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, Appellants

v.

El Paso Electric Company, Appellee

FROM THE 353RD DISTRICT COURT OF TRAVIS COUNTY

NO. D-1-GN-17-006837, THE HONORABLE JAN SOIFER, JUDGE PRESIDING

D I S S E N T I N G O P I N I O N

The Comptroller’s jurisdictional issue requires us to apply Tax Code 

section 111.104(c)(2). That statute requires a taxpayer’s refund claim filed with the Comptroller 

to “state fully and in detail each reason or ground on which the claim is founded.” Tex. Tax Code 

§ 111.104(c)(2); see also id. §§ 111.104(b) (discussing “tax refund claim[s] . . . filed with the 

comptroller”), 111.105 (discussing later-filed motions for rehearing). For at least 16 years, this 

Court has interpreted Section 111.104(c)(2) to require the refund claim to put the Comptroller “on 

notice of the legal bases for the[] claims.” See Strayhorn v. Lexington Ins. Co., 128 S.W.3d 772, 

778–80 (Tex. App.—Austin 2004), aff’d, 209 S.W.3d 83 (Tex. 2006); accord Hegar v. Ryan, LLC, 

No. 03-13-00400-CV, 2015 WL 3393917, at *10 (Tex. App.—Austin May 20, 2015, no pet.)

(mem. op.). The Court’s decision today upends that interpretation. I respectfully dissent in part.
2

Section 111.104(c)(2) is a jurisdictional prerequisite to a taxpayer’s ability to sue 

for a refund. See Combs v. Chevron, Inc., 319 S.W.3d 836, 844 (Tex. App.—Austin 2010, pet. 

denied). The statute addresses the taxpayer’s refund claim, which is what begins the refund 

administrative process. See Tex. Tax Code §§ 111.104(c)(3) (setting deadline for filing of refund 

claim), 112.151(a)–(b) (permitting refund suit in district court only if taxpayer “filed a tax refund 

claim under Section 111.104”); Local Neon Co. v. Strayhorn, No. 03-04-00261-CV, 2005 WL 

1412171, at *3 (Tex. App.—Austin June 16, 2005, no pet.) (mem. op.) (“In a tax refund suit, a 

taxpayer must file a refund claim with the Comptroller providing the grounds on which the claim 

is founded, file a motion for rehearing with the Comptroller after the refund claim is denied, and 

file a refund suit within 30 days after the denial of that motion for rehearing.”).

What is sometimes called “the manufacturing exemption”—a shorthand moniker

that appears nowhere in Tax Code section 151.318—exempts only a limited set of “certain 

otherwise-taxable tangible personal property that is used in the production process” of “certain 

types of tangible personal property for sale to ultimate consumers.” See Combs v. Home & Garden 

Party, Ltd., No. 03-09-00673-CV, 2010 WL 4367054, at *3 (Tex. App.—Austin Nov. 3, 2010, no 

pet.) (mem. op.) (citing Sharp v. Tyler Pipe Indus., Inc., 919 S.W.2d 157, 159, 161 (Tex. App.—

Austin 1996, writ denied)); see also Tex. Tax Code § 151.318(a)(1)–(11), (b)(1)–(3), (c)(1)–(5), 

(d), (e), (f), (n), (o), (p), (q), (q-1), (s)(1)–(3), (t)(1)–(2) (providing that certain types of tangible 

personal property are exempt and that others are not and defining terms to clarify which are exempt 

and which are not); Conf. Comm. Rep., Tex. H.B. 3211, 76th Leg., R.S. (1999) (stating that 

language added by this bill to Section 151.318(a)(4), including “telemetry units . . . related to the 

step-down transformers,” “revise[s] and elaborate[s] on provisions relating to the sales and use tax 

exemption for various manufacturing and industrial processes”). Not every type of equipment
3

used in manufacturing is exempt. Not every kind of “meter” is exempt. Not even every kind of 

“telemetry unit” is exempt. Cf. Tex. Tax Code § 151.318(a)(4) (specifying only three kinds of 

telemetry units that are exempt: those related to (1) certain “instrument transformers,” (2) certain 

“step-up transformers,” or (3) certain “step-down transformers”). Only those types of equipment 

listed in the statute as exempt are exempt.

This statutory framework guides how we must view the legal basis of El Paso 

Electric’s refund claim. Its legal basis is “telemetry units that are related to the step-down 

transformers” from Section 151.318(a)(4). If the legislature had deleted just that phrase from the 

statute, then El Paso Electric would be left without a legal basis for its refund claim in this suit. 

