### TEXA S C OU R T OF A PPEAL S, THIR D DIST R ICT , AT AU STIN

NO. 03-0 7 -00 638 -CV

Sout hwes te r n Be ll Y e llo w P ag e s , A ppe lla nt

v. Susa n Co m bs, Suc c e sso r to Ca r ole St r ay hor n, C om pt r oll e r of P ublic Ac c ount s o f the State of Texas; and Gre g Abbott, Attor ney Ge neral of the State of Texas , Appellees

F ROM THE DISTRICT CO URT OF TRAVIS COUNTY , 200TH JUDICIAL DISTRICT NO. D-1- GN-06- 0045 00 , HO NORAB LE ORLI NDA NARAN JO , JUDGE PRESIDI NG

C O N C U R

R I N G O P I N I O N Althoug h I a g r e e th a t th e p r in te d mate r ia l a t is s u e in th is c a s e is n o t e xe mp t from use tax pursuant t o t ax co d e section 151.011(a ), I do not ag ree with the majority ’s rationale and
rea ding of

section 151.011(a ). The ma jority rea ds the porti on of sec tion 151.011(a) a dded by the leg islature in 2003 as meaningthat the leg islature intended the use tax to apply to tang ible persona l proper ty that has bee n proce ssed, fa bricated, or manuf

actur ed into other prope rty or attac hed to or incorpora ted i nto other property transporte d into this state e x c e pt f or printed materia l that has bee n proce ssed, fa

bricated, or manuf

actur ed into other property or attached to or incorporate d into other proper ty . The majority

interpre ts this t o mean that se ction 151.011(a) ex cl u d es from the use tax “only printed materia l that is itself a component part of a final product.” This interpretation makes the a pp lic a bil ity of se c tio n 1 51.0 11 (a ) t o p ri nte d mate ri a l turn on wh e the r t

he pr int e d mate ri a l is “proc essed, f

abric ated, manuf

actur ed, attac hed to, or incor porate d into other proper ty ” o r “a2

compon en t p ar t ” o f s ome other “ final produc t.” I do not believe this to be a c orre ct re ading of section 151.011(a ), and I am of t h e v i ew t h at it will promot e additional conf usion in the area

of use tax on tangible pe rsonal prope rty purcha sed outside of Te x as and br oug ht into the state. For many y ear s prior to 2003, printed materia l pur chase d outside of Texas and tr ans po rt e d in to T e xas w a s su bje c t to us e tax un der

the the or y that pr int e d mate ri a l w a s “ tang ibl e persona l property .” T his view of the pr e-2003 ve rsion of sec tion 151.011(a) wa s confirme d by this Court i n Ma

yDe pa rtm e nt S

tor es Co . v . S

tr ayh or n , No. 03-03-00729- CV, 2004 Tex. App. L EXI S 7681 (Tex. App.—Austin Aug . 26, 2004, pet. denied) (mem. op.). May D epartment Stores was not re viewed by

the Texas Supre me Court, a nd the leg islature has not amended the statute since the dec ision was published. I n response to another c ase de cided by this Court i n 1997, Sh ar p v. Morton Buildings, Inc. , 953 S.W .2d 300 (Tex. A pp.—Austin 1997, pet. denied), the leg islature amende d section 151.011(a ) in 2003 to add a cla use that cla

rified that tang ible persona l property that has bee n proce ssed, fa

bricated, or manuf

actur ed into other proper

ty or attache d to or

incorporated int o o the r pr op e rt

y tr ans po rt e d int o thi s state —e .g ., c omp on e nt pa rt s of so me oth e r f

ina l pr od uc t—i s tang ible persona l property subject to use tax. T h e l egis lature e x empted printed material fr om this clarification. Consequently , the cl ause in the statute added by the 2003 amendme nt does not sp e a k to the ta xati on of pr int e d ma te ri a l a t a ll. I t sp e a ks to t he ta xati on

of c omp on e nts of

tang ibl e p e r s o n a l p r o p e rt y other than printed material , and clarifies that such i tems are included in the scope of tang ible persona l property subject to use tax. T h e cl au s e at i ssue does not purpor t to describe
ever y ty pe of tang ible persona l proper ty subject t o use t ax. I t is not a comprehe nsive definition of
ever y thing that is i ncluded in the t erm “tang ible persona l proper ty .” I t was mea

nt to make clea

r that3

the interpre tation of the statut e as s et out in Morton Buildings , that e ff e c tiv e ly e xclu de d a

