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

NO. 03-0 4 -00 822 -CV

DuP ontP hot om as ks, Inc . , A ppe lla nt

v. Carole K eet on Strayhorn, Com ptroller of P ubl ic Acc ounts of the State of T exas and Gre g Abbott, Attor ney Ge neral of the State of Texas , Appellees

F ROM THE DISTRICT CO URT OF TRAVIS COUNTY , 126TH JUDICIAL DISTRICT NO. GN303695 , HO NORAB LE DARLENE BY RNE , JUDGE PRESIDI NG

O P I N I O N I n orde r to ma nu f a c tu r e s e n s it iv e e le c tr o n ic e qu ip me n t, D u Po n t P h o to ma s k s , I nc. (“D uPont”) enter ed into an ag ree m en t fo r the c onstruction of a ster ile, controlled c hamber (“c leanr oom”) a

nd a building to house the chamber. Af ter the building was c onstructed, DuPont le a s e d th e b u il d in g an d th e c le an r o o m to an o th e r c o mp an y . D u Po n t d id n o t p ay sales tax on the parts purc hased f

or the c onstruction of the c leanr oom and claimed that, beca u s e it purchase d the ite ms w iththe int e nt o f u lti mate ly le a sin g the c le anr oo m, i t w a s en ti tl e d to the sa le -f or -r e sa le exemption from t h e p aym en t o f s ales tax. See Tex. Tax Code Ann. § 151.006 (West 2002). The Comptroller disag ree d and conc luded that , u n der the rele vant statutes and a dminist rative r ule, DuPont was not entitled to the exempti on. See 34 Tex. Admin. C ode § 3.294(k) (2006). DuPont p ai d t h e am o u n t i n qu es t i o n u n d er p ro t es t an d i n i t i at ed an ad m i n i s t ra t i v e he ar i n g. Af t er t h e h ea ri n g, th e Co mp tr o ll e r

is s u e d ano r d e r s tati n g th a t D u Po n t d id

n o t q u a li f y f o r th e e xe mp ti o n . DuPont2

appea led to the district court, contending that it was entitled to a re fund and se eking a dec laration that th e Co mp tr o ll e r ’ s a dmi n is tr a ti v e r u le w a s inv a li d

an d in c o n s is te n t w it

h th e r e le v an t s tatutor

y authority
. The dist rict court decla red that the rule was valid and gra nted summary

judgme nt in favor of the Comptroller. DuPont appea ls the judgme nt of the district court, and we will a ffirm the cour t’s jud g me nt. BACK GR OUND

Du Pon t manu fa c tur e s ph oto ma sk s, wh ic h are qu art z or g la ss plate s imp re sse d w ith
a me t al l ay er t hat ar e used in the pr oduction of semiconduc tors. To proper ly manufa cture a photomask, DuPont must produce the masks i n a “c l eanroom,” which is a ste rile, controlled environment in which pote ntially contaminating materia ls are f iltered out. I n 1996, Du P o n t en t er ed i n t o a j o i n t v en t u re wi t h t h re e s em i co n d u ctor
manu fa c tur e rs —M ic ro n T e c hn olo g ie s, I nc .; M oto ro la , Inc .; a nd Ad va nc e d Mic ro De vic e s, I nc .— to
c re a te the Du Pon t Ph o t o m a s k s , I n c . R e t i c l e T e c hn olo g y

Ce nte r, L .L .C. (t

he “ Ce nte r” ) f

or the purp os e of deve loping technolog ies for the fabr ication of lea ding- edg e photomasks. The joint venture was
c re a ted by an “ op e ratin g a g re e me nt” be tw e e n th e c omp anie s. Un de r t he te rm s o f t

he a g re e me nt,
e a c h me mbe r o f t

he Ce nte r wa s e nti tle d to a n e qu a l amou

nt o f t he Ce nte r’ s p ro du c tio n a

nd wa s a ble to purcha se, at c ost, the photomasks manufac tured on its behalf
. The a g ree ment specifie d that DuPont would construct and ope rate a “F acility ” for the purpose of

satisfyin g t h e o b

j ec t ives of the joint venture . The a g ree ment further define d the “F acility ” as “ the deve lopment and manuf acturing f acility to be construc ted . . . and lea sed by [DuP ont] to the [C enter ] and dedicate d to the [C enter ’s] business.”Both the lease and the ope ratingag ree ment wer e re viewed in c am e ra by the dis tr ic t c ourt
. 1 Although ne ither exhibit was include d in the appellate rec ord, neither party contests t he desc riptions of and qu otatio ns fr om the se do c ume nts fo un d in the br ie fs . A c c or din g ly , w e wi ll a c c e pt t he br ie fs ’ char acte rizations of these documents a s true. See Tex. R. App. P . 38.1-38.2. 3 Shortly afte r the a g ree ment was fina liz ed, DuPont enter ed into contra cts for the construction of two building s. The first building was a pproxi matel y 1 7 , 0 00 square fee t and was de sig ne d to ho us e a

5, 50 0 s qu are fo ot c le anr oo m. T he c le anr oo m w a s a sse mbl e d u sin g va ri ou s it e ms including a

raised f loor; moveabl e an t i -st atic inner walls, partitions, outer wa lls, and air-ha ndling equipment for a ir circ ulation; a moveable c eiling; spe cial ele ctrica l wiring ; and climate c ontrol equipment. The r emainder of t he first building contained m ore traditional business space s including office s for the Cente r’s e mploy ees. The second buildi ng was designe d to contain a de ioniz ed water plant and other

equipment nec essar

y for the ope ration of the cl eanr oom. Both buildings we re constructe d on land owned by DuPont. The construction of the clea nroom cost $7.3 million, and the construction of the rema inder of the buildings cost $2.09 million.

