### TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

ON RECONSIDERATION EN BANC

NO. 03
- 18
- 00790
- CV

Glenn Hegar, Comptroller of Public Accounts of the State of Texas , and Ken Paxton, Attorney General of the State of Texas, Appellant s

v. El Paso Electr ic Company, Appellee

FROM T H E 353RD DISTRICT COURT OF TRAVIS COUNTY NO. D
- 1
- GN
- 17
- 006837, THE HONORABLE JAN SOIFER, JUDGE PRESIDING

O P I N I O N

The opinion s and judgment issued on August 13 , 2020 , are withdrawn , and the
follow i ng opinion is substituted

.

Gle n Hegar, Comp troller of Public Accounts , and Ken Paxton, Attorney General , (collectively , the C omp troller) app eal from the trial court ’ s judgment following a bench trial that granted in part E l Paso E lectri c Company ’ s ( EPE) refund claims for sales taxes paid on transactions in volving “telemetry units

. ” See Te x. Tax Code § 151.318 (a)(4)

. In two issues, the Comp t r oll er challen ges th e trial court ’ s subject matter jurisdiction over EPE ’ s re fund claims and , if the trial court h a d jurisdiction, the trial court ’s conclusion that the manufacturing exemption2

applied to the transactions in question

. See id. For the follo wing reasons, we affirm the trial

court ’ s judgment.

B ACKG R OUND 1
M anufacturing Exemption

To give context to th e pa rties ’ dispute, we brief ly discuss the manufacturing tax exemption and its applicable statutory provision . The manufacturing exemption is an except ion

t o the gener al rule that sales tax is imposed on any “ sale ” of a “ taxable item ” in the state

. S ee
T e x. Tax Code § § 151.051 (stating general rule that “ tax is imposed on each s ale of a t axable
ite m in t his state ” ), .318 (a) ( exempt in g items “ from the taxe s imposed by this chapter if sold, leased, or rented to, or stored, used, or consumed by a manufactu re r ” ) ; s ee Sil icon Lab s
. , Inc.

v. Hegar , No . 03

- 17

- 00061

- CV , 2018 Tex. App. LEX IS 5 323, at * 1

– 2 ( Te x . App.

— Austi n July 13 , 201 8 , pet. denied) (mem. op.) ( ge nerally de scribing manufac tur ing exemption) ; GTE Sw.
Inc. v. Combs , No. 03

- 08

- 00561

- CV, 2010 Tex. Ap p. LEX IS 4223, at *7

– 9 (Tex. App.

— Austin June 3, 2010, pet. denied) (mem. op.) ( same )

. In general terms, “ [t]he manufacturing exemption exempts a person wh o produces certain types of tangible personal property for sale to ultimate consumers from having to p ay s ales tax on its purchase of certain otherwise

- taxable tangible personal property t hat is used in the production process. ” Combs v. Home & Garden Part y, Ltd. , No. 03

- 09

- 00673

- CV, 2010 Tex. App. LEXIS 8875, at *7 (Tex. App.

— Austin Nov. 3, 2010, no pet .) (me m. op.)

.

1 The facts are taken primarily from the trial court ’ s unc hallenge d findings o f facts and fro m the administrati ve la w judge ’ s Proposal for D ecision i n the administrative proceedi ng s , which the Comptroller adopt ed

.3 Re levant to the pa rt ies ’ dispute , S ubsection 151.318 (a)(4) provides :
(a ) The following items are exempt from the taxes imposed by this chap ter if sold, leased, or rented to, or stored, used , or consu m ed by a manufac turer:

. . . (4 ) actu at ors, s team production equipment and its fuel, in

- process flow through tanks, cooling towers, generators, heat exchan gers, transformers and the switches , breakers, capacitor banks, regulators, relays, reclosers, fuses, interruptors, reactors, arrestors, r es istors , insulators, instrument transformers, and telemetry units that are related to the transformers, electronic co ntrol room equipment, comp uterized control units, pumps, compressors, and hydraulic units, that are used to power, supply, support, or con tr ol equ ipment that qualifies for exemption under Subdivision (2) or (5) or to generate electricity, chilled water, or steam for ultimate sale; transform ers located at an electric generating facility that increase the voltage of electricity generated for u lt imate sale, the electrical cable that carries t he electricity from the electric generating equipment to the step

- up t ransformers, and the swit ches, bre akers, capacitor banks, regulators, relays, reclosers, fuses, interruptors, reactors, arrestors, resist or s, ins ulators, instrument transformers, and tel emetry units that are related to the step

- up transformers; and transformer s that decrease the v oltage of ele ctricity generated for ultimate sale and the switches, breakers, capacitor banks, regulators, relay s, reclo sers, fuses, interruptors, reactors, arrestor s, resistors, insulators, instrument transformers, and telemetry units that are related to the step

- down transfo rmer s
. Tex. Tax Code § 151.318 (a)( 4)

. T he parties ’ di spute concerns the l ast listed item i n S ubsec t ion (a)(4)

— “ t elemetry units that are related to the step

- down transfo rmer s
. ” Id.

