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Petitioners and its affiliates, manufacturers and distributors of food and beverages in the United States, sought a declaration that the Texas franchise tax was unconstitutional, Tex. Tax Code 171.0001-.501, an injunction prohibiting its collection, and mandamus relief compelling the Comptroller to refund the taxes they paid from 2009 through 2011. Petitioners did not pay their taxes under protest or request a refund from the Comptroller, statutory requisites to taxpayers suits in the district court but not, relators contended, for suit in this court. The court disagreed and held that the statutory requisites were conditions on the legislative waiver of the State's immunity from suit. Accordingly, the court dismissed the case for want of jurisdiction.Receive FREE Daily Opinion Summaries by Email
IN THE SUPREME COURT OF TEXAS
IN RE NESTLE USA, INC., SWITCHPLACE, LLC, AND NSBMA, LP, RELATORS
ON PETITION FOR WRIT OF MANDAMUS
Argued January 12, 2012
JUSTICE HECHT delivered the opinion of the Court.
In this original proceeding, petitioners seek a declaration that the Texas franchise tax1 is
unconstitutional, an injunction prohibiting its collection, and mandamus relief compelling the
Comptroller to refund the taxes they paid from 2008 through 2011. Petitioners did not pay their
taxes under protest or request a refund from the Comptroller, statutory prerequisites to taxpayer suits
in the district court2 but not, relators contend, for suit in this Court. We disagree. We hold that the
statutory prerequisites are conditions on the legislative waiver of the State’s immunity from suit.
Accordingly, we dismiss the case for want of jurisdiction.
Petitioners are Nestle USA, Inc., a Delaware corporation, Switchplace, LLC, a Texas
limited-liability company, and NSMBA, LP, a Texas limited partnership. Nestle and its affiliates
manufacture and distribute food and beverages in the United States. In Texas, Nestle engages only
TEX. TAX CODE §§ 171.0001-.501.
Id. §§ 112.051-.052, 112.151.
in wholesale activities. Switchplace, headquartered in Dallas, is a global temporary housing
company that provides accommodations for relocation, business travel, temporary assignments, and
other related services for businesses and their employees. NSMBA rents large equipment, such as
generators, air conditioners, cooling towers, and trailers, for use in construction. Petitioners contend
that the Texas franchise tax violates the Equal and Uniform Clause of the Texas Constitution3 and
the Equal Protection,4 Due Process,5 and Commerce Clauses6 of the United States Constitution.
Taxpayer suits generally, and suits challenging the franchise tax in particular, are permitted
by chapter 112 of the Tax Code. Section 112.052(a) provides that “[a] person may bring suit against
the state to recover [a] . . . franchise . . . tax . . . if the person has first paid the tax under protest as
required by Section 112.051”.7 Section 112.051 applies to a tax collected by the Comptroller “under
any law”.8 It requires that the protest must be submitted with the payment,9 must be in writing,10 and
must “state fully and in detail each reason for recovering the payment.”11 A copy of the protest must
TEX. CONST. art. VIII, § 1(a).
U.S. CONST. amend. XIV, § 1.
Id. art. I, § 8.
TEX. TAX CODE § 112.052(a).
Id. § 112.051(a).
Id. § 112.052(a).
Id. § 112.051(b).
be attached to the original petition,12 and “[t]he issues to be determined in the suit are limited to
those arising from the reasons expressed in the written protest as originally filed.”13 Suit must be
brought against the tax collector, the Comptroller, and the Attorney General14 within ninety days
after the protest payment is made.15 Chapter 112 also allows injunctive relief, subject to conditions
that include the prior filing of a statement of grounds with the Attorney General, and either the
payment of taxes due or the posting of a bond for twice the amount due.16
Chapter 112 also allows a taxpayer to sue following the Comptroller’s denial of an
administrative refund claim.17 The taxpayer must move the Comptroller for rehearing of the denial
of the claim, pay any additional tax found due,18 and bring suit against the Comptroller and Attorney
General19 within thirty days after the motion is denied.20
Chapter 112 allows no other actions to challenge or seek refunds of the taxes to which it
applies. Section 112.108 prohibits the issuance of any “restraining order, injunction, declaratory
judgment, writ of mandamus or prohibition, order requiring the payment of taxes or fees into the
Id. § 112.053(c).