After the buildings we re c onstructed, DuPont r en t ed the building s, including the clea nroom, to the Center in one lease
. Under the l ease , DuPont ag ree d to rent the followingto the 1 Center: [T] he pre mises (the “Pre mises”) c onsisting of

(I ) all of [DuP ont’s] rig ht, title and interest in the land (the “ L and”)

. . . , (ii) all rig ht, title and interest of [DuP ont] in and to all buildings and other struc tures and f

ix tu res now or

here afte r located on the L and (the “Improvements”) , and4 ( i i i ) a ll ri g h t , t i t l e an d

i n t e r e s to f

[D u P o n t ] i nan d

t o t h e e a s e m e n t s, rig hts and appurten an ce s relating to the L and and the I mprovements . . . .
The lea se re quired the Cente r to make mon t h l y p ay ments but did not specify what portions of the rent we re attributable to use of the cleanr oom or any other individual portion of the building s; on the contra ry , the lease only

specifie d one sing le re nt pay ment for the le ase of

the entire structure
. DuPont did not pa

y sales tax on the purcha se of the items u s ed t o co n s t ru ct the
c le anr oo m. Ra the r, it a sse rt e d that its purc ha se of the c le anr oo m qu a lif ie d for th e sa le -f

or -r e sa le exemption from sales tax provided in the tax code be cause the i tems used t o construct the c leanr oom
wer e purc hased w ith the intention that the cleanr oom would be lease d to the Center. See Tex. Tax Code Ann. § 151.006. Howe ver, D uPont did not provide re sale cer tificates to the c ompanies that it pur chase d the items from. See id. § 151.151 (West 2002) (rather tha n paying tax , purcha ser may g ive re sale c ertifica

te when acquiring taxable item if purcha ser intends to sell or l ease item in reg ular
course of business).

The Co mp tr o ll e r p e r f

o r me d an a u d it o n D u Po n t to d e te r

mi n e w h a t a mo u n t if any DuPont owed as sale s tax for the pe riod betwe en January 1, 1996, and Oc to b er 3 1, 1997. During the audi t , t he Comptroller conc luded that, under the re levant provision of the a dminist rative c ode interpre ting the sa le-for -re sale e x emption, DuPont’s purchas e o f t h e items used to construc t the clea nroom did not qualify

for the e x emption. See 3 4 T e x . A dm i n . C o d e § 3
. 2 9 4 ( k ) ( 1 )
. A c c o r d i n g l y, the Comptroller notified DuPont that it owe d sales and use ta x es in the amount of $558,389.51 a nd issued a pena lty

of $230,894.99. See Tex. Tax Code Ann. §§ 111.008 (West 2002) (if Comptroller5

is not satisfied with ta x repor t, Comptroller may deter mine amount of tax to be pa i d ), .061 (authorizing imposition of penalty ). DuPont contested t he amount of ta x es and pe nalty owed, a nd an administrative hear ing w as conduc ted. An administrative l aw judge issued a proposal for dec ision concluding that the clea nroom qualified unde r the sale -for -re sale e x emption. Ho we v er, after the hea ring , the Comptroller issued a dec ision in which she conclude d that the leasingof the c leanr oom d i d not qualify for the e x emption. The Comptroller re asoned that the sale-f or-r esale ex em p t i o n does not
a p p l y t o t an g i b l e p e r s o n a l p r o p e rt y p u r c h a s e d f o r l e a s e i n c o n

j u n c t i o n w i t h t h e l e a s e o f

r e a l p r o p e rt y. Fur ther, the Comptroller conclude d that, beca use the c leanr oom was lea sed alongwith the rema inder of t h e t wo bui ldings, DuPont could not invoke the sale -for -re sale e x emption. After the Compt ro l l er’s opinion was issued, DuPont paid, under prote st, the tax es, pena lties, and ac crue d interest asse ssed. See id. § 112.051 (West 2002) (if per son require d to pay taxes contends amount imposed is improper, per son must pay fee and submit protest with fee)
. DuPont then filed suit ag ainst the Comptroller and the Atto rn ey Ge n er al. See id. §§ 11 2. 05 2 ( pe rs on wh o pa id und e r pr ote st may fi le su it) , 112 .0 53 (We st 200 2) (s uit mus t be a g a ins t Comptroller and Attorney Gene ral). I n its suit, DuPont soug ht rec overy of t he taxes, penalty , and interest it had pre viously

paid and a sked the district cour t to declar e that rule 3.294(k) is invalid and that the lease of the c leanr oom qualified for the sale- for- resa le exemption. Both parties moved f or summary judgme nt. The district court de clar ed that ru l e 3
. 2 9 4 (k) is valid and g rante d summary jud g me nt i n f

a vo r o f t he Com ptr oll e r. Du Pon t a

pp e a ls the de c isi on

of the dis tr ic t c ourt
.6 STA ND AR

D O F RE VI EW The standards for obtaining a t raditional sum mary judgme nt are well established: the movant must show that there is no g enuine issue of materia l fac t and that it is entitl ed to judg ment
as a matter of law ; in deciding whether there is a disputed materia l fac t issue prec luding summary judgme nt, the court must take e vidence favorab l e t o the nonmovant as true , must indul g e eve ry
rea sonable infe renc e in favor of the nonmovant, and r esolve a ny doubts in the nonmovant’s favor
. Se rg e an t Ente rs. , Inc . v. Stray ho rn , 112 S.W .3d 241, 245 (Tex. App.—Austin 2003, no pet.) (c iting Cat he yv . B oo th , 9 00 S.W. 2d

33 9, 34 1 ( Te x. 19 95 ); Nixon v. Mr. Prop. Mgmt. Co. , 690 S.W .2d 546, 548-49 (Te x . 1985)). We re view the trial court’s decision to g rant summary judgme nt de novo. Id. (c i t i n g Natividad v. Alexsis, Inc

. , 875 S.W .2d 695, 699 (Tex. 1994)).