A dministrat ive Proceedings

EPE filed refund cla im s f

or sales taxes that it paid for the au dit p eriod Apr il 1, 2006 , through December 31, 2009

. The Comp t roller d oes not disp ute th at EPE is a manufacturer of
elect ricity for Texas sales tax purposes but denied EPE ’ s tax ref und claim s co ncerning customer

meters , substation meters , and collars that EPE pur chased , installed , and used to provide electricity to its cus to mers
.4 T he cu stomer meters a re used at cus tom er locations , are part of a local network , and are physically con nected by wire to l ocal step

- do w n trans formers

. A step

- down transformer is eq uipment th at is installed in customer areas or ne ighborhoods

— eit her on a uti lity pole or
under ground

— to reduce the voltage of electricity entering a customer ’ s location t o m ake it

us able for the customer ’ s purposes
. The substation meters interface with the step

- down transformers to provide direct data on how the step

- dow n tra nsformer s a re fu nctioning, including
their vol tage, and the collars a re installed on the meters and allow EPE to send a signal to shut
off a c u stomer ’ s electricity service. EPE sought a refund of the sales taxes paid on the se items
ba sed on the manuf

actu r ing ex emp tion because the items were “ telemet ry unit s th at are rela ted to
the step

- down transformer s
. ” 2 See id

.

In the Proposal for De cision (PFD) that the Comptroller adopted , t he
administra tive law judge (ALJ) sustained staff ’ s o bjection to EPE ’ s ref und claim s f

or sales taxes paid on the transactions concerning the meters an d collars to the extent the claims were based on
the man ufacturing exemption . The ALJ agree d with staff that EPE ’ s argument that was based on
the manufacturing exemption was “ not timely raise d ” under th e Com ptroller rule set ting the
de adline for EPE to amend its statemen t s of grou nds and exclu d ed the issue from consideration
in the cont ested case hea ring

. Se e 34 Tex. Admin. Code § 1.11 ( Comptroller of P ublic Ac counts , S tatemen t of Groun ds; P r eliminary Conference) (setting out con tent of statement of gro unds and

2 EPE also argued in the administra tive proceedings that the ite ms in question were pur chase s f

or r esale as a separate ground f or c laiming an exemption from s ales tax

. See T ex. Tax Code §§ 151.00 6 ( def i ni ng “ sale for res ale ” ) , .302 (exemp ting “ sale for resale of a taxable item ” from taxes imposed by chap ter )

. T hat ground is not at issue in this appeal

.5

deadline f

or amend ing state ment of grounds )

. 3 EPE challenged t his decision in its motion for
reh earing , which t he Comptroller denied

. EPE then filed its suit for tax r efun d.

Plea to t he Jurisdiction

Prior to the bench trial , the Comptroller filed a plea to the juris diction that
chal le nged the trial court ’s jurisdiction ov e r EPE ’ s refund claim s
. In his plea, the Comptroller
asserted that EPE wa ived the opportunity to r aise the manufact uring exem ption wi th resp ect to
th e tran s a ctions concerning the meters and collars because it f ai led to compl y with the proced ural requir emen ts of S ub section 111.104 (c) (2) of the Tax Code and t he Comptroller ru le that set the
de adline for EPE to amend its statemen t s of grou nds

. See Tex. T ax C o d e § 11 1

. 104 (c) (2) (re quiring claim for r efun d to “ state fully and in detail each reason or ground on whi ch the claim
is founded ” ); 34 Tex. Admin. Code § 1.11

. EP E filed a response to the Comptroller ’ s p lea to the ju risdiction , and the par ties pr esented j uri sdicti onal eviden ce
.

The e viden ce before the trial court included filings in the administrative
proc eeding s , such as EPE ’s initial claims for re funds, its statements of gr ounds and supporting
sch edul es, the PFD , an d EPE ’ s motion f or rehearing

. EPE ’ s statement s of g ro unds refer to the
manufact uring ex emption a mong the stated ground s for EPE ’ s claim s for refun d and qu ote
S ection 151.318, includ ing S ubsection (a)(4)

. Th e supporting sche dule s also i dent i fy specific

tr ansactions involving “ meters ” b y line ite m that include deta i led in formation about the
pa rticular transaction including dates , invo i ce number s , and amounts and spec ifically refer to the
manufa cturing exemption

— such a s by listing “ mfg. e q uip.

— 1 00% exempt ”

— a nd S ection

3 A lthough a pri or Comptr olle r rule applies in this case , we cite t he c u rrent r ule for c o n veni ence
. I ts re quirements are substantially the same and do not affect our ana lysis

.6

151.318 , as well as the applicable Com ptroller rule

. 4 See Tex. Tax Code § 151.318 ; 3 4 Tex

. Admin . Code § 3.300 (Comptroller of Publi c Accoun ts, Manufact urin g; C ustom Man ufac turing ; Fabricat ing; Processing).

EPE also filed a n af

fidavit by it s de sig nated tax repres ent ative

. In his affidav it, the tax represen tative averred that “ [o]n the sched ules submitted with the refu nd claim [s] , me ters
were list ed as exempt manufa cturing equipment. ” Th e r epr esentative simi larl y swore as t o the
schedules th at were provide d with the statements of grou nds as follows : “ On these sched ules,
the reason for th e re f

und for meters and rela ted ite ms was bo th ‘ mfg. equip.

