Opinion

TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN

NO. 03-02-00747-CV

United Services Automobile Association and USAA Life Insurance Company, Appellants

v.

Carole Keeton Strayhorn, Comptroller of Public Accounts of the State of Texas,

and Greg Abbott,1 Attorney General of the State of Texas, Appellees

FROM THE DISTRICT COURT OF TRAVIS COUNTY, 345TH JUDICIAL DISTRICT

NO. GN103414, HONORABLE MARGARET A. COOPER, JUDGE PRESIDING

OPINION

This appeal concerns a tax refund claimed under repealed sections of the Texas

Insurance Code. Appellants United Services Automobile Association and USAA Life Insurance

Company (collectively, USAA) argue that repealed language in the Texas Insurance Code providing

that “no other tax” than a gross receipts tax would apply to insurance companies operated to exempt

them from paying all forms of state tax not expressly provided for in the insurance code at that time.

Consequently, USAA seeks a refund from the Comptroller for all sales and use taxes it paid for

taxable transactions from 1994 through 1999. The district court denied USAA’s motion for

summary judgment and granted the Comptroller’s motion for summary judgment, declaring that the

1

The notice of appeal in this case named the previous attorney general of Texas, John

Cornyn, as appellee. We have substituted the name of the current attorney general of Texas, Greg

Abbott. See Tex. R. App. P. 7.2(a).

disputed provisions of the insurance code did not exempt USAA from sales and use taxes. On

appeal, USAA argues in one issue that the district court misinterpreted the plain meaning of the

former statutes and should have exempted it from paying sales and use taxes. We affirm the

judgment of the district court.

BACKGROUND

Although this dispute concerns provisions of the insurance code as they existed from

1994 to 1999, its roots reach deep into the history of tax policy in Texas. See Act of June 17, 1993,

73d Leg., R.S., ch. 685, § 3.11, 1993 Tex. Gen. Laws 2559, 2583-84 (hereinafter cited as Former

Tex. Ins. Code art. 4.10); Act of July 13, 1984, 68th Leg., 2d C.S., ch. 31, § 4, art. 4, sec. 1, 1984

Tex. Gen. Laws 193, 215-21 (hereinafter cited as Former Tex. Ins. Code art. 4.11).2 Thus, we begin

our inquiry with the origin and development of the tax exemption language found in former articles

4.10 and 4.11.3 Originally, insurance companies, like other businesses, were subject to a general

2

We will refer to the versions of the articles from the Insurance Code in force from 1994 to

1999 as “former article 4.10” and “former article 4.11.” Before codification, the earlier versions of

former articles 4.10 and 4.11 were found in the Texas Revised Civil Statutes as articles 7064 and

7064(a).

3

The relevant sections of former articles 4.10 and 4.11 provided:

Art. 4.10

Sec. 1. Every insurance carrier, including Lloyd’s and reciprocal exchanges and

any other organization or concern receiving gross premiums from the business

of fire, marine, marine inland, accident, credit, livestock, fidelity, guaranty,

surety, casualty, workers’ compensation, employers’ liability, or any other kind

or character of insurance, except title insurance and as provided in Sections 2, 3,

and 4 of this article, shall pay to the comptroller for transmittal to the state

treasurer a tax upon such gross premium receipts as provided in this article. . . .

***

2

Sec. 14. No occupational tax shall be levied on insurance carriers or companies

herein subjected to this premium receipts tax by any county, city, or town. The

taxes in this article shall constitute all taxes collectible under the laws of Texas

and assessed by the commissioner and administered by the comptroller. Farm

mutuals, local mutual aid associations and burial associations are not subject to

the franchise tax.

No other tax shall be levied or collected from any insurance carrier by the

state, county, or city or any town, but this law shall not be construed to prohibit

the levy and collection of state, county, and municipal taxes upon the real and

personal property of such carrier.

Act of June 17, 1993, 73d Leg., R.S., ch. 685, § 3.11, 1993 Tex. Gen. Laws 2559, 2583-84

(hereinafter cited as Former Tex. Ins. Code art. 4.10).

Art. 4.11

Sec. 1. Every insurance carrier receiving premiums from the business of life

insurance, accident insurance, health insurance, life and accident insurance, life

and health insurance, health and accident insurance, or life, health, and accident

insurance, including variable life insurance, credit life insurance, and credit

accident and health insurance for profit or otherwise or for mutual benefit or

protection, in this state, shall pay to the State Board of Insurance for transmittal

to the state treasurer an annual tax on its gross premiums as provided in this

article.

***

Sec. 9. The taxes aforesaid shall constitute all taxes and license fees collectible

under the laws of this state from any such insurance organization organized under

the laws of this state, except, and only except, unemployment compensation taxes

. . .; and the fees provided for under Article 4.07, Insurance Code, the deposit fees

described by that article and amendments to it; and in case of companies writing

workers’ compensation insurance, the taxes otherwise provided by law on

account of such business; and no other taxes shall be levied or collected by the

state or any county, city, or town except state, county, or municipal ad valorem

taxes upon real and personal property of such insurance organization.

No other tax shall be levied or collected from any insurance carrier by the

state, county, or city or any town, but this law shall not be construed to prohibit

the levy and collection of state, county, and municipal taxes upon the real and

3

license tax. See Edmund Thornton Miller, A Financial History of Texas 294-300 (1916). By 1880,

the legislature created a system of occupation or franchise taxes to replace the license taxes of

corporations. See id. at 301. The legislature replaced the occupation tax on insurance companies

with a gross premiums tax in 1893.4 Act approved May 11, 1893, 23d Leg., R.S., ch. 102, § 1, 1893

Tex. Gen. Laws 156, 156, reprinted in 10 H.P.N. Gammel, The Laws of Texas 1822-1897, at 586,

586 (Austin, Gammel Book Co. 1898). In doing so, the legislature denied cities, counties, and towns

the power to levy other “occupational” taxes on insurance companies. Id.; see also Miller, supra,

at 307. From 1893 to 1897, Texas experienced a deep financial depression, and the populist party,

experiencing the period of its greatest strength in 1894, advocated a heavier taxation of corporations.

Miller, supra, at 313; see also Alwyn Barr, Reconstruction to Reform: Texas Politics 1876-1906

143-60 (1971).

In 1905, the legislature began shifting the tax burden away from farmers and other

landowners by continuing to raise taxes on corporations. See Barr, supra, at 234