out-of-state court decisions, such as Powerex Corporation

v. Department of Revenue, 346 P.3d 476 (Or. 2015) (en banc), and Department of Revenue

v. Parker Banana Co., 391 So.2d 762 (Fla. Dist. Ct. App. 1980), and contends that the

12
“overwhelming majority” construe similar apportionment language as considering the ultimate

destination of the tangible goods. See Hellerstein, 1 State Taxation ¶ 9.18[1][a], at 9-256 (stating

that “overwhelming majority” of courts have construed UDITPA as “embodying an ultimate-

destination rule”). Although we give “additional weight” to decisions in other states when

interpreting uniform laws generally, Graphic Packaging Corp. v. Hegar, 538 S.W.3d 89, 106

(Tex. 2017), the differing approaches of the states indicate that there is not an “uniform”

implementation of the Multistate Tax Compact apportionment provision. See Olympia Brewing

Co. v. Commissioner of Revenue, 326 N.W.2d 642, 646 (Minn. 1982) (“At best, the authorities

cited by the parties indicate that there is not a[n] unanimity of opinion as to the meaning of the

phrase ‘within this state’ in section 16 of UDITPA.”). This is because those out-of-state

decisions may not address the particular issue before us 6 or because subsequent legislative action

complicates our understanding of those decisions. 7 This is also because each state, including

6
NuStar contends that the Oregon Supreme Court in Powerex applied the “ultimate
destination” test in ruling that certain natural gas sales to out-of-state purchasers were not sales
in Oregon. Powerex Corp. v. Department of Revenue, 346 P.3d 476, 486 (2015) (en banc)
(holding natural gas sales were not in Oregon). Although the Powerex court undertook an
analysis of the apportionment issue and suggested that the ultimate destination test was the best
reading, id. at 483, the Powerex court ultimately explained that there is no universal agreement
on that interpretation and expressly declined to decide the issue, explaining that the lower tax
court’s “opinion obviates the need to do so.” Id. at 483–84.
7
The Florida court in Parker Banana held that the phrase “within this state” must
modify only “purchaser,” rejecting the State’s “tortured construction” that the phrase actually
only modified “delivered” but not “shipped.” Department of Revenue v. Parker Banana Co.,
391 So. 2d 762, 763 (Fla. Dist. Ct. App. 1980). The Parker Banana court’s analysis focuses
heavily on the implications of the use of “within” in the statute, which has an overlapping but
distinct meaning from “in.” Compare Within, Webster’s Third New Int’l Dictionary (2002)
(defining prepositional form as “used as a function word to indicate enclosure or containment,”
as in “in the limits or compass of; not beyond”), with In, id. (defining prepositional form as “used
as a function word to indicate location or position in space or in some materially bounded
object”). Moreover, the Florida legislature thereafter amended its statute to explicitly reject
consideration of the ultimate destination of the property. See Fla. Stat. § 220.15(5)(b)(1) (“Sales
13
Texas, has amended or modified the model language of the Multistate Tax Compact to fit within

its own regulatory tax schemes and therefore is not enacting (or interpreting) identical statutory

language, let alone uniform statutory tax schemes. See Nathan v. Whittington, 408 S.W.3d 870,

873 (Tex. 2013) (per curiam) (seeking to construe uniform laws “as consistent as possible with

the constructions of other states that have enacted . . . a similar provision” (emphasis added)).

As the Texas Supreme Court has cautioned, the provisions in the Multistate Tax

Compact, including the UDITPA apportionment provision, are not intended to be “immutable,

binding contractual terms,” Graphic Packaging, 538 S.W.3d at 106, and the State of Texas

reserves its sovereign tax power to “administer[] its tax laws, including tax-base apportionment,

without reference to or consideration of the other states’ laws,” id. at 102. Thus, even if the

apportionment statute could be interpreted as being contrary to the approach of some states under

the Multistate Tax Compact, “[n]othing in the Compact expressly prohibits the states from

adopting an exclusive apportionment method that overrides the Compact’s formula” nor

expressly prevents Texas “from limiting, amending, or altogether deleting” the UDITPA

provisions within the Multistate Tax Compact. See id. at 104–05.

Ultimately, “[w]e presume the legislature chose a statute’s language with care,

including each word chosen for a purpose while purposely omitting words not chosen.” See

Hallmark Marketing, 488 S.W.3d at 798. The only reasonable construction of

Section 171.103(a)(1) is that the apportionment statute turns on where the business activity

of tangible personal property occur in this state if the property is delivered or shipped to a
purchaser within this state, regardless of the f.o.b. point, other conditions of the sale, or ultimate
destination of the property, unless shipment is made via a common or contract carrier.”
(emphasis added)).

14
occurs; that is, the place of delivery controls for apportionment purposes even if the buyer is

located out of state. See Southwest Royalties, 500 S.W.3d at 406. This construction gives effect

to all the language in the statute and is consistent with the purposes undergirding the Multistate

Tax Compact, namely, attributing sales to the state where they are delivered to the purchaser. 8

We thus turn to NuStar’s facial validity challenge of the subsections of the

Comptroller’s Rule. See 34 Tex. Admin. Code § 3.591(e)(29), (31). Although NuStar separately

argues that the subsections (1) contravene specific statutory language; (2) run counter to the

general objectives of the statute; and (3) impose additional burdens, conditions, or restrictions,

Office of Pub. Util. Counsel, 131 S.W.3d at 321, all three arguments advanced the same

fundamental premise: that the subsections of the Comptroller’s Rule are contrary to the relevant

statute because the Comptroller Rule applies a “place of delivery” approach to apportioning

gross receipts. As explained above, however, applying a “place of delivery” construction is

consistent with Section 17.103(a)(1), and therefore NuStar has failed to overcome the

presumption that then-subsections (e)(29)(A), (C), (H), and (31) of the Comptroller Rule are

facially valid and constitutional. See Exam’rs of Marriage & Fam. Therapists, 511 S.W.3d at

33. The trial court therefore did not err when it concluded that those provisions of the

Comptroller’s Rule were valid, granted the Comptroller’s motion, and denied NuStar’s motion.

See Valence Operating Co., 164 S.W.3d at 661. We overrule NuStar’s sole issue on appeal.

8
The Comptroller contends that the Legislature’s adoption of new margin tax provisions
while still using the same statutory language demonstrates legislative acceptance of the
Comptroller’s “place of delivery” construction. Because we interpret Section 171.103(a)(1) as
unambiguous, however, the legislative acceptance doctrine does not apply. See Rogers v. Texas
State Bd. of Pub. Accountancy, 310 S.W.3d 1, 7 (Tex. App.—Austin 2008, no pet.) (“The
doctrine of legislative acceptance is a statutory construction aid that courts may use when the
text of a statute is ambiguous.”).
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 CONCLUSION

For these reasons, we affirm the trial court’s order granting the Comptroller’s

motion for partial summary judgment and denying NuStar’s motion for partial

summary judgment.

__________________________________________
Darlene Byrne, Chief Justice

Before Chief Justice Byrne, Justices Kelly and Smith

Affirmed

Filed: December 21, 2023

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