Id. § 112.053(b).
Id. § 112.053(a).
Id. § 112.052(b).
Id. § 112.101(a); see also §§ 112.1011-.108.
Id. § 112.151.
Id. § 112.151(a)(2), (3).
Id. § 112.151(b).
Id. § 112.151(c).
registry or custody of the court, or other similar legal or equitable relief against the state or a state
agency relating to the applicability, assessment, collection, or constitutionality of a tax”21 other than
an order issued as provided under the statute.22 The only exception is that prepayment of the tax as
a prerequisite to suit is excused when it “would constitute an unreasonable restraint on the party's
right of access to the courts.”23
Petitioners did not pay their taxes under protest or ask the Comptroller for a refund.24 They
contend that the requirements of chapter 112 apply only to taxpayer suits brought in the district court
and not to one brought as an original proceeding in this Court. Section 112.001 mandates that
taxpayer suits permitted by chapter 112 be brought in the district court in Travis County.25 But in
2006, the Legislature overhauled the Texas Franchise Tax Act and as part of those revisions, in
section 24 of the bill, conferred on this Court “exclusive and original jurisdiction over a challenge
to the constitutionality of this [bill] or any part of this [bill]”.26 Petitioners argue that section 24
jurisdiction creates a right to sue independent of chapter 112.
Id. § 112.108.
Id. §§ 112.101-.108 (“Subchapter C. Injunctions”).
Switchplace filed an amended return in 2008 that resulted in a non-related refund claim of $15,729.39. No
portion of that refund claim was denied.
Id. § 112.001.
Act of May 2, 2006, 79th Leg., 3d C.S., ch. 1, § 24, 2006 Tex. Gen. Laws 1, 40 (House Bill 3).
The text of section 24 does not support petitioners’ argument. As we noted in In re Allcat
Claims Service, L.P.,27 section 24 is simply “a specific, limited exception” to section 112.001.28 In
all other respects, we observed, a taxpayer suit “is subject to chapter 112”.29 We did not specifically
consider the applicability of chapter 112’s protest-payment and refund-claim prerequisites to section
24 suits because the taxpayer in Allcat had complied with chapter 112. But the history of 112 shows
the importance of its requirements in all taxpayer suits it permits.
Chapter 112’s procedures originated in the Suspense Statute of 1933.30 The Suspense Statute
provided that state taxes could be paid under protest and would then be held in suspense pending
resolution of the taxpayer’s complaint in a suit brought by him against the public official who had
collected the tax. Before then, a taxpayer could challenge a state tax in a suit for injunctive31 or
___ S.W.3d ___ (Tex. 2011).
Id. at ___.
Id. at ___.
Act of June 7, 1933, 43d leg., R.S., ch. 214, §1, 1937 Tex. Gen. Laws 637, codified formerly as TEX. REV.
CIV. STAT. ANN. art. 7057b, recodified by Act of July 30, 1959, 56th Leg., 3d C.S., ch. 1, § 1, 1959 Tex. Gen. Laws 187,
190-191, as TEX. REV. CIV. STAT. ANN. TAX.-GEN. art. 1.05, recodified by Act of May 31, 1981, 67th Leg., R.S., ch.
389, § 1, 1981 Tex. Gen. Laws 1490, 1511-1517, as TEX. TAX CODE §§ 112.001-.156.