— 100 % exempt ’ and cited the primary tax r eferen ces ‘ TTC 151.318; T AC 3.3 00. ’ ” T he representative fur ther averred
about EPE ’ s refund claim s b ased o n the manuf acturing ex em ptio n during the administrativ e
proc eeding s , inc luding th at “ [t] he man ufacturing exemption was claime d with respect to the

m eters f rom the in itial requ est for r efund h earing and no addit ional transactions were added during the refun d hearing procedure or SOAH matter that were not inclu d ed in the requ est s for

4 A s to the detailed infor mation provide d o n the schedules, EPE ’ s “ A ccounts P ayable Invoices ” schedule s id entif y specific transac tion s by line item , an d each line ite m prov i d e s the ve ndo r, invoice dat e, inv oic e numb er, des criptio n, app licable T ax C ode provision (s) a nd Comptroller rule(s ) , amount of taxes pa id , amount o f re fund re quested , and the reason or grou nd for the request. S i milarly, EPE ’ s “ Invent o ry Is s uances ” schedu l es ide nti f y specific transa ctio n s by lin e item, and each lin e item provide s the item number , transaction date, item description, the applicable p r ovision (s) of the Tax Code and Comptrol ler rules , amount of cost , taxes p aid , and amou n t of r efund re ques te d

. A nother sc hedule provided by E P E during the administr ati ve proceeding s ide ntifi es specific transaction s by li ne item , and each line item provide s an image lin k, v endor number, ve ndor n ame , inv oice date, issue , descr ipt ion, reason f o r ref u nd reque st wit h reference to applicable Tax C ode pr ovisio n (s) and Comptroller rules , account descript ion, wor k o rder, work order descri pt ion, charging cost descrip t ion , proje ct nu mber, amount of t axe s p aid , and amount of refund r equeste d

. I n the PFD , the ALJ f ound : “ Most of the meter p urch ases at issue we re made from I tron Electr icity Me tering, Inc. (It ron). The p rimary two mode ls that w er e purchase d were the Cent r on and Sentinel. ” The l ine ite ms o n the sche dule s identify ing the s pec if ic transactio ns involvin g Centr on and Sentinel con sistently refer to t he manufa cturing exemption and S ection 151.318 as a stat ed g r ound f or seeking a refu n d

.7

r ef und hearing ” and that , during the administra tive proce eding s , EPE “ remov ed other remaining
transactions rela te d to the meters on the schedules exchanged with the Comptrol ler b ut did not

ever remove the m eters themselves from its m anufacturing exem p tion cl ai m. ”

Foll owin g a he aring, the trial cour t denied th e Comptroller ’ s plea to
the jurisdict ion

.

Ben ch Trial
S hortly after the tria l court den ied the Comptroller ’ s plea to the jurisdiction , the
case was tried to the bench

. EPE ’ s witness was its me tering supervisor , who ha d w orked for
EPE for forty years, and its exhibits included schedules showing the requested refu nd p er transaction by line item and in su mmar y
. T he Comptroller did not call any witnesses , and the parties agreed t o the amount of r efund that would be owed based o n the trial court ’ s ruling

.

The metering sup ervisor te stified about the role and fu nctiona lity of t he subs tation

meters , customer meters, and collars and their respective relationship s with step

- d own
trans f orm er s with in local networks

. I n his cl osing statement , the Comptroller ’ s c ounsel
ackno wledged that “ with regard to the s ubstati on m eters, t h e testimony ha s been that the
substa tion meters are de dicated to the step

- down transformers and they tele communicate the
metri cs of t he transformers ” and that “ the State will ac knowledg e that those things are tel emetry
units related to step

- down tra nsfo rm ers. ” B ut he d isputed that the customer me ters or collars qualified for the ex emption on that basis

.

The trial cour t therea fter entered judgment awarding EPE $211,880.79

. The trial

cou rt also made findings of fact an d conc lusions of l aw
. The trial cour t ruled in EPE ’ s fa vor as to the transact ion s involving the substation meters and customer met ers , concluding that th o se8

tran s actions were t ax exempt under the manufacturing exemption , but the trial court denied
EPE ’ s refun d claims as to the sale s taxes pa id on the transa ct ions invo lving the c ollars

. Concerning the cus tomer meters and their relation to s tep

- d own transf ormers , t he trial court ’ s findings o f fact include :
10. EPE purchased, installed, and used customer meters at cu st omer locations.
1 1. Custo mer meters were p art of a local network that were connected to lo cal stepdown transformers, used to measure and provide electri city to customers. 12. Step

- down transformers were equipment installed in customer areas or neighborho od s

— either on a ut ility pol e or underground

— to reduce the voltage of th e electricity enterin g a customer ’ s location, making it useable for a customer ’ s pu rposes. 13. Customer meters were physically connected to step

- down transformers by wire.
14. Customer me ters were instal led at cu stomer locations to measure customers ’ elect ricity consumption. Customer meters also had several other functions that al lowed them to interact with the step

- down transformers. 15. Customer meters have telemetry functionality that allowed them to collect c ustomer consumpti on data in kilowatt hours. I nformation collecte d and transmitted from the customer meters was us ed colle ctively to analyze the step

down transformers ’ performance, maintenance, and safety requirements.
16. Custome r meters then tr ansmitted those metrics to EPE personnel using cellular technology or auto mated meter reading (AMR). The communications te chnology removed the need for someone to physically interact with the telemetry unit to read the usage data.

The tri al court ’ s concl usions of law include “ EPE ’ s p urchase and use of customer meters
and substation meters are exe mp t fr om Texas sales tax unde r Tex. Tax Code § 151.318(a)(4)

as ‘ telem etry u nits that are related to .

