Summary
The Texas Court of Appeals, Third District, held that Cirrus Exploration Company qualified for the sales-tax exemption for aircraft used by a certificated or licensed carrier. The court concluded that Cirrus’s FAA Letter of Authorization under 14 C.F.R. § 91.147 satisfied the Comptroller’s rule, reversed the summary judgment for the Comptroller, and rendered judgment for Cirrus.
Topics
Practice areas
Questions Presented
- Whether Cirrus qualified as a certificated or licensed carrier under Texas Tax Code section 151.328(a)(1) and Comptroller Rule 3.297 based on its FAA authorization under Part 91 and section 91.147.
- Whether the Comptroller's longstanding interpretation limiting the exemption to carriers certified under FAA Parts 121, 125, or 135 was entitled to deference.
Holdings
- Cirrus qualified as a licensed and certificated carrier because it was authorized by the FAA to operate an aircraft as a common carrier transporting persons or property for hire in the regular course of business. Its FAA Letter of Authorization under Part 91 was sufficient; certification under Parts 121, 125, or 135 was not required where FAA regulations did not require those certifications.
- The Comptroller's interpretation was not entitled to deference because the governing rule was unambiguous. In any event, the interpretation was unreasonable and inconsistent with the rule because it improperly narrowed the authorized methods of qualifying as a carrier.
Key quotations
“This construction is squarely contrary to the unambiguous language of the Comptroller’s own Rule 3.297” (at 471)
“Because Cirrus is authorized by the FAA to operate its helicopter as a common carrier transporting persons or property for hire in the regular course of its business, it is a “licensed and certificated carrier” under the Comptroller’s regulations.” (at 473)
Factual background
Cirrus operated a helicopter business that hired out a helicopter and pilot for aerial tours, photography, surveys, and inspections. It purchased two helicopters without paying sales tax, presenting exemption certificates, and held an FAA Letter of Authorization under 14 C.F.R. § 91.147 for commercial air tours. The Comptroller denied the exemption on the ground that Cirrus lacked carrier-specific certification under FAA Parts 121, 125, or 135, even though Cirrus's operations fell within FAA exceptions permitting operation under Part 91 alone.
Procedural history
The Comptroller assessed Cirrus $66,900.06 in sales-tax liability concerning two helicopter purchases. After the Comptroller upheld the assessment and SOAH affirmed it following a contested-case hearing, Cirrus paid $70,598.19 under protest and sued in Travis County district court for a refund. The district court granted summary judgment for the Comptroller and denied Cirrus's motion; the court of appeals reversed and rendered judgment for Cirrus.
Remand instructions
The court reversed the district court's judgment and rendered judgment in favor of Cirrus for $70,598.19, plus interest allowed under the Tax Code.