See Rogers v. Daniel Oil & Royalty Co., 110 S.W.2d 891, 894 (Tex. 1937) (“We assume that, absent the
suspense statute, the [plaintiff] would have the right . . . to resort to a court of equity for injunctive relief [if not subject
to the tax complained of].”)
declaratory relief,32 but could sue for a refund only with legislative permission33 or by alleging
payment under duress.34 The Suspense Statute obviated the necessity of proving duress,35 and to the
extent it offered an adequate remedy at law, would have precluded injunction suits that did not
comply with its provisions.36 The Suspense Statute was recodified as chapter 112 in 1981. The
statute did not preclude declaratory judgment actions,37 but in 1989, section 112.108 was added,
making the actions it permitted exclusive for challenging state taxes covered by the chapter.38 The
Cobb v. Harrington, 190 S.W.2d 709, 712 (Tex. 1945) (“This action is for the purpose of obtaining a
judgment declaring that respondents are not [subject to the tax and that the tax collectors] are acting wrongfully and
without legal authority. The acts of officials which are not lawfully authorized are not acts of the State, and an action
against the officials by one whose rights have been invaded or violated by such acts, for the determination and protection
of his rights, is not a suit against the State within the rule of immunity of the State from suit.”).
Nat’l Biscuit Co. v. State, 135 S.W.2d 687, 688 (Tex. 1940) (quoting the Legislature’s joint resolution giving
permission to sue for a refund of franchise taxes: “There is no provision of law, nor has there been any provision of law
whereby this money unlawfully exacted could be returned or recovered except through a direct appropriation by the
Legislature . . . .”).
Austin Nat’l Bank v. Shepherd, 71 S.W.2d 242, 246 (Tex. 1934) (“A person who pays an illegal tax under
duress has a legal claim for its repayment.”).
Dallas Cnty. Cmty. Coll. Dist. v. Bolton, 185 S.W.3d 868, 879 (Tex. 2005) (“In the years after Nabisco and
Austin Nat’l Bank, the Legislature systematically adopted refund mechanisms and protest requirements in various statutes
that obviated the need to show business compulsion in many cases. . . . For example, the Legislature adopted
mechanisms for the refund of a tax . . . collected by the comptroller . . . .”) (internal quotation marks omitted).
Rogers, 110 S.W.2d at 894 (“We think [the Suspense Statute] is complete and adequate to protect the
protesting taxpayer as to the principal amount paid. It is true that the protesting taxpayer must obey or perform the
various procedural provisions of the suspense statute as to time and otherwise, but we are unable to see how this fact can
be held to constitute it incomplete or inadequate.”); see TEX. TAX CODE § 112.101-.108 (providing the present procedure
for injunctive relief).
Cobb, 190 S.W.2d at 713 (“The general purpose of the suspense statute is to provide an adequate legal remedy
whereby the taxpayer may test the validity of the law imposing the tax or the authority of the official who seeks to
enforce payment of the tax, and by providing the remedy, to prevent interference by injunction with the collection of
taxes. . . . It does not follow, however, that respondents are precluded by the suspense statute from maintaining this
action for a declaratory judgment.”).
Act of June 2, 1989, 71st Leg., R.S. ch. 232, § 16, 1989 Tex. Gen. Laws 1070, 1074, adopting TEX. TAX
CODE § 112.108. In R Communications, Inc. v. Sharp, 875 S.W.2d 314 (Tex. 1994), we held that the Open Courts
provision of the Texas Constitution did not allow the Legislature to condition all declaratory relief on prepayment of
taxes. Section 112.108 has since been amended to preclude an Open Courts violation. Act of May 26, 1995, 74th Leg.,
actions permitted are a suit after payment under protest, suit for injunction after payment or posting
of a bond, and a suit for a refund.39
The rights and restrictions of chapter 112 are part of “the State’s entire tax collection
scheme”.40 A section 24 action brought originally in this Court, free of chapter 112’s restrictions,
would severely disrupt that scheme. If a taxpayer were not required to lodge its complaints first by
protest or a refund claim, the Comptroller would lack notice of the assertion of illegality, perhaps
— as this case illustrates — for years. From the first Suspense Statute, it has been important that
the tax collector know of disputes and their potential effect on revenues. Were taxpayers permitted
to delay in suing for a refund, the monetary burden of a loss on the State could be greatly increased.