Gene rally , a par

ty cannot a ppeal the de nial o f a motion for summary judgme nt beca use it is an interlocutory order and, thus, not a ppeala ble. Id. (c i t i n g Cincinnati L ife Ins. Co. v. Cates , 927 S.W .2d 623, 625 (Tex. 1996)). Howeve r, whe n both parties move f or summary

judgme nt
and the dis tr ic t c ourt

g ra nts on e mot ion

and de nie s th e oth e r, the un su c c e ssf ul p art y may a pp e a l bo th the g rant of the prevailing party ’s m otion and the denial of its own. Id. (c i t i n g Holmes v . Morales , 924 S.W .2d 920, 922 (Tex. 1996)). In such a case , we will r eview the summary judgme nt evidence offe red by

both sides, determine a ll questions presented, a nd ren d er t h e judgme nt the trial court should have re ndere d. Id. (c i t i n g FM Pr op s. Op e ra tin g Co . v . Ci ty of A us tin , 22 S.W .3d 868, 872 (T e x. 20 00 ); Commissioners Court v. Agan , 940 S.W .2d 77, 81 (Tex. 1997)).
DI SCU SSIO N DuPont raises four i ssues on appea l. First, it asser ts that rule 3.294(k)( 1) excee ds the Comptroller’s rulemakingauthority and is, there fore , invalid. N ext, it c ontends that its purchase of7

the items use d in the construction of the clea nroom qualified for the sale-f or-r esale ex empt ion. Third, it argues t h at t h e d i strict court e rre d by excluding ce rtain evide nce attached to DuPont’s motion for summary

judgme nt. Finally , it asserts that a legislative rider, whic h prohibits a tax refund
ov e r $ 25 0, 00 0 w ith ou t le g isl a tiv e a pp ro va l, i mpr op e rl y

re str ic ts i ts a

bil ity to o bta in t

he re fu nd , is contra ry to the direc tives of the tax code, and violate s the Texas and fe dera l constituti ons.
Rul e 3. 29 4( k) (1 ) i s V ali d

I n it s f ir st i ssu e on a

pp e a l, Du Pon t ass e rt s tha t rul e 3. 29 4( k) (1 ) i s inva lid be c a us e it exceeds the Comptroller’ s rulemakingauthority and is contradictor

y to subsection 151.006(2) of the tax code. DuPont arg ues t hat subsection 151.006(2) require s a subjective de termination when
asce rtaining whether

a taxpay er is entitled to the sale-for- resa le ex emption but that rule 3.294(k) (1) improp e r ly

im p o s e s ano b

je c ti v e s ta

n d ar d
. Sp e c if

ic a ll y , D u Po n t i n s is ts th a t, w h e na taxp ay er attempts to invoke the sale-f or-r esale exemption for persona l pr operty purcha sed for

the purpose of leasingit und er an ag ree ment that lease s both real pr operty and the pe rsonal prope rty purcha sed, subsection 151.006(2) ma ndates that a

n assessment of the relative importance of the lea sing of the two ty pes of proper

ties be undertaken: if leasing the persona l property is of g reater importanc e than leasingthe re al prope rty , the taxpay er ma y invoke the sale -for -re sale e x emption and not pay sales tax on t h e p u rcha se of the pe rsonal prope rty . Fur ther, it contends that the Comptroller’ s interpre tation does not allow fo r this comparison and impermissibly forbids the invocation of the
e xemp tio n in

c on ne c tio n w iththe purc ha se of pe rs on a l pr op e rt

y if the pe rs on a l pro pe rt

y is l e a se d in conjunction with rea l property , no matter how insig nificant the le asing of t he real property is to the
ov e ra ll a g re e me nt.8 Un de r t he ta x co de , the le a se of

tang ibl e pe rs on a l pr op e rt y is a sa le that is su

bje c t to taxation. See Te x. Tax Code Ann. §§ 15 1. 00 5 ( Wes t Su pp . 2 00 6) (d e fi nit ion

of “ sa le ” ), .0 09 (We st 20 02 ) ( de fi nit ion

of “ tang ibl e pe rs on a l p roper ty ” ), .0 10 (t ang ibl e pe rs on a l pr op e rt y is a “ ta xab le item”), .051 (imposing sales tax on “taxable items”). Howe ver, if cer tain require ments are satisfied, the le a se of

tang ibl e pe rs on a l pr op e rt y may be e xemp t f

ro m taxati on

un de r t he sa le -f or -r e sa le exemption. The purpose of the sale-f or-r esale exemption i s to prevent double tax ation. Stray ho rn
v. Raytheon E-Sys., I

nc. , 101 S.W .3d 558, 572 (Tex. App.—Austin 2003, pet. denied). U nder the rele vant portions of the tax code, a “sale for r esale ” mea