c e rt a in
c la ss o f i te ms, was not the wa y the leg islature wa

nted the use ta x statute to work. The taxation of printed material for use tax purposes was set out in May D epartment Sto re s and wa s not altered by

the 2003 amendme nt to section 151.011(a) . I n fac t, printed materia l
was e x pressly

excluded fr o m the amendme nt. Ibelieve the appropr iate interpr etation of the leg islature’s a ction i n am en d i n g section 151.011(a ) in 2003 is to say that whateve r items the leg islature wa

nted to make sure are inclu d ed in t he ter m “tang ible persona l property” with the
a dd iti on of the a me ndme nt, it d id n ot i nte nd to a dd re ss pr int e d ma te ri a l wi th t he a me ndme nt at a ll. Un d er this int erpr etation, the taxation of printed mater ial is not affe cted by the leg islature’s 2003 amendment a

nd continues uncha

ng ed. The majority ’s interpre tation of the 2003 ame ndment will chang e the taxation of printed mater ial, albeit not in the way Southwestern Be l l reque sts. The majority rea ds the new
a me n d me n t to s ay th a t c o mp o n e n ts o f s o me f in a l p r o d u c t a r e s u b je c t t o u s e tax unless the compone nt is p rin te d m ate ria l in whi c h c as e it i s n ot s ub je c t to us e tax

at a ll . Howeve r, the statute does not say th i s . T h e s t a tu t e p r o v i d e s t h a tt an g i b l e p e r s o n a l p r o p e rt y
— o t h e r t h anp r i n t e d

m a t e r i a l

—t h a tis incorpora ted into other prope rty

is included in the definition of tang ible persona l p ro p er t y for the purposes of use tax. This c lause does not te ll us what happens to pr inted materia l. We must look somewher e else other than this clause for guidanc e on printed m ater ial. This guida nce is available. Th e un a me nd e d p or

tio n of se c tio n 151 .0 11 (a ) ha s bee n inte rp re te d to inc lud e pr int e d mate ri a l w ith in the s cope of tang ible persona l proper ty subject t o use tax. See May D ep’t Stores , 2004 Tex. App. L EX I S 76 81 , at *2 7- 28 . T hat po rt ion of the statut e re ma ine d unc ha ng e d by the 20 03 a me ndme nt.4

There fore , Ibelieve the better inter pretation of section 151.011(a ) is that the taxation of printed
ma te ri a l w a s una ff

e c te d b y the 20 03 a me ndme nt. I n addition, the m ajority ’s i nterpre tation will cre ate ne w and potentially confounding fa c t is su e s to un ra

ve l in or de r t o d e te rm ine wh e the r pr inte d mate ri a l tr ans po rt e d in to t his state is
su bje c t to us e ta x. Un de r t he ma jor ity ’s vie w, the re are no w tw o cat egori e s o f p ri nte d mate ri a l: (1) pr inted materia l that is a component of some final product, and (2) printed materia l that is a final pr od uc t it se lf . O ne ty pe of pr int e d mate ri a l w ill no w b e su bj ect to use t a x an d th e oth e r w ill no t. Th e pr ob le m w ill be de te rm ini ngto w hic h o f t he se tw o n e w c a tegor ies one ’s pr int e d mate ri a ls belong . When is printed material a component of a

final produc t, and wh en is it a final produc t its e lf ? Ic an s e e thi s a s a

po te nti a lly

ve ry dif fi c ult a nd fa c t- int e ns ive qu e sti on . Ido no t be lie ve thi s
was a dichotomy

the leg islature wa s intending to c reate in 2003 when it was addressingthe Morton Bu ild ing s iss ue . H a d th e le g isl a tur e int e nd e d to make a dr a ma tic de pa rt ur e fr om May D epartment Stores , it wo uld have do ne so in a mor e str a ig htf or wa rd and a pp are nt m ann e r. Th e ma

jor ity in t his
c a se make s su c h a

de pa rt ur e fr om May D epartment Stores and cha ng es the lawwith respec t to the taxation of printed material in a signific ant way . This c hang e is not re quired by the 2003 amendme nt t o s e c t i o n1 5 1
. 0 1 1 ( a )
. C o n s e qu e n t l y, I c o n c u r i nt h e j u d g m e n to n l y.

__________________________________________ G. Alan Waldrop, Just ice Be fore J ustices Patterson, Waldrop and H enson Filed: January

30, 2009