In this case, petitioners acknowledge that if they were to prevail and all franchise taxes determined
to be illegal were refunded to all similarly situated taxpayers, the impact on the state fisc would be
enormous. It is unreasonable to think that the Legislature would have been as cautious as it has been
for nearly seventy years in permitting taxpayer suits and then create an original taxpayer suit in this
Court with no limitations whatever. Section 24 cannot reasonably be read to do so.
Petitioners argue that even if the protest-payment and refund-claim requirements of chapter
112 apply to original proceedings in this Court, they were excused from compliance because protests
and claims were futile; the Comptroller would never forego collection of the franchise tax. But the
R.S., ch. 579, § 13, 1995 Tex. Gen. Laws 3374, 3377.
TEX. TAX CODE §§ 112.052, 112.101, and 112.151. Petitioners do not argue that the limitations of these
actions is unconstitutional, as did the taxpayers in R Communications, 875 S.W.2d at 314-315. Nor do petitioners
contend that an ultra vires suit against the Comptroller is outside chapter 112’s provisions. See City of El Paso v.
Heinrich, 284 S.W.3d 366, 372 (Tex. 2009).
R Commc’ns, 875 S.W.2d at 318.
purpose of such procedures is not solely to obtain favorable action by the Comptroller; the
procedures require a taxpayer to state complaints specifically, limit the taxpayer to those complaints
in a subsequent action, allow the tax collector to consider the impact on revenue, and put the
taxpayer on a short clock to sue. Apart from these reasons for not excusing petitioners from
compliance with chapter 112, there is an even firmer impediment. Because these taxpayer rights of
action are created by statute, waiving the State’s immunity from suit, “the courts may act only in the
manner provided by the statutes which created the right.”41
Petitioners have not complied with chapter 112. To compel a tax refund by mandamus is to
grant retrospective monetary relief. Retrospective monetary claims, even by way of mandamus or
declaratory relief, are generally barred by immunity, absent legislative consent.42 If chapter 112
does not permit suit, the only possible legislative waiver of immunity is section 24. But a waiver
of sovereign immunity must be “clear and unambiguous”.43 Section 24’s grant of jurisdiction to this
Court is not a clear and unambiguous waiver of immunity.44
Therefore, we cannot grant the mandamus relief petitioners request. And, as we held in
Allcat, we have the constitutional power to grant injunctive and declaratory relief in original
Dan Ingle, Inc. v. Bullock, 578 S.W.2d 193, 194 (Tex. Civ. App.–Austin 1979, writ ref’d) (citing Robinson
v. Bullock, 553 S.W.2d 196, 197 (Tex. Civ. App.–Austin 1979, writ ref’d n.r.e.).
See City of Houston v. Williams, 216 S.W.3d 827, 828-829 (Tex. 2007) (per curiam); Tex. Natural Res.
Conservation Comm'n v. IT-Davy, 74 S.W.3d 849, 855-856 (Tex. 2002) (“[P]rivate parties cannot circumvent the State’s
sovereign immunity from suit by characterizing a suit for money damages, such as a contract dispute, as a
declaratory-judgment claim.”). But cf. Austin Nat’l Bank v. Shepherd, 71 S.W.2d 242, 246 (Tex. 1934) (mandamus
proceeding prior to Suspense Statute to compel refund of taxes paid under duress).
TEX. GOV’T CODE § 311.034.
See Tooke v. City of Mexia, 197 S.W.3d 342, 342-343 (Tex. 2006) (holding that phrases like “sue and be
sued” and “plead and be impleaded” are insufficient to waive immunity).
proceedings only as necessary to effectuate mandamus relief. Since chapter 112 precludes us from
granting the latter, we cannot grant the former.
For these reasons, petitioners’ action is dismissed for want of jurisdiction.
Nathan L. Hecht
Opinion delivered: February 10, 2012