That phrase in the statute is thus the legal basis for its refund claim.

As a result, to put the Comptroller on notice of that legal basis, El Paso Electric’s 

Statements of Grounds and supporting schedules needed to assert—not prove, just assert—that the

customer meters, substation meters, and collars were telemetry units related to step-down 

transformers. Cf. OGCI Training, Inc. v. Hegar, No. 03-16-00704-CV, 2017 WL 4899015, at *5 

(Tex. App.—Austin Oct. 27, 2017, no pet.) (mem. op.) (applying Tax Code section 112.051(b)’s 

“fully and in detail” requirement and saying of it, “A protest letter is sufficient under 

section 112.051 when it puts the Comptroller on notice of the legal basis for the taxpayer’s claim, 

without requiring the protesting taxpayer to state all the evidence on which he relies to support that 

legal basis.” (internal citations omitted) (citing Ryan, 2015 WL 3393917, at *10; James v. 

Consolidated Steel Corp., 195 S.W.2d 955, 962 (Tex. App.—Austin 1946, writ ref’d n.r.e.))). This 

they did not do. The Court’s decision to the contrary relies on three features of the Statements of

Grounds and supporting schedules to conclude that El Paso Electric stated “fully and in detail each 

reason or ground on which [its] claim [wa]s founded.” Cf. Tex. Tax Code § 111.104(c)(2). None 
4

of those three features, however, rises to the “fully and in detail” level required by 

Section 111.104(c)(2) or to the “put the Comptroller on notice of the legal basis of the refund 

claim” level required by this Court’s interpretation of the statute.

First, the Court relies on the supporting schedules’ references to many of the items 

at issue as “meters.” But Section 151.318(a)(4) does not exempt “meters.” In fact, a different 

statute altogether, Section 151.317(e), is the only portion of the Limited Sales, Excise, and Use 

Tax Act1to mention “meters.” Also, the parties recognize that not all “meters” are telemetry units. 

For a meter to constitute a telemetry unit, the parties say, it must either telecommunicate 

measurements or measure and transmit measurements to another device. See ante at __ n.8. And 

at trial, El Paso Electric’s witness confirmed that not all meters are telemetry units because, he 

testified, (1) El Paso Electric uses some meters that do not have telemetry capability and the 

company is still phasing out the non-telemetry meters and (2) telemetry capability involves “some 

sort of communication device integrated into the meter.” In all then, asserting that a piece of 

equipment is a “meter” does not state fully and in detail that a taxpayer is seeking a refund for a 

telemetry unit that is related to a step-down transformer. Such an assertion raises nothing about 

any of the specific types of equipment listed in Section 151.318(a)(4) (or those listed in any other 

subsection of Section 151.318).

Second, the Court relies on El Paso Electric’s notations of “mfg. equip.—100% 

exempt.” That a piece of equipment is manufacturing equipment, without more, does not entitle 

it to a tax exemption. Section 151.318(a)(4) lists over four dozen categories of equipment, with 

none being simply “manufacturing” equipment. Further still, several other statutes within the 

1

 See Tex. Tax Code §§ 151.001–.801.
5

Limited Sales, Excise, and Use Tax Act exempt types of “manufacturing” equipment, expressly 

using “manufacturing” or its variants. Section 151.310(c) exempts sales of items that are 

“manufactured by” qualifying religious, educational, or public-service organizations.

Section 151.321 does the same for sales of items that are “manufactured by” qualifying student 

organizations. So too in Section 151.332(a) for items “manufactured . . . by a person 65 years old 

or older and that is sold at a qualified sale” held for “providing assistance to elderly persons.” And 

Section 151.3565(a) and (b)(2)(A) exempt certain “emergency preparation items,” which phrase 

is defined to include “storm protection device[s] manufactured, rated, and marketed specifically 

to prevent damage to a glazed or non-glazed opening during a storm.” Thus, to assert that a piece 

of equipment is “manufacturing” equipment does not provide sufficient “detail,” see Tex. Tax 

Code § 111.104(c)(2), to distinguish from among the exemptions in Section 151.318(a)(4) or these 

other statutes within the Act.