. . ste p
- down transformer [ s ]

. ’ ” Th e Comptroller ’ s appeal f ollowed.9 A NALYSIS On appeal , the Comptroller challenges the trial court ’ s subjec t matter jurisdiction
to consider EPE ’ s re fund claims , but he d oe s not challenge the trial court ’ s conclusion that the

trans a ction s in volvin g the substation meters we re tax ex e mpt u nde r the manu facturing exemption

. Th us , the tran s ac tion s involving the cu stomer meters are the only transaction s in
d ispute on appeal if w e determ ine that the trial court had subject matter ju risdiction over EPE ’ s

re fu nd claims

. 5 In this context, w e turn to the Comptroller ’ s issues, beg inning with his challenge
to the trial court ’ s subject matter ju r isdict ion

. Subject Matter Jurisdiction

I n his first issue, the Comptroller challenges the trial court ’s denial of his pl ea to the jurisdiction

. 6 He a rgu es tha t t he trial court did not have jurisdiction over EPE ’ s refund
claims because EPE “failed to timely ass ert its c laim with the specificity required ” by the Tax
Code and relies on S ection 111 .104 (c) of the Tax Code an d t he C omp troller ru le setting th e

5 EPE did not file an a ppeal and therefore d oes not challeng e th e portion of t he tri al court ’ s ju d gment denyin g its refund claim s as to the sales taxes paid on the transactions involving the collars

.

6 EPE argues that the Com ptroller may not raise his jurisdictional chal l enge at this junct ure and that he should h ave timely brought an interlocutor y appeal from the denial of hi s plea to the jurisdiction. See Tex. Civ. Prac. & Re m. Code § 51. 014 (a) (8) (providing for interlocutor y appeal from denial of gove rnmental unit ’ s plea t o jurisdiction) ; Tex. R. App. P. 26.1(b ) (p roviding deadline for fi ling notice of appeal w hen accelerated ) , 28.1 (prov i ding that interlo c utory appeals are accelerated)

. Th e T exas Supreme Court, however, ha s made clear that

“ a party does no t forfeit its ri g ht to challenge a ruling on appeal fro m a final judgment simply by opting not to pursue a n interloc ut ory ap p ea l of tha t r uling

. ” Bonsmara Nat. Beef Co. v. Hart of Tex. Cattle Feeders, LLC , 603 S.W.3d 385 , 387 (Tex. 2020). Further, challenges to subject m at ter jurisdiction may be raised for t he f irst time on appeal. See Texas Ass ’ n of Bus. v . Texas Air Control Bd. , 852 S.W .2d 440, 445

– 46 (Tex. 1993)

. T hus, we conclude that the Comptroller ’ s first issue i s properly before us.10

deadlin e for amending statem ent s of g rounds

. See Tex. Tax Code § 111.104 (c) ; 34 Tex. Admin. Code § 1.11

.

S tandard of Rev iew A plea to t he jurisdiction is among the procedural mechanisms through which a party may cha llenge a trial court ’ s authori ty to dec ide the subject ma tter of a specific cause of
action. See Texas Dep ’ t of Parks & Wildlife v. Miranda , 133 S.W.3d 217, 226 (Tex. 2004)

. A plea challeng ing the trial court ’s subject matter jurisdiction ra ises a questi on of law that we
review de no vo. Id

. “[I ] f a plea to t he juris diction challenges the existence of jurisdictional facts, ” as is the case here, “ we consider relevant evidence s ubmitted by the parties when necessary to resolve the jurisdictional issues rai sed, as the trial court is req uired to do. ” Id. at
22 7 ( citing B land Indep. Sch. Dist. v. Blue , 34 S.W.3d 547, 555 (Tex. 2000) ); see also Mission Consol. Indep. Sch. Dist. v. Garcia , 372 S.W.3d 629, 635 (Tex. 2012) (describing plea to jurisdiction practi ce when challenge is to existen ce of jur is dictio nal facts and expl aining that

“ trial court ’ s review of a plea to the jurisdiction mirror s that of a traditional motion for summ ary judgment ” (citing Miranda , 133 S.W.3d at 228 ) )

.

The Comptroller ’ s challenge to the trial court ’s jurisdic tion also in volves statu tory

constru ction , a qu estion of law that we review de novo. See First Am. Title Ins. Co. v. Combs , 258 S.W.3d 627, 631 (Tex. 2008)

. Our primary concern in co nstruing a statute is the expres s statutory language. See Galbraith Eng ’ g Consul tants, Inc. v. Pochucha , 29 0 S.W.3 d 863 , 867 (Tex. 2009). “ We thus construe the text according to its plain and common meaning unl ess a contrary intention is apparent from the context or unless such a const ruction leads to absurd
results. ” Presi dio Indep . Sch. Dist. v. Scott , 309 S.W.3d 927, 930 (Tex. 2010) (citing City of11

Rockwall v. Hughes , 246 S.W.3d 621, 625

– 26 (Tex. 2008)). We a lso “ read the statute as a whole and interp ret it to give effect to every part. ” Railroad Comm ’ n v. Texas Citizen s for a S afe
Future & Clean Water , 3 36 S.W.3 d 619 , 628 (Tex. 2011) (quoting City of San Antonio v. City of
Boerne , 111 S.W.3d 22, 25 (Tex. 2003 )) ; see Texas Lottery Comm’n v. First State Bank of DeQueen , 325 S.W.3d 62 8, 635 (Tex. 2010) (explaining that c ou rts “ pres ume the Legislature
selecte d language in a statute with care and that every word or phrase was used with a purpose in
mind ” ). F urther, a precondition to deference to an agency ’ s interpretation of a statute i s ambiguity

. Southwest Royalties, Inc. v. Hegar , 500 S.W.3d 400, 404

– 05 (T ex. 2016)

.

