Dallas County Appraisal Dist. v. L.D. Brinkman & Co. (Texas), Inc.

• Decision Date: 31 October 1985
• Docket Number: No. 05-84-01270-CV,05-84-01270-CV
• Citation: 701 S.W.2d 20
• Parties: DALLAS COUNTY APPRAISAL DISTRICT and Foy Mitchell, Chief Appraiser of the Dallas County Appraisal District, Appellants, v. L.D. BRINKMAN & COMPANY (TEXAS), INC. and Carnation Company, Appellees.
• Court: Texas Court of Appeals

Page 20

701 S.W.2d 20

DALLAS COUNTY APPRAISAL DISTRICT and Foy Mitchell, Chief Appraiser of the Dallas County Appraisal District Appellants, v. L.D. BRINKMAN & COMPANY (TEXAS), INC. and Carnation Company Appellees.

No. 05-84-01270-CV.

Court of Appeals of Texas Dallas.

Oct. 31, 1985.

Rehearing Denied Dec. 11, 1985.

Peter G. Smith, Saner, Jack, Sallinger & Nichols, Dallas, for appellants.

Brett A. Ringle, Shank, Irwin & Conant, Dallas, for appellees.

Before SPARLING, ALLEN and MALONEY, JJ.

MALONEY, Justice.

This is an appeal from a determination that certain property held in warehouses in Dallas County is not subject to ad valorem taxation in the State of Texas. The appeal involves an interpretation of TEX.TAX CODE ANN. § 11.01. Appellants, Dallas County Appraisal District and its chief appraiser contend that all of the inventory of appellees, L.D. Brinkman & Company (Texas), Inc. and Carnation Company, that was in their warehouses on the first day of January, was subject to taxation. Appellees contend the trial court correctly excluded a percentage of the inventory from taxation because that percentage would be shipped out of state within 175 days.

Appellants, in four grounds of error, argue that (1) the trial court erred in determining that the appraised market value of the inventory of Brinkman was, for ad valorem tax purposes, $5,783,391 and not $10,186,976 on January 1, 1982 and $5,967,310 and not $10,435,130 on January 1, 1983 and (2) the trial court erred in determining the appraised market value of the inventory of Carnation was, for ad valorem tax purposes, $6,413,688 and not $8,865,539. We agree.

The trial court excluded from the appraised value of Brinkman's inventory that proportion of the inventory which Brinkman shipped out of state within 175 days of its arrival in Texas. This amounted to 47.4% of Brinkman's January 1, 1982 inventory. Similarly, the trial court excluded 30% of the appraised value of Carnation's inventory on January 1, 1982, which was the proportion of its inventory which Carnation shipped out of state within 175 days of its arrival in Texas. Thus, the trial court excluded or deducted that proportion of the inventory which it found was only temporarily in the state. It accordingly rendered judgment that Brinkman's inventory on January 1, 1982 had an appraised market value of $5,783,391, which was the value of the total inventory, $10,186,976, less the value of the goods shipped out of state within 175 days. It also rendered judgment that Brinkman's inventory on January 1, 1983 had an appraised market value of $5,967,310, the value of the total inventory, $10,435,130, less the value of the goods shipped out of state within 175 days. Finally, according to the judgment, the appraised market value of Carnation's January 1, 1982 inventory was $6,413,688, which was the value of the total inventory, $8,865,539, less the value of the goods shipped out of state within 175 days. The trial court based these calculations on stipulated facts. None of the relevant facts in this case are in dispute. The dispute in this case involves issues of legal interpretation.

The trial court rendered judgment for appellees based on TEX.TAX CODE ANN. § 11.01(d) (Vernon 1982), the so-called "free-port" law. This statute reads as follows:

(d) Goods, wares, ores (other than oil, gas and other petroleum products), and merchandise are presumed to be in interstate commerce and/or are not to be located in this state for longer than a temporary period if the property is:

(1) transported from outside this state into the state to be forwarded outside this state;

(2) detained in this state for assembling, storing, manufacturing, processing, or fabricating purposes; and

(3) not located in this state for longer than 175 days. [Emphasis added].

TEX.TAX CODE § 11.01(c) (Vernon 1982) declares that:

(c) This state has jurisdiction to tax tangible personal property if the property is:

(1) located in this state for longer than a temporary period;

(2) temporarily located outside this state and the owner resides in this state; or

(3) used continually, whether regularly or irregularly, in this state. [Emphasis added].

Thus, if property is only temporarily located in Texas and is not used continually in Texas, it is not within Texas' taxing jurisdiction. If "goods, wares, ores ... and merchandise" meet the requirements of section 11.01(d), they are "presumed" to be only temporarily located in Texas.

The stipulated evidence shows that appellees' goods met requirements (2) and (3) of section 11.01(d)'s presumption of temporary location in this state. The parties disagree over whether the goods met requirement (1). The appraisal district argues that the goods were not "to be forwarded" out of state, since appellees had no specific intention, with respect to most of the particular goods in question, to forward those goods out of state. Appellees argue that a specific intention to forward particular goods is not required when, as here, the taxpayer expected to forward a certain definite percentage of those goods out of state.

We conclude, however, that we need not resolve or even address this particular dispute. We hold that, regardless of whether appellees' property qualifies for the statutory presumption of section 11.01(d), the record shows conclusively that the property was in Texas "for longer than a temporary period."

The Constitution of the State of Texas provides that "all real property and tangible personal property in this State ... shall be taxed in proportion to its value...." TEX. CONST. art. VIII, § 1. The Texas Constitution further provides that "all laws exempting property from taxation other than the property mentioned in this Section shall be null and void." TEX. CONST. art. VIII, § 2. Thus, under the Texas Constitution all real and tangible personal private property "in this State" is subject to taxation unless it comes under an exemption authorized in the Texas Constitution. City of Wichita Falls v. Cooper, 170 S.W.2d 777, 780 (Tex.Civ.App.--Fort Worth 1943, writ ref'd); see City of Beaumont v. Fertitta, 415 S.W.2d 902, 909-12 (Tex.1967). Principles of federal law, of course, may--and do--limit this power to tax. See e.g., Calvert v. Zanes-Ewalt Warehouse, Inc., 502 S.W.2d 689 (Tex.1974), appeal dismissed, 416 U.S. 923, 94 S.Ct. 1921, 40 L.Ed.2d 279 (1974). Hence, subject only to federal limitations and exemptions set forth in the Texas Constitution, the State of Texas, through its political subdivisions, ¹ has the power to tax any real and tangible personal private property in the state.

Since "jurisdiction to tax" means the legitimate power to tax, section 11.01, which defines the state's taxing jurisdiction over real and tangible personal property, also defines the limits of the legitimate power of the State of Texas and its political subdivisions to tax such property. See Great Southern Life Insurance Co. v. City of Austin, 112 Tex. 1, 9-10, 13, 243 S.W. 778, 780, 782 (1922). If, however, the legislature were to define taxing jurisdiction in such a way that property subject to taxation under the Texas Constitution and federal law was not subject to taxation under the statutory definition of taxing jurisdiction, the legislature would be indulging in an unconstitutional attempt to grant an exemption from taxation. See State v Southwestern Gas & Electric Co., 145 Tex. 24, 26, 193 S.W.2d 675, 677 (1946) (the selection of subjects of taxation is itself an exemption of what is not selected); Dickison v. Woodmen of the World Life Insurance Society, 280 S.W.2d 315,...