ns a sale of (1) tang ible persona l proper ty or a taxable se rvice to a purcha ser who acquir es the proper ty or ser vice f or the purpose of re selling it . .
. i n t h e n ormal cour se of bu sin e ss in the fo rm or c on dit ion in wh ic h it is ac qu ir e d o r a s an atta c hme nt t o or integ ral pa

rt of other tang ible persona l property or taxable servic e; [or] (2) tang ible persona l proper ty to a purcha ser for the sole purpose of the purc haser ’s leasingor re nting it in the Unit ed States of Ame rica . . . to another pe rson, but not if incidental to the lea sing or rentingof re al estate ; . . .
Tex. Tax Code Ann. § 151.006 (1) -(2)
. The tax code further provides that the “sa le for r esale of a taxable item is ex empted fr om” sales a nd use taxes. Id. § 151.302(a) (West 2002). The Comptroller’s r

ule interpre ting the sa le-for -re sale e x emption rea ds, in releva nt pa rt , a s f oll ow s: ( k ) L e a s e o f

r e a l p r o p e rt y w i t h t an g i b l e p e r s o n a l p r o p e rt y. (1) I f a contra ct for the l ease or rental of real prope rt y includes the lease or re ntal of tang ibl e persona l property (such a s furniture) as par t of the ag ree ment, no sales tax is due on the am ount char g ed the tena

nt for the lease or

renta l of the tang ible persona l pr op e rt y . A re sa le c e rt if

ic a te may no t be iss ue d a

nd sa le s o r u se9 ta x must be pa id at th e tim e the tang ibl e pe rs on a l pr op e rt y is purcha sed.
34 Te x. Ad

min . Co de § 3 .2 94 (k )( 1) ; s e e also T ex . Tax Code Ann. § 111.002 (West 2001) (Comptroller may

adopt rules that do not conf lict with laws of this St ate)
. Rely ing on a

previous ca se issued by

this Court and refe rringto definitions of the phrase “incidenta l to” found in va rious dictionaries, DuPont contends that the phrase “incidenta l to” found in section 151.006 mea ns subordinate to or a m i nor ac companiment. See Sharp v . Park ‘N F ly o f Tex

. , 96 9 S .W .2d 5 72 , 5 74 (T e x. Ap p. —Aus tin 19 98 , p e t. d e nie d) ; see, e .g., Black’ s Law Dictionary 52 3 ( a

br idg e d 6 th e d. 19 83 ) ( inc ide nta l me ans “[ d] e pe nd ingup on or a pp e rt a ini ngto something e lse as primary ; something nece ssary , apper taining to, or depending upon another which is t e rm e d the pr inc ipa l
. . . ” ). Th e re fo re , D uPo nt i ns ist s th a t se c tio n 1 51 .0 06 a llo ws a ta xpay e r t o invoke the sale -for -re sale e x emption for the pur chase of per sonal proper ty to be lease d u n d er a

n ag ree ment also leasingrea l property if the lea sing of the persona l pr operty is of g reater importanc e tha n th e le a sin g of

the re a l pr op e rt

y . B a se d on thi s r e a din g of se c tio n 1 51 .0 06 , it

argue s th a t, b e c a

us e rule 3.294(k) does not include the phrase “incidenta l to” or allow for an assessment of the re lative imp or tanc e of the pe rs on a l and

re a l pr op e rt

y le a se d und e r o ne ins tr

ume nt, ru le 3. 29 4( k) imp ro pe rl y pr oh ibi ts the inv oc a tio n o f the e xemp tio n fo r t he le a se of

re a l and pe rs on a l pr op e rt

y wh e n th e le a se of the pe rs on a l pr op e rt

y is o f p ara mou nt i mpo rt anc e to t

he a g re e me nt. Ac c or din g ly , D uPo nt i ns ist s that the rule r

uns afoul of the plain languag e of the statute and, ther efor e, ex ce ed s the rulemaking authority of the Comptroller. See Tex. Gov’t Code Ann. § 311.011 (West 2005) (words and phra ses shall be construe d acc ording to rules of g rammar and common usag e).10 We d isa g re e wi th D uPo nt. I n d e te rm ini ngwh e the r a ru le is va lid , w e are lim ite d to
asce rtaining whether

the rule is contr ary

to the rele vant statute. State v. Public Util. Comm’n , 131 S.W .3d 314, 321 (Tex. A pp.—Austin 2004, pet. denied)
. Whil e an ag ency ’s rul es m u s t comport wi th t he a g e nc y ’s a

uth or izin g statut e , th e le g isl a tur e is n ot re qu ir e d to inc lud e e ve ry sp e c if ic de ta il or anticipate all unfore seen c ircumstance s. Id. Fur ther, when making our dete rmination, an ag ency
r u l e i s p r e s u m e d

v a l i d , an d

t h e c h a l l e n g i n g p art y b e ar s t h e b u r d e nt o d e m o n s t r a t e i t s i n v a l i d i t y. Office of Pub. Uti l

. Counsel. v. Public Util. Comm’n , 1 04 S.W. 3d 22 5, 23 2 ( Te x. Ap p. —A us tin 2003, no pet.). We w ill def er to a n ag ency ’s interpre tation a s long a s it is reasonable a nd does not contra dict the pl ain m eaningof the statute. Pe rry Ho me s v . S tra y ho rn , 1 0 8 S. W. 3 d 4 4 4 , 4 4 8 ( T e x. Ap p. —A us tin