Sectio n 111.104(c) Among the jurisdict ional prerequisites for brin ging a tax refund suit is compliance
with S ection 111.004(c) of the Tax Code

. S ee Tex. Tax Code § 112.151 (requiring claimant to
follow adm inistrat ive procedur es specified in S e ctions 111.104 and 111.105 of Tax Code

as prerequisite to b ringing suit for tax refund claim ) ; see also Combs v. Chevron, Inc. , 319 S.W.3d 836 , 844 (Tex . App.

— Austin 2010, pet. denied) (explaining that com pliance with procedur al requireme nts of tax protest law was jurisdictional prerequisite for trial court to hear
and dec ide merits of tax refund suit)

. 7 S ubsectio n 111.104 (c) (2) states that a claim for refund

must “ state fully and in detail each reason or ground on whi ch the c laim is founded. ” Tex . Tax
Co de § 111.104 (c) ( 2)

.

7 The C omp tr oller do es not dispute that EPE c o mplied with S ection 111. 105(d) of the Tax Code b y raising th e manufac turing ex e mpt ion in its motion for re hearing as to the transaction s in question

. S ee Tex. Tax Code § 111.105 (d) ( s t ating that motion for rehear ing on tax refund claim “must be written and a ssert each specif ic g round of error ”) ; see also id. § 11 2 .152 (lim iting issues in su it brought under subchapter to “ grounds of error contained in the motion for rehearing ” )

.12 This Court has concluded that th e stat ut ory langua ge in S ubsection ( c) (2) is not ambiguous and interpreted its plain language in contex t and con junction with ot her sections of
the T ax Code that cont ain simi lar language

. See Hegar v. Ry an, LLC , No. 03

- 13

- 0040 0

- CV,
2015 Tex. App. LEXIS 5096, at *25

– 28 (Tex . App.

— Austin May 20, 2015, no pet.) (mem. op.) (concluding that S ub section 111.104(c)(2 ) was not ambiguous, citing common meaning of

“ reason, ” “ ful ly , ” “ de tail, ” and “ ground, ” and inter preting plain language in context an d conjunction with ot her sections of Tax Code that contain similar language) ; see a l so S cott , 309 S.W.3d at 930

– 31 & n.3 ( noting that generally substantially same phrases in statutes on same subj ect matter wi ll have same meaning)

. W e concluded that “ [ t ] he plain language of the require ments of S ubsection (c)(2) are satisfied when the ground

— the legal foundation or basi s

— of the claim is stated ‘ fully and in detail. ’ ” Ryan , 2015 Tex. A pp. LEX IS 5096, at *2 7

. We interprete d the phrase to require the taxpayer to st ate t he “ reason or ground ” in such a way as to put the Comptroller on notice of the legal ba sis of the claim. See id. a t *28

– 31 (comparing language in S ub section 111.104( c) wi th simi lar language in other section s )

.

As support for his position that EPE “failed to timely ass ert its c laim with the specificity required by the Tax C ode , ” t he C om ptr oller r el ies on his rule th at sets the de adline for amending stateme n t s of grounds

. See 34 Tex. Admin. Code § 1.11

. T he C o mp troll er argu es that

“ [ t ] he Court should find that [EPE]’ s failure t o comply with [ the Comptroller rule ] deadline was a failure to comply with the ‘fully and in det ail’ requirement of Tax Code s ection 111.104.” T h e Comptro ller ’ s po sition , however, c onfla t es the requir e ment s under his procedural rule s with the
T ax Code ’ s jurisdictional r e quire me n t s for bringing a tax ref und suit

. S ee Tex. Tax Code § 112.151 ; C

hevron , 319 S.W.3d at 844 (explaining that compl i ance with sectio ns 111.104 a nd
111.105 of Tax Co de creat es trial court jurisdiction over tax r efund claim ). We decline the13

Comptroller ’ s invi tation to im pos e jurisdictional req uire ments tha t a re n ot in the sta tute.
C f. , e.g. , Ryan , 2015 Tex. App. LEXIS 5096, at * 35 (con cluding in context of rule chall en ge that
rules were invalid t h at impo s ed “ ‘ additional burd ens, conditions, or restrictio ns in excess of o r incon sis te nt with ’ s u bsection 111.104 (c) and th e ov erall stat utory scheme ” ( citation omit ted ) )

.

