Houston Wire & Cable Company v. Susan Combs, No. (Tex.App.- Austin, Mar. 12, 2008) ( ) (Before Justices Patterson, Puryear and Pemberton)
Full style: Houston Wire & Cable Company vs. Susan Combs, Comptroller of Public Accounts of the State of Texas, and Greg Abbott, Attorney General of the State of Texas
Appeal from 200th District Court of Travis

M E M O R A N D U M O P I N I O N

Upon consideration of appellant's motion for rehearing, we overrule the motion; however, we withdraw our opinion and judgment dated December 12, 2007, and substitute the following. Houston Wire & Cable Company ("HWC") appeals the Comptroller's (1) denial of a sales tax refund claim for its purchase of cable reels, arguing that its purchase of reels was non-taxable. In two issues, HWC challenges the legal and factual sufficiency of the evidence, contending that the purchases are not taxable because the reels qualify for the sale-for-resale exemption, see Tex. Tax Code Ann. § 151.302(a) (West 2002), and because HWC qualifies for the manufacturing exemption, see id. § 151.318(a)(1) (West Supp. 2006). (2) We reject HWC's contentions and affirm the judgment of the district court.

FACTUAL AND PROCEDURAL BACKGROUND

The background facts are undisputed. HWC is a supplier of electrical wire and cable. HWC buys cable in bulk from suppliers and maintains the cable in its inventory. HWC cuts, spools, and delivers cable according to the specific needs of its customers, who are primarily electrical wholesalers and distributors. When HWC purchases cable from its suppliers, the cable is delivered on reels. When HWC receives orders from its customers, it cuts and respools the cable onto new reels. The reels used by HWC to respool the cable are the subject of this lawsuit. They are purchased by HWC to allow it to customize the cable assemblies for its customers. A customer's order could specify, for instance, the type, arbor size, color, coding, labeling, lagging, attachments, or fumigations requirements for the reels. In the process of respooling, HWC attaches the reels to the specific cable ordered by the customer.
The parties agree that purchases of the cable itself qualify for the sale-for-resale sales tax exemption. HWC contends that its purchases of the reels, likewise, qualify for the sale-for-resale exemption and therefore paid the sales tax under protest for the period in question, August 1, 1997, through December 31, 2001. The amount of the refund at issue is $160,596.03, which includes the tax paid on the reels plus statutory pro rata interest for the refund period.
HWC contends that it is entitled to a refund because purchases of the reels, like purchases of the cable, qualify for the sale-for-resale exemption. Alternatively, even if the reels are excluded from the sale-for-resale exemption, HWC argues that it is entitled to a refund because it qualifies for the manufacturing exemption. On both points, HWC challenges the legal and factual sufficiency of the district court's findings.
After the Comptroller denied its refund claim, HWC filed suit in district court. Following a trial de novo, see Tex. Tax Code Ann. §§ 112.054, .154 (West 2001), the district court granted judgment in favor of the Comptroller on all issues. This appeal followed.