20 03 , n o p e t.) ; se e als o Ta rra nt A pp ra isa l D ist . v . M

oo re , 8 4 5 S. W. 2 d

8 2 0 , 8 2 3 ( T e x. 19 93 ) ( a g e nc y ’s c on str

uc tio n is e nti tle d to se ri ou s c on sid e ratio n) ; Qu or um Sa le s, In c . v . S ha rp , 910 S.W .2d 59, 64 (Tex. App.—Austin 1995, writ denied) ( court bound to ac cept Comptroller’s interpre tation of exemption i f in te r p r e ta ti o n is r e asonable , in that it harmoniz es with rele vant statute). First, we note that, contra ry to Du P ont’s asser

tions, the meaning of “inc idental to” found in the second portion of the sale-f or-r esale exemption i s unclea r. Va rious definitions for the phrase “incidenta l to” indicate that the phrase can have the sa me meaningas the phra se “inc ident to.” The e ntry for “incidental to” f

ound in A Dictionary of Mode rn Legal Usage define s “incidenta l to”
as mea ning “ happeningby

chanc e and subor dinate to some other thing; p eriphe ral.” Br y an A. Gar ner, A Dictionary of Modern Legal Usage 430 (2d ed. 1995). However, the entry also specif

ies that the phra se “inc idental to” has historically been use d intercha

ng eably with the phrase “incident to,” which is def

ined a s m ea n i n g “close ly related to; naturally

appea ring with.” Id. The intercha ng eability of these phrase s is a lso a cknowledg ed in a nother authority cited by

DuPont. See11

Ox for d U niv e rsa l D ic tio na ry

on Hi sto ric Pr inc ipl es 1523 (3d ed. 1955) (“inc ident” can be def ined
a s “ inc ide nta l” ); se e als o W e bs te r’ s Sev e nth Ne w Colle

gia te Di c tio na ry

580 (1971) ( one def

inition fo r “ inc ide nt” sp e c if

ie s th a t it c an me an “ so me thi ngde pe nd e nt on or su bo rd inate to s ome thi nge lse of g reater or pr incipal importance ”). B eca use the mea

ning of the languag e of the statute is unclear and bec ause the statut e i s a tax ex emption statute, we c onstrue the statute in fa vor of the tax ing authority and ag ainst the taxpay er. See U pjohn v. Rylande r , 3 8 S. W.3 d 6 00 , 6 06 (T e x. Ap p. —Aus tin 2000, pet. denied)
.

DuPont asser

ts that, in Pa rk

‘N Fl y , we pr e vio us ly

a do pte d a de fi nit ion

of the ph ra se “incidenta l to” as meaning subordinate to something else. In Pa rk ‘N Fl y , this Court had occa sion to c on sid e r whe the r a

bu sin e ss t

hat of fe re d p ark ingand a ir

po rt tr ans po rt a tio n s e rv ic e s c ou ld r e fu se to collect sale s tax on the price it a llocated for its tra nsportation service s. 969 S.W .2d at 574. Park

‘ N F l y p r o v i d e d p ar k i n g f o r a i r p o rtp a s s e n g e r s w i s h i n g t o l e a v e t h e i r c ar s n e ar

t h e a i r p o r t
. In
a dd iti on , Pa

rk ‘NF ly wo uld tr ans po rt it s c us tom e rs to a nd fr om t he a ir po rt via a shutt le bu s. Al tho ug h it

c ha rg e d o nly on e pr ic e fo r i ts servi ces, P ark ‘N F ly a llo c a te d 3 0% of

its c ha rg e to i ts parking service s and 70% to its shuttle se rvice s. The re levant statute g overningsales taxes specifie d that “ sa le s p ri c e ” is the tot a l amou nt f or wh ic h a ta xab le ite m is so ld wi tho ut a de du c tio n f

or the c os t of “tra nsportation incident to the p er fo rm ance of a taxable service .” Te x . Tax Code Ann. § 151.007(a) (4) ( West 2002). I n 1995, a rul e wa s adopted c larify ing that the shuttle service component would be ta x able. See 34 Tex . A dmi n. Cod e § 3 .3 15 (2 00 6) . T his Court ult imate ly conclude d that the phra se “inc ident to,” as it is used in subsection 151.007(a) (4) of the tax code, means “ closely

related to” and that t h e C o m p t ro ller’s rule was, ther efor e, consistent with the g overningstatute. Pa rk

‘N Fl y , 969 S.W .2d at 575.12 Du Pon t’ s r e lia

nc e on thi s c a se is mis pla c e d fo r se ve ra l re a so ns . F ir st, the ta x sta tut e and adminis trative rule s at issue in Pa rk ‘N Fl y are inapplicable to the prese nt case . Fur ther, in Pa rk ‘N Fl y , we we re a sked to interpre t the phrase “incident to,” not “ incidental t o . ” I n making our ult imate de te rm inatio n th a t the Com ptr oll e r’ s ru le is c on sis te nt wi th the g ov e rn ing statut e , w e did ref ere nce the same definitions for “incident t o” and “incidenta l to” found in A D ic tio na ry of M od e rn Legal Usage that wer e discuss ed p re viously ; however , we a lso mentioned the fac t that the two phrase s have be en used intercha ng eably
. Moreove r, we expressly limit ed our holdingthat the two phrase s are not intercha

ngea b l e to the fac ts and statute at issue in that ca se. See id. (incident a nd incidental “a

re not interc hang eable here ”). Gi ve n th a t the ph ra se “ inc ide nta l to” ha s his tor ic a lly be e n u se d in te rc ha ng e a bly wi th

