Opinion ID: 3214719
Heading Depth: 2
Heading Rank: 2

Heading: Is the Statute Ambiguous?

Text: The statute provides that the sales tax exemption applies to tangible personal property used in “the actual manufacturing, processing, or fabrication of tangible personal property.” TEX . TAX CODE § 151.318(a)(2), (5), (10). The main disagreement between the parties is whether the equipment is used for “processing,” and neither argues that the term is ambiguous. However, the fact that the parties do not contend a statute is ambiguous does not mean that it is not. Whether statutory language is ambiguous is a matter of law for courts to decide, and language is ambiguous only if the words yield more than one reasonable interpretation. See Combs v. Roark Amusement & Vending, L.P., 422 S.W.3d 632, 635 (Tex. 2013); Tex. Citizens for a Safe Future, 336 S.W.3d at 628 (“It is precisely when a statutory term is subject to multiple understandings that we should defer to an agency’s reasonable interpretation.” (emphasis added)). 7 When a statute contains a term that is undefined, as “processing” is in this case, the term is typically given its ordinary meaning. State v. $1,760.00 in U.S. Currency, 406 S.W.3d 177, 180 (Tex. 2013). But the meaning must be in harmony and consistent with other statutory terms and “[i]f a different, more limited, or precise definition is apparent from the term’s use in the context of the statute, we apply that meaning.” Id. If an undefined term has multiple common meanings, it is not necessarily ambiguous; rather, we will apply the definition most consistent with the context of the statutory scheme. See Thompson v. Tex. Dep’t Licensing & Regulation, 455 S.W.3d 569, 571 (Tex. 2014). Here the three words “manufacturing,” “processing,” and “fabrication” are found in a section entitled “Property Used in Manufacturing.” TEX . TAX CODE § 151.318. Southwest recognizes that “processing” may sometimes be encompassed within “manufacturing,” as the State asserts, but argues that “processing” as used in the statute must refer to something different from “manufacturing” and “fabrication,” otherwise it is surplusage. Citing various dictionary definitions, Southwest argues that “processing” as used in the statute involves “creating or inducing a physical change” in the tangible personal property being processed, and “processing” of hydrocarbons need not be “manufacturing” to come within the exemption provided by section 151.318. We agree with Southwest. While manufacturing may well include types of “processing,” the use of the separate term “processing” in the statute indicates the Legislature understood and intended that “processing” includes matters outside the confines of “manufacturing.” In this regard, the Comptroller has defined “processing” as it is used in section 151.318 as being “[t]he physical application of the materials and labor necessary to modify or change the characteristics of tangible personal property.” 34 TEX . 8 ADMIN . CODE § 3.300(a)(10). The State asserts that even if “processing” is not encompassed within “manufacturing,” this definition applies. Although the Comptroller’s definition is not binding, we may consider it in determining the definition most consistent with the scheme of the statute, just as we may look to other aids for construing statutory language. See $1,760.00 in U.S. Currency, 406 S.W.3d at 181; Firestone Tire & Rubber Co. v. Bullock, 573 S.W.2d 498, 500 n.3 (noting that the Comptroller’s definition will not be effective to expand or contract the language of the statute). The definitions cited by, and the interpretation proposed by, Southwest, as well as the Comptroller’s definition, are consistent with the other text of the statute. Even though there may be shades of difference in various definitions of “processing,” we think the differences are immaterial when the term is considered in context of the framework of section 151.318. See Thompson, 455 S.W.3d at 571. The essence of all the common meanings of “processing” correlate with the definition adopted by the Comptroller. The State asserts that there may be an ambiguity about “the scope” of the exemption. But the inquiry is not whether the scope of a statute is ambiguous, but rather whether the statutory language itself is ambiguous. Tex. Dep’t of Ins. v. Am. Nat’l Ins. Co., 410 S.W.3d 843, 853-54 (Tex. 2011) (“An administrative agency’s construction of a statute it implements ordinarily warrants deference when . . . the statutory language at issue is ambiguous.”) (emphasis added); see Thompson, 455 S.W.3d at 572 (considering the statutory phrase “evidence of the person’s rehabilitation or rehabilitative effort while incarcerated or after release” to determine whether the language was ambiguous before considering whether it included the requirements urged by the Department of Licensing and Regulation). 9 Because, in context, the statutory language is not subject to multiple understandings, we agree with the parties that it is not ambiguous. The Legislature intended “processing” in subsections 151.318(a)(2), (5), and (10) to mean the application of materials and labor necessary to modify or change characteristics of tangible personal property.