Finally, the Court relies on El Paso Electric’s citations to and quotations of 

Section 151.318 in its Statements of Grounds and supporting schedules. El Paso Electric quoted 

not only all of Section 151.318(a)(4)’s list of over four dozen categories of exempted items but 

also nearby subsections (a)(1), (2), (5), (6), (7), (8), (9), (10), and (11) too. Mass quoting like this 

does not suffice to put the Comptroller on notice of the legal basis of a claim for telemetry units 

related to step-down transformers. Without specifying that telemetry units related to step-down 

transformers was the basis of the claim, the quotation of all of Subsection (a)(4) plus the other nine 

statutory subsections did not inform the Comptroller on what basis he must defend against the 

claim. See Ryan, 2015 WL 3393917, at *10–11; Lexington Ins., 128 S.W.3d at 779–80. And that 

said, simply citing Section 151.318, even more so, does not provide the required fullness and detail

because it does not put the Comptroller on notice of which of that statute’s many types of exempt 
6

equipment is at issue. See Tex. Tax Code § 111.104(c)(2); Ryan, 2015 WL 3393917, at *10; 

Lexington Ins., 128 S.W.3d at 779–80.

2

Long ago, this Court interpreted another “fully and in detail” requirement within

the tax statutes, and that interpretation highlights the Statements of Grounds and supporting 

schedules’ deficiency. Current Tax Code section 112.051(b)’s predecessor required that certain 

taxpayer protests state “fully and in detail each and every ground or reason” for the protest. See 

James, 195 S.W.2d at 962 (quoting predecessor statute). This Court said that that statutory phrase 

existed “[t]o require the taxpayer to inform the collecting agency the grounds or reasons for such 

protest with sufficient clarity and detail for the agency to determine from its own records and the 

information furnished the merits and validity of the protest.” Id. We have steadily reaffirmed this 

principle from James, including as recently as 2017. See OGCI Training, 2017 WL 4899015, at 

*5 (explaining that James interpreted statute’s “fully and in detail” requirement to “allow the 

Comptroller the first opportunity to determine the merits and validity of the taxpayer’s protest” 

(citing James, 195 S.W.2d at 962)); Lawrence Indus., Inc. v. Sharp, 890 S.W.2d 886, 892 (Tex. 

App.—Austin 1994, writ denied) (similarly reaffirming principle from James); Nu-Way Oil Co. v. 

Bullock, 546 S.W.2d 336, 340 (Tex. App.—Austin 1976, no writ) (same). And we have said that 

the “fully and in detail” requirement, as interpreted by James, “does more than simply provide 

notice of a claim.” Local Neon, 2005 WL 1412171, at *5 (citing James, 195 S.W.2d at 962).

Here, by their silence about whether the equipment at issue were telemetry units 

related to step-down transformers, the Statements of Grounds and supporting schedules prevented 

2

 The other considerations mentioned by the Court—for example, that El Paso Electric 

provided the dates, invoice numbers, and dollar amounts for many of the transactions for the pieces 

of equipment—say nothing about the legal basis of the claim.
7

the Comptroller from being able to determine the merits and validity of the refund claim. The 

Comptroller could not determine whether the claimed equipment were the right kinds of telemetry 

units, or telemetry units at all, because the Comptroller did not know that that is what he needed 

to determine. The Court’s decision today therefore creates an odd split within our jurisprudence: 

“fully and in detail” under Section 111.104(c)(2) is now far less stringent than is “fully and in 

detail” under Section 112.051(b).

As a reasonableness check on the new path forged by the Court today, suppose that 

a taxpayer seeking a refund launches the process with a refund claim that lists the brand names of 

certain pieces of equipment (as El Paso Electric did here, among the other information already 

addressed). Suppose also that the taxpayer then simply attaches to its equipment list a print-out of 

the entire Tax Code. Every possible tax exemption grounded in the Code is thereby quoted in the 

taxpayer’s refund claim. Today’s opinion by the Court would condone such an approach—the 

taxpayer has named its equipment and quoted the exemptions that it will rely on. But such an 

approach would not put the Comptroller on notice of the legal basis or bases of the refund claim. 

See Ryan, 2015 WL 3393917, at *10; Lexington Ins., 128 S.W.3d at 779–80. This approach instead 

obscures the legal bases of the claim, burying them among other, irrelevant legal bases. The 

Court’s departure today from the requirement to put the Comptroller on notice is thus unworkable 

and, worse, judicially neuters the legislature’s jurisdictional requirement in Section 111.104(c)(2).
8

For these reasons, I would deny en banc reconsideration. I respectfully dissent in 

part from the Court’s opinion and judgment, would not reach the merits issue in the appeal, and 

would instead dismiss El Paso Electric’s suit for want of jurisdiction.

__________________________________________

Chari L. Kelly, Justice

Before Chief Justice Byrne, Justices Goodwin, Baker, Triana, Kelly, and Smith

Filed: March 5, 2021