T he Comp tr ol ler do e s not dispute that beginning with EPE ’ s in itial claims for

r efund he was on notice that EPE was seekin g a r efund based on t he manu facturing exemption
pursu ant to section 151.318 as to each of th e transa ctions in question

. See Silicon Lab s
. , Inc

. , 2 018 T ex . App. LEX IS 5 323, at * 1 3

– 16 ( exp lain ing that specific ity requireme nts of S ub section
111.104 (c) provi d e notice t o Comp troller of legal b as is of clai m ) ; Ryan , 2015 Tex. App. LEXIS
5096 , at * 25

– 31 ( same )

. EPE expr essly re ference d the man uf acturing ex emption and quote d
S ect io n 151.318 , incl uding S ubsection (a)(4) , in its statements o f gro unds a nd provided furth er

n otice in it s accompanying sch edules that it was seeking a refund ba sed on the manufa cturing exemption as to each of the specific ally id en tif ied tra nsaction s
. See 34 Te x. Admin. Co de § 1. 11 ( a ) ( addressing required content of statement of g rou nds )

. Th e sche dule s identif y the specific transactions b y line ite m s that include deta i led i n formation about the pa rticular
transaction including dates , invo i ce numbers , and amounts

— and when ap plicable , that the item
involved in the transaction w as a “ met er ”

— and spec ifically refer to the manufa cturing exemption

— such a s by listing “ mfg. e quip.

— 1 00 % exempt ”

— and section 151.318 , as well as
the applicable Com p troll er rule

. The Comptroller also d oes not dispu te that he was on no ti ce during the administrative proceedings th at EPE was claiming that the transactions in q uestion were exempt because the meter s and collars were “ telemetry units that are re lated to th e ste p
down transformers

. ” See Tex. Tax Code § 151.318 (a)(4 ) ; Ryan , 2015 Tex. App. LEXIS 5096, at
*3 1 (observing that “ statutory scheme, from the filing of a refund claim to a suit for refund, is14

d esigned so that the Comptroller is aware of the legal basi s for the refund claim but then gives
th e taxpayer a period of time to prove its clai m ” )

.

A pplying the plain l anguage of the unambiguous statute and consistent with our precedent , w e conclude t hat EPE ’s claims for tax refund based on the manu facturing

exe mpt io n satisf

ie d the requir e ments of S ub section 11 1.104 (c) (2)

. See Silicon Lab s
. , Inc , 2018 Tex. App. LEX IS 5 323, at * 1 3

– 16 ; Ryan , 2015 Te x. App. LEXIS 509 6 , at * 25

– 31 ; see also
In re N estle, USA, In c . , 35 9 S .W.3d 20 7, 208

– 09 (Tex. 20 1 2 ) (orig. proceeding ) (ge nerally discussing requirements of protest letter); H.K. Global Trading, Ltd. v. Co mbs , 4 29 S.W.3d 132, 136 (Tex. App.

— Austin 2014, pet. denied) (concluding that prote s t l etter was su f ficient to
invoke trial cour t ’ s jur isdiction ) ; Combs v. Heal th Ca re Serv s. Corp. , No. 03

- 09

- 00617

- CV,
20 11 Tex. App. LEXIS 2 0 81, at * 43

– 45 (Tex . App.

— Austin Ma r. 1 6, 2011 ) (mem. op.) (co ncluding that motion for reh earing was sufficiently de finit e to identi fy refund cl ai m based

on sal e s
- tax exemptions made for and resold t o fed er a l government ) , af f ’ d in part and rev ’ d
i n part on other grounds , 4 0 1 S.W .3 d 62 3 ( Tex. 2013 ) ; cf. Chevron , 319 S.W .3d at 844

– 45 (concludi ng th at trial court lacked jurisdiction over “ 98 new, un related cl aims ” t hat taxpayer
raised for first time in m otion for rehearing ) ; Loca l Neon Co. v. S trayhorn , No . 03

- 04

- 00261

- CV,
2005 Tex. App. LEXIS 4667, at *13

– 15 (T ex. App.

— Austin June 16 , 2005, no pet.) (m em. op.) (discussing specific ity requirement fo r protest letter s a n d concluding that “ bare stat e me nt ” t h at

ta xes were pa id under p rote st “ did no t sati sfy the purpose of the written pr otest requirement
becau se th e letter does not inform the Comptroller on w hat basis she must defen d the suit ” )

. Thus, we conclude that the trial court had subject matter jurisdi ction over EPE ’ s refund claims
and overr ule th e Comptroller ’ s first issue.15

Cus tomer Meters

In his secon d is sue, the Comp trol ler argues that the trial court erred when it
awarded a refund to EPE pursuant to the man ufacturing exemption on the trans actions invol ving
the customer met ers
.

Standard o

f Rev iew In an appeal from a bench trial, we review a trial court ’ s conc lusions of l aw de novo, affirming the judgment on any legal theory that finds support in the e vidence. See BMC
So ftware Belg

. , N.V. v. Ma rchand , 83 S.W.3d 789, 794 (Tex. 2002); Worf ord v. Sta mper , 801 S.W.2d 108, 109 (Tex. 1990). Furt her, w hen findings of fact are filed and unchallenged,

“ [ t ] hey are binding on an appellate court unless the cont rary is established as a matter of law, or
if there is no evidence to support the finding. ” McGalliard v. Kuhlmann , 722 S.W.2d 694, 696 (Tex. 1986) ; s ee Ortiz v. J ones , 917 S. W.2d 770, 772 (Tex. 1996) ( explain ing that appellate court
review s tr ial court ’ s findings of fact for legal and factual suf fic iency of evidence by same standards applied to jury verdict )

.