“ inc ide nt t o, ” the Com

ptr oll e r’ s in te rp re tatio n o f t he sa le -f or -r e sa le e xemp tio n is r e a so na ble . Ru le 3. 29 4( k) (1 ) pr oh ibi ts the inv oc a tio n o f t he e xemp tio n f

or tang ibl e pe rs on a l pr op e rt y if the pr op e rt

y is lease d as part of an ag ree ment leasingrea l property
. See Te x. Ad min
. Cod e § 3. 29 4( k) (1 ). Th is interpre tation comports with the definition of “incide ntal to” as mea ning “ closely

related to.” Second, we note that t h e C o mp t ro l l er ’s i n t er p re t at i o no f t h e s al e- fo r- re s al e ex emption is longstanding . Be cause the meaning of t he statute is unclea r, we g ive serious c onsideration to the contempora

neous construc tion of the statute made b y t h e C o mptroller. See R ylander v . Fisher Controls Int’l, Inc

. , 45 S.W .3d 291, 302 (Tex. App.—Austin 2001, no pet.). When a statute ha s been g iven a long standing construction by an administrative of

fice r and the statute is re-e nacte d without substantial chang e, “the L eg islature is presumed to ha ve been familiar with that interpretation and to have a dopted i t.” Texas De p’t of Protective& Regulatory Serv s. v. Me ga Child C

are, Inc

. , 145 S.W .3d 170, 176 (Tex. 2004) . The sale -for -re sale e x emption was first ena cted in 1941. See Act of13

April 28, 1941, 47th L eg ., R.S., ch. 184, art. X, § 1, 1941 Te x . Gen. L aws 269, 292 (not r equiring tax be levie d more than onc e on sale of same a rticle of me rcha

ndise). In 1981, the exemption was codified into the tax code with languag e nea rly identical to the current ve rsion and has be en ame nded
sever al times since then without substantial chang e. See Act of Ma y 29, 1981, 67th L eg ., R.S., ch. 389, § 105.006, 1981 Tex. Gen. L aws 1490, 1546; Ac t of J uly 3, 1984, 68th L eg ., 2nd C.S., ch. 31, art. VI I , § 7, 1 9 8 4 T ex . Gen. L aws 193, 223 (a dding phr ase “ or taxable servic e”) ; Act of May 19, 19 95 , 74th L e g ., R.S. , ch . 350 , § 1, se c . 151 .0 06 , 199 5 T e x. Ge n. L aws 28 81 , 2 88 2 ( a dd ingph ra se “or in the U nited Mexi can States” ). In 1977, the Comptroller amende d a prior rule specify ing that ta n g ib le p e r s o n a l p r o p e rty le a s e d in c o n ju n c ti o n w it

h r e a l p r o p e r

ty is n o t e li g ib le f

o r the sale- forresa le exemption. See 2 Te x. Re g . 7 00 (1 97 7) (a me nd ingru le 02 6. 02 .2 0. 01 4) (i f c on tr a c t f or le a se of re a l pr op e rt

y inc lud e s le a se of

tang ibl e pe rs on a l pr op e rt y , s a le s tax is du e wh e n p e rs on a l pr op e rt y is purchase d). This inter

pretation ha s rema ined consistent throug h the cur rent interpr etation of the exemption. See 34 Tex. Admin. C ode § 3.294(k)
.

Th ir d, we no te tha

t th e Com ptr oll e r’ s r

ule pr ov ide s a

br ig ht- lin e ru le , w hic h b e ne fi ts both tax pay ers a

nd auditors. See P erry Hom es , 1 08 S.W. 3d a t 44 8. Gi ve n th e nume ro us po ssi ble
rea sons for ente ring into c o n t ra ct s involving the lea sing of rea l and per sonal proper ty and the countless combinations of re al and pe rsonal prope rty , requiringthe Comptroller to determine whether the lease of the re al proper ty is subor dinate to the lease of the pe rsonal prope rty seems an overly onerous task. See id. (Comptroller should not be requir ed to eng ag e in subjective a naly sis of
eac h contra ct to deter

mine parties’ intent with reg ard to pa y ment of taxes). For all the re asons g iven, we conclude that the rule doe s not ex cee d the Comptroller’s
ru le makin g a

uth or ity and , a c c or din g ly , o ve rr

ule Du Pon t’ s f

ir st i ssu e on

a pp e a l.I n it s b ri e f, Du Pon t c on c e de s th a t if the ru le is va lid on its fa c e , Du Pon t lo se s o n it s c la im 2 that it is entit led to the exemption. 14 DuP ont is Not Entitled to the Sale-for-re sale Exem ption

I n its s ec o n d i ssue on appe al, DuPont asserts that its purcha se of the c leanr oom qualified for

the sale- for- resa le exemption. S pecif ically , it contends that the purpose of for ming the Center wa s to build a facility for the pr oduction of photomasks and that, there fore , it purchase d the items nece ssary

for the c ons t ru ct i on of the c leanr oom for the “ sole purpose of ” lea sing the clea nroom. See Tex. Tax Code Ann. § 151.006(2). I t also argues that the lea se of the c leanr oom was not “incidental to” to the le ase of the two buildings; on t h e contra ry , it insi sts that the lease of the
c le anr oo m w a s o f p ri mary imp or tance. I n supp or

