The district court judge found that Clearview had transferred care, custody, and control of the outside equipment to its subscribers and ordered the state to refund the tax. The state appealed. The Third Court of Appeals explained that in the Tax Code, the resale exemption is applied differently to tangible personal property purchased to perform a taxable service than it is applied to goods purchased by a retail store for resale to customers. Unlike a retail store, a cable TV service retains an ownership interest in cable equipment. To require that a service provider completely divest itself of all rights in the property would be unreasonable.
Primary possession is determined by examining who primarily controls and cares for such equipment.
In this case, the subscriber primarily controlled the equipment. For example, the subscriber decided when and how long to use the equipment and what programming the equipment the antenna would receive because each subscriber controlled the power supply to this integrated system. The subscriber decided who was allowed to use the equipment and where the equipment should be placed. The subscriber was obligated to properly care for the equipment, i.e., to leave the equipment in place, undisturbed. Clearview, on the other hand, cared for the equipment when it was defective, damaged, lost, or stolen.