The Comptroller ’ s seco nd issue also concern s statutory construction, s pecificall y the scope and meaning of the m anufacturing exemption

. S tatu tory exemption s from taxation are strictly con s trued because “ they undermine equality and unif ormity by placing a greater burden on some taxpaying businesses and individuals rather than placing the burden on all taxpayers equally. ” Nort h Alamo Water Suppl y Corp. v. Willacy C n t

y. Appraisal Dist. , 804 S .W.2d 894, 899 (Tex. 1991) ; see also Southwest Royalties , Inc. , 500 S.W.3d at 404 (explaining that ta x exemptions are narrowly construed and that taxpayer has burden to “ clearly show ” that

exe mption applies). “ Although statutory tax exemptions are narrowl y construed, construing16

them narrowly does not mean disregarding the wo rds used by the Legislature. ” Southwest Royalties, Inc

. , 500 S.W.3d at 404

. Further, “ [t] he concept that a tax exemption must be

‘ strictl y ’ construed ‘ cannot be used as an excuse to s tray from reasonableness. ’ ” GTE Sw. Inc. , 2010 Tex. App. LEXIS 4223, at *7 (citing Sharp v. Tyler Pi pe Indus., Inc. , 919 S.W.2d 157, 161 (Tex. App.

— Austin 1996, writ denied) ).

Are th e customer meters exemp t pursuan t to the m anufacturing e xemption ?
T he trial court c oncluded that the c u stomer meters we re exempt pursuant to the manufacturing exempti on , concluding that :

4

. EPE ’s purchase and use of cu stomer meters .

. . are exempt from Texas s ales tax under Te x. Tax Code § 151.318(a)(4) as “ telemetry un its that ar e related to

. . . step d own transf

ormers
. ”

. . . 6. The phrase “ related to ” is re ad broadly under Texas law.
7. The c ustomer meters

. . . were re lated to the step

- down transformers by pro viding data to EPE personnel about the operation and func tionality of the ste p
down transfor mers. 8. E PE used the telemetry data from the c ustomer meters .

. . to make necessary maintenance and repairs to its step

- down transfo r mers.

The Comp t roller does not dispute th at the customer meters have “telemetry capab ility ” and are “telemetry units ” 8 within the meaning of S ubsection 151.318 (a)(4) b ut argues that “they are not r elated to step

- down trans formers as described in the Tax Code. ” See Tex

. Tax
C ode § 1 51.318 (a)( 4) ( exempting “telem etry units that are related to the step

- down

8 The p arties substantially agree on the meaning of a “ tel emetry unit. ” The Comptroller de fine s a “ te lemetry unit ” as “ a device that tel ecommunic ates mea surements , ” and EPE defin es it as “ a device that mea sures and transmits the mea surements to another device. ”17

tra nsformers ” )

. H e argues that thi s Court should defer to his statutory interpr etation in this case
and “ use a narrow construction [of ‘ related to ’ ] , which would re quire the customer meter s to
di rectly measure the output of the step

- down transformers ” and that , in context , “ the only

reason able interp retation of th e statute is that the telemetry un i t must telecommunicate th e metrics of step

- down transformers. ” Otherwise, the Comptroller arg ues, every meter on an
electri c generating and tra nsmission gr id w ould qu alify for the manu facturing e xemption because
the met er s “would not regis ter any elec tricity consumption unless all the other elements of the system were functi oning ” and “the Le gisla ture intended that on ly ce rtain telem etry units ar e exempt. ” I n the Comptroller ’ s view, for a meter t o qualify, it “ should be d ed icated to a

st ep
- down tra nsformer and it should telecommunicate the input or outp ut metrics of the
transformer it self

. ” T he C omptrol ler also relies on other specified devi ces that qual ify for the manufacturing exemption , such a s “ capacitator banks ” and “ instrumen t transformers , ” as support
for his position that the “ relationshi p must be mor e than mere interconnection ” and argues that i f

“ m e re wire was enough to sati sfy the term ‘ related , ’ [the Legislature] w ould have stated so ” as it
did with r e spect to s te p
- up transformers.

We begin o u r analysis by observing that the phrase “ related to ” in S ubsection
151.318 (a)(4) is no t defined in the statute

. S ee id. § 151.318(a)(4)

. Nor is the phrase a mb iguous,
and we therefore cons tru e it based on its plain and common meaning

. S ee S cott , 309 S.W.3d at
930

. “ In ordinary use, ‘ re lates to ’ means to have a connect ion with, to refer to, or to concern. ”
T exas Dep ’ t of Public Safety v. Abbot t , 310 S.W.3d 670, 674

– 675 & n.2 (Tex. App.

— Austin
201 0, no pet.) (citing definition of “relate” in Black’s Law Dictionary 1288 (6th ed. 1990)) ; s ee Scott , 309 S.W.3d at 930

. As recogni zed b y the trial court in its conclusions o f law, t his phrase
is “ very b road in its ord inary usage , and we must presume that the l egisla ture used such a b ro ad18

formulation p urp osely. ” See Abbott , 310 S.W.3d at 674

– 75 ; see also Colorado v. Tyco Valves
& Controls, L .P. , 432 S.W.3d 885, 890 (Tex. 2014) (applying broad defini t ion of “ relates to ” )

. We , howeve r, need not decide t h e brea dth of the phrase “ related to ” in the context of S ubsect ion
151.318 (a)(4) because we conclude that the phrase ’ s mea ning is b road enough to encompass the
relation be tween the customer meters and th e step

- down transformers as found by the trial cou rt
in its unchallenged fin dings of fact

. See McGalliard , 722 S.W.2d at 696 (explaining that generally unchallenged findings are b indi ng on appellate court)

.

