### T E X A S C O U R T O F A P P E A L S , T H I R D D I S T R I C T , A T A U S T I N

NO. 03-09-00312- CV

Delta A ir Lines, In c., Appellant

v. Sus an Com bs, Com ptroller of P ubl ic Acc ounts of the State of T exas; and Greg A bbott, Attor ney Ge neral of the State of Texas, App ellees

F ROM TH E DISTRI CT COURT O F TRAVIS CO UNTY, 200 TH JUDICI AL DISTRICT NO. D-1 -GN-0 4-0 0043 9, H ONO RAB LE RHO NDA HURLEY , JUDGE P RESIDING

O P I N I O N

This is a suit for a tax ref u n d

. Appellant Delta Air L ines, I nc. filed suit ag ainst appellee s Susan Combs, the Texas Comptroller o f P u b l i c Accounts, and Gre g Abbott, the Attorney Gene ral of Texas, for a ref und of sales tax paid on purcha ses of janitorial and maintenanc e service s. The district court enter ed a take nothing judgme nt ag ainst Delta. Delta asser ts that its purcha ses are ex empt from taxation as “sale s for resa le.” See Tex. Tax Code Ann. § 151.302(a) (West 2008). We aff

irm the judg ment of the district cour t. Background Delta conducts airline opera tions at the Dallas/F ort Worth I nterna tiona l Ai rport and Houston’s Geor g e Bush I nterc ontinental Airport. To occupy terminal space at those locations, Delta enter ed into lease ag ree ments with the Dallas/F ort Worth I nterna tional Airport Boa rd and theCity of Houston (collec tively , the “Airpor ts”). Under eac h ag ree ment, Delta ag ree d to be responsible for janitoria l and maintenanc e ser vices on the oc cupied pr emises. Delta contra cted with four companies for the janitorial and maintenanc e service s require d under its agr eeme nts with the Airports. Delta paid sales tax on these transactions for the period of F ebrua

ry 1, 1993, throug h Dec ember 31, 1996. Delta filed a claim with the Comptroller for a ref u n d of the sales tax paid on the amounts paid to the janitorial and maintenanc e service companies. T h e C o m p t rol ler denied Delta’ s claim. After exhaus t i ng its administrative reme dies, Delta filed suit in district court on Fe bruar y 13, 2004, challeng ing the denial of its ref und claim. See id. § 112.151 (West 2008). The parties filed competing motions for summary judgme nt. On May 8, 2008, the district court g rante d the Comptroller’s motion for summary judgme nt, denied Delta’ s motion for summary judgme nt, and ente red a

take nothing judgme nt in favor of the Comptroller. Delta a ppeals.

Anal ysis We revie w the district court’s summary judgme nt de n o v o. Joe v. Two Thirt y Nine Joint Venture , 145 S.W .3d 150, 156 (Tex. 2004). Under the “tra ditional” standard, a summary judgme nt should be g rante d only wh en t h e m ovant establishes that there is no g enuine issue as to a

ny materia l fac t and that it is entitl ed to judg ment as a matter of law. See Tex. R. Civ. P

. 1 6 6 a(c ); Provident Life & Acc ident Ins. Co. v. Knott , 128 S.W .3d 211, 215-16 (Tex

. 2 0 0 3 ). When, as here , both parties file motions for su m m ar y j udg ment and the court g rants one and denies the other, we must decide all questions prese nted and rende r the judgme nt that the trial court should have rende red. City of Garland v. Dallas Morning News , 22 S.W .3d 351, 356 (Tex. 2000).
2We must aff irm the summary judgme nt i f an y g round prese nted to the district court by the Comptroller is meritorious. Picke tt v. Texas Mut. Ins. Co. , 239 S.W .3d 826, 840 (Tex. App.—Austin 2007, no pet.). Statutory

exemptions from taxation ar e strictly construed beca use “they undermine equality and uniformity by placing a g reater burden on some taxpay ing businesses and individuals rathe r than placing the burden on all taxpay ers equally .” North Alamo W ater Supply Corp. v. W

illacy County Appraisal Dist. , 804 S.W .2d 894, 899 (Tex. 1991). Consequently , the burden of proof for showing that the exemption applies is on the claimant. See id. The exemption m ust affirma tively ap p ea r i n the statutory lang uag e, and all doubts are resolved in favor of the taxi ng authority and ag ainst the claimant. See Bullock v. National Bancshares Corp. , 584 S.W .2d 268, 272 (Tex. 1979).

There is no dispute that the jani t o ri al and maintenanc e service s at issue are “r ea l proper

ty service s,” see Tex. Tax Code Ann. § 151.0048(a) (4) (West 2008), whi ch ar e “taxable service s,” see id. § 151.0101(a) (11) (West 2008), and subject to sales tax, see id. §§ 151.010, .051(a) (West 2008).

Howeve r, Delta contends that its purcha ses of such s er v i ce s fall within the “sale for resa le” tax exemption. The sale for resa le of a taxable item is exempted from sales tax. See id. § 151.302(a) . A sale f

or re sale include s:

a sale of

. . . a taxable service to a purcha s er wh o ac q u i re s t he

. . . service for the purpose of rese lling it .

. . in the normal course of business in the form or condition in which it is acquir ed or as an attachme nt to or integ ral part of other tang ible persona l property

or taxable servic e.

3Id. § 151.006(a) (1) (W es t 2 0 0 8 ). Delta arg ues that, in acc ordanc e with its ag ree ments with the

Airports, its purcha ses of janitorial and maintenanc e service s are for the purpose of rese lling those service s to the Airports in the normal c ourse of its business. We disag ree . Delta does not purcha se the janit o ri al and maintenanc e service s for the purpose of resa le. Delta purcha ses the service s for the purpose of fulfilling its obliga tions under its a g ree ments with the Airports. These ag ree ments require Delta to kee p the lease d premises in a clea n, order ly , and opera

ble condition. Ba sed on the terms of the ag ree ments, we cannot conclude
t hat Delta’ s fulfilling such obliga tion constitutes the perf ormanc e of a taxable janitori al o r maintenanc e service for the Airports an d , t here fore , constitutes a sale to the Airports

. See id. § 151.005(3) (West 2008) (def ining “sale ” to include “the perf ormanc e of a taxable service ”). The Airports are not purcha sing or acquir ing janitorial, maintenanc e, or any rela ted service s from Delta. They are simply leasing rea l proper ty to Delta with the require ment that Delta maintain the space it is l ea sing. Delta can do this howeve r it wants within the para meters of its ag ree ments with the Ai rp o rt s . Delta’ s decision to purcha se janitorial and maintenanc e service s from a third party provider—r ather than perf orming the service s itself—does not transfor m its obliga tion under the ag ree ments with the Airports into a sale of janitorial and maintenanc e service s to the Airports. Such purcha ses are Delta’ s chosen means of acc omplishi ng its contra ctual obliga tions under its l ease ag ree ments. The Airports lease terminal space to Delta. I n connec tion with this transac tion, the ag ree ments establish that Delta is the party responsible to ensure that those jani t o ri al and maintenanc e service s that are require d to keep the lease d premises clea n, order ly , and opera

ble are , in fac t, perf

ormed. This i s n o t a s ale of janitorial and maintenanc e service s to the Airports, and

4there fore , Delta’ s purcha se of janitorial and maintenanc e service s under these circ umstances is not

a sale for r esale

.

We affir m the judgme nt of the district court.

__________________________________________ G. Alan Waldrop, Just ice Be fore Chief J ustice Jones, J ustices Waldrop and He nson Affir med Filed: Aug ust 3, 2010

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