t of the se argume nts , D uPo nt c omp are s th e c os t of the c onstruction of the c leanr oom with the cos t o f t h e construc tion of the rema inder of the bu ild ing s and , b a se d o n th a t c omp ari so n, argue s th a t 78% of th e ren t du e un de r t he le a se
c or re sp on de d to the us e of

the c le anr oo m and

22 % t o us e of

the re ma ind e r o f t

he bu ild ing s. I t a lso state s th a t it

wo uld no t hav e c on str

uc te d the tw o buil din g s had it not int e nd e d to lea se the c le anr oo m. We h a ve a lr e a dy

c on clu de d th a t r

ule 3. 29 4( k) is a

re a so na ble int e rp re tatio n a

nd is consis t ent wit h the re levant portions of the ta x code. T he rule prohibits the invocation of the exemption i f an a g ree ment includes the lea se of r eal pr operty and tang ible persona l pr operty
. See Tex. Adm i n . Code § 3.294(k)( 1). I t is undisput ed that the lea se betwe en DuPont and the Cente r included the lea se of the building s along with the clea nroom. Acc ording ly , DuPont was not entitled to claim a sale -for -re sale e x emption. 2

Moreove r, eve n if t h e rule we re inva lid, DuPont would not have qua lified for the exemption under the tax code. Subection 151.006(2) allows an indi vidual to claim the exemption15

for the sa le of “ tangible personal property to a purc haser fo r the sole purpose of the purc haser ’s le as ing or re nti ng it. ” Te x . Tax Code Ann. § 151.006(2) ( emphasis adde d). DuPont did not p u rchase a clea

nroom; on the contra

ry , it pur chase d various items that w ere assembled to make a clea nroom. Be cause it d i d not purcha se a c leanr oom for the sole pur pose of subseque ntly

leasing it, DuPont’s purchase of

the items nece ssary

for the construction of the cleanr oom does not qualify for the e x emption.

This conclusion is also supported by lang uag e found in the f

irst provision of section 151.006. Jones v . Fowler , 9 69 S.W. 2d 42 9, 43 2 ( Te x. 19 98 ) ( wh e n d e te rm ini ngle g isl a tiv e int e nt, entire act, not isolated portions, must be considered)
. Subsection 151.006(1) a llows an individual to c la im the e xemp tio n f

or the purc ha se of

tang ibl e pe rs on a l pr op e rt y a c qu ir e d f

or the so le purp os e of re se lli ngthe pr op e rt

y “ in th e no rm a l c ours e of bu sin e ss in t

hefor m o r c on dit ion in w hic h it is
a cq u i red or

as an att ac hm e nt to o r in te

gral p ar t of

oth e r ta ng ibl e pe rso na l pr op e rty . ” Tex. Tax Cod e Ann. § 1 51 .0 06 (1 ) ( e mph a sis a dd e d) . T he re is n o s uc h c omp a ra ble language fou nd in subsection (2) that would allow for a claim of the sa le-for -re sale e x emption when the item purc hased for lease has bee n attache d to or combined with other ta ng ible persona l property . When determining the me anin g of a statut e , we mus t pr e sume that e ve ry wo rd in the statut e ha s been deli be rate ly included and that exclusions from the statute wer e made purposef ully
. Se e Ga ble

s R e alt yLtd . P ’s hip

v . Trav is C

e nt. Ap prais al D ist
. , 81 S.W .3d 869, 873 (Tex. App.—Austin 2002, pet. denied). For all the re asons discussed, we conclude that DuPont wa s not e ntitled to the salefor- resa le exemption and overrule its second issue. Cf

. Upjohn v. Ry lander , 38 S.W .3d 600, 606 (Tex. App.—Austin 2000, pet. denied) ( tax ex emption claims are construed in f avor of taxi ng
a uth or ity and str ic tly c on str ue d again st t a xpay e r) ; see also Op. Tex. Att’y Gen. No. WW-143516

(1 96 2) (i nte rp re tin g pr ior ve rs ion of sa le -f or -r e sa le e xemp tio n a

nd c on c lud ingthat pu

rc ha se of ite ms to be ins ta lle d int o ho us e wi th int e nti on of se lli ng ho us e late r d oe s n ot q ua lif y fo r e xemp tio n b e c a

us e items are not late r sold as per sonal proper ty).
Summ ary Judgm ent Evidence

I n it s th ir d is sue on app eal , D uPo nt c on te nd s th at th e dis tr ic t c ourt e rr e d w he n it excluded cer

tain evidenc e in re sponse to an objec tion by the C omptroller. The Comptroller objec ted to DuPont’s inclusion of the administrative law judg e’s pr oposal for de cision and the Comptroller’s final dec ision in its motion for summary judgme nt and objecte d to portions of the motion discussing the a dmi nis tr a tiv e hearin g. Spe c if ic a lly , th e Com

ptr oll e r a sse rt e d th a t, b e c a us e an a pp e a l f ro m a final dec ision by

the Comptroller is tr i ed d e novo in the district court, see Tex. Tax Code Ann. § 112.054 (West 2001) , the inclusion of the documents wa s not permitted under g overnme nt code subsection 2001.173(a ), which spe cifies that in a tr ial de novo
the re vie wi ngc ourt

sh a ll try e a c h is su e of

fa c t and law i n th e mann e r that a

pp lie s to other c ivil s u i t s in this s tate as thoug h there had not bee n an interve ning a g ency action or de cision but may not admit in evidenc e the f act of prior state a g ency

action or the nature of that action except to the limit ed extent nece ssary to show compliance with statutory

provisions that vest jurisdiction in t he cour t.
Tex. Gov’t Code Ann. § 2001.173(a) (West 2000). The Com ptroller asserted that, beca use there was no dispute over whe ther the district c ourt had jurisdiction over the case , t h e evidence of the prior
a g e nc y a c tio n w a s in a dmi ssi ble . T he dis tr ic t c ourt su sta ine d th e se ob

je c tio ns in i ts j ud g me nt. Du Pon t c on te nd s th a t th e tr ia l c ou rt e rr e d b e c a

us e , in a dd ition to i ts t a x ap pe a l, DuPont was also askingfor a decla ration from the di strict court that rule 3.294(k)( 1) wa s invalid and17

for a decla ration that a leg islative rider w as unconstitutional. I t argues that these c laims are br oader tha n the ta x a sse ssm e nt c la im and that, the re fo re , the re is no le g a l ba sis fo r e xclu din g the do c ume nts from conside ration in the dec laratory judgme nt action. After the Comptroller objecte d to the inclusion of the disputed docume nts, DuPont made no attempt to offer the evidenc e for the limited purpose o f co n s i deration in it s decla ratory jud g me nt a c tio n. Ac c or din g ly , D uPo nt m ay no t c omp la in a

bo ut t he e xclu sio n o f e vid e nc e on a pp e a l. See Tex. R. Evi d. 105 (par ty may not complain about exclusion of evidence f or one pur

pose, eve n if admissible for a

nother purpose , if party

does not expr es s l y offe r evide nce f or its “limited,
a dmi ssi ble purp os e ” ); see also Tex. R. App. P . 33.1 (pre servation of err or). More over, D uPont has not shown how the district court’ s err or, if any , “prob ab l y ca u s ed the re ndition of an improper judgme nt” or “proba

bly preve nted [it ] from properly prese nting the c ase.” See Tex. R. App. P . 44.1 (s tand ard fo r r e ve rs ibl e e rr or

in c ivi l c a se s)
. I n a de c larator y jud g me nt a c tio n re g ard ingthe va lid ity of an administrative rule, the district court does not def er to the Comptroller’ s or an a dminist rative law j ud g e ’s de te rm inatio n o f t he va lid ity

of a ru le ; on the c on tr ary , the dis tr ic t c ourt e ng a g e s in its
own re view of the rul e and the rele vant statutes to deter mine if the rule c omports with the require ments and direc tives of those statutes. Ther efor e, the e x clusion of the docume nts in question did not preve nt D uPont fr om making its c ase or lead to an imprope r ver dict. Acc ording ly , for a ll the
rea sons previously

stated, we overr

ule this issue.

Rider 11 I n it s f

ourt h a nd fi na l is su e , D uPo nt a sse rt s th a t r ide r 1 1 to Ho us e B ill 1 of the 78 th leg islative session violates the Texas and fe dera l constituti ons and the tax code
. See Act of June 1,18

20 03 , 7 8th

L e g ., R.S. , c h. 13 30 , a

rt . I , 2 00 3 Te x. Ge n. L aws 50 23 , 507 4- 75
. Spe c if ic a lly , it c la ims that, beca use the ride r pre vents the Comptroller from pa ying a tax re fu n d of more tha

n $250,000 wi tho ut ap pr ov a l by the le g isl a tur e , the ri de r is an imp ro pe r en a c tme nt of g e ne ra l le g isl a tio n w ith in an appropriations bill in violation of article I I I , section 35 of the Te x as Constitut ion. See id. ; se e als o Tex. Cons t. art. I I I , § 35 (no bill shall c ontain more than one subjec t). Fur ther, it arg ues that the ride r impermissibly attempts to a lter a provision of the tax code that re quires the Comptroller to issue a ref und if a taxpay er suit results in a deter mination that the money

paid under

protest belong s to the taxpay er. See T e x. T a x Co d e A n n . § 1 1 2
. 0 6 0 ( a ) ( We s t 2 0 0 1 )
. F in a ll y , D u Po n t c o n te n d s th at the rider a lso violates the Texas and fe dera l constituti ons beca use it deprives D uPont of property , is an unlawful taking , denies DuPont’s rig ht of acce ss to the remedies provided by courts by imposing an
unrea sonable financial barrier , and denies DuPont due process and equal protection. See U. S. Co ns t. amend. XI V (Due Process Cl ause) ; Tex. Const. art. I , §§ 13 (ac cess to cour ts), 17 (taking s clause) , 19 (due c ourse of

law). Be cause we have concluded that DuPont is not entitled to a tax ref und, we ne ed not addre ss whether rider 11 w ould unconstituti onally impair its ability

to obtain a re fund. More over, rider 11 a pplied only to appropriations occurr ing in the 2004- 2005 biennium. This tim e has e x pired. Moreove r, the curr ent appropr iation doe s not c ontain the provision r equiringleg islative approva l for ref unds over $250,000. See Act of May 29, 2005, 79th L eg ., R.S., ch. 1369, art. I , 2005 Tex. Gen. L aws 43 24 , 4 3 6 6

- 6 7
. A c c or din g ly , w e c on c lud e that D uPo nt’ s c la im i s mo ot a nd , th e re fo re , o ve rr

ule thi s is su e on

a pp e a l.19 CO NC LU SION Ha v i n g overr

uled all of DuPont’s issues on appe al, we a ffirm the judg ment of the dis tr ic t c ourt
.

David Pury ear , J ustice

Be fore J ustices B . A. Smith, P atterson a nd Pury ear Affir med Filed: De cembe r 20, 2006