The trial court ’ s unchallenged findings includ ed tha t the cus tomer meters : (i) were “ part of a local ne twor k that were con nected to local stepdown transformers , ” (ii) “ were physically connected to step

- down transformers by wire , ” (iii) “ had several other functions that
al lowed them to interact with th e step

- down transformers , ” and (iv) “ have telemetry funct iona lity
that allowed the m to collect customer consumption data in kilowatt hours ” and “[i] nformation
collected and transmitted from the customer meters was us ed colle ctively to analyze the step

- down trans formers ’ performance, maintenance, and safety requi reme nts. ” The trial cou rt
also found that the cu stomer meters “ transmitted those metrics to EPE personnel using cellular
techn ology or automated meter reading (AMR) ” a nd that “ t he communications te c hnolog y removed the need for someone to physically intera ct w ith the telemetry un it to read the usage
data. ” These unchall enged findings support the t rial court ’ s conclusion that the cus tomer meters

“ are re lated to the step

- d own transformers ” and, th us, t hat th e tra nsaction s involving the

customer meters were e xemp t from taxation under the manufac t uring exemption

.

Based on his proposed interpret ation of the phrase “ related t o, ” t he Comptroller argues that the customer meters are not rela ted to the step

- down trans formers because the meters relay metrics about c usto mer usage and not s tep

- down transforme rs , citing the metering19

supervisor ’ s test imony that the meters “ do not measure a tr ansformer ’ s out put at the transformer ”
and th a t the meters are the “ cash regis ters of the company ” because they measure the amount of

e n ergy a customer is using to generate an en er gy bill

. We, however, decline to ad opt the Comptroller ’ s inte r pretation tha t would require the customer meters to communicate certain
informati on a bout a ste p
- down transformer in order to be “ related to ” th e tr ansformer because it
would require us to engraft extra

- statutory req uirements

. See Combs v. Roark Amusement & Vending, L .P. , 422 S.W. 3d 632 , 6 37 (Tex. 2013) ( observing t hat “ provisions do not impose , either explicitly or implicitly, any such extra

- sta tuto ry requirement ” and “ declin [ing] to engraft

one

— revising the statute under the guise of interpreting it ” ) ; see also Sout hwest Royalties, Inc

. , 500 S.W.3d at 404 ( explaining that narrowly const ru ing s tatutory tax exemptions “ does not mean disregarding t he w o rds used by the Legislature ” ); GTE Sw. Inc. , 2010 Tex. App. LEXIS 4223, at
*7 ( stating th at concept that tax exemption must be strictly construed cannot be used as excuse to stray from reason ablenes s )

.

Further, c onsistent with the trial court ’ s unch alle nged findi ngs, the supervisor provide d evidence of a substa ntial relation between the customer meters and the step

- d own transformers in t heir local networ k s
. See Colorado , 432 S.W.3d at 890 ( discuss ing U .S. Supreme Court ’ s construct ion of phrase “ rela tes to ” that required relation not to be “ to o ten uous, remote, or peripheral ” (citing Shaw v. Del ta Air Lines, Inc. , 463 U.S . 85, 100 & n.2 (1983 ))). The supervisor testified that the c us tomer me ters “ a re tied downstrea m to the step

- down

tr ansformer in se r ies wi th th e point of d elivery that it ’ s going to serve ” and answered “ Yes ”
when asked if the customer meters are part of “ a designed system to work together with the step

dow n transformer ” and i f they were “ spec ific to a particul ar step

- down transformer. ” H e explained the design or “ dedicatio n ” as follows:20

Well, if you have one step

- down transformer, you could have one custo mer or you could have fifteen customers on it. So we have to run differ ent lin es to a customer ’ s premise, and we put a meter in eac h on e. You have to be built for the power t hat you ’ re using not for what somebody else is using.
But in order to determine what that transformer and the performance of that transformer is doing, we have to be able to take those meters and be able to add u p th e summation of them

— whether it ’ s voltage, whether it ’ s current, whatever

— and be able to determine the performance of tha t transformer. So all of those meters on that circuit are tied back to that on e step

- down transformer.
Applying the plain meaning o f “ r elated to ” in con text, we conclude that t he t rial cou rt ’ s unchalleng ed findings , as we ll as the evi dence , est ablish that the cu s tome r meters were “ related

to ” step

- down transfor mer s and suppor t the t rial court ’ s con clus ion s that the manufacturing
exemp tion applied to the trans actions involving the custo mer met ers
. See BMC Softwar e Belg

. , 83 S.W.3d a t 7 9 4; McGalliard , 722 S.W.2d at 696. Thus, w e o verrule the Comptroller ’ s

se cond issue.

C ONC LUSION

Ha ving overruled the Comptroller ’ s issues , we affirm the tri al court ’ s judgment

.

____________ ______________________________ Melis sa Goodwi n , Justice
Before Chief Justice Byrne , J ustic es Go odwi n , Bak er, Triana, Ke l ly , an d Smi th Dissenting Opinion by Justice Kelly, joined by Justice Smith
Affirmed on Motion for Reconsideration En Ban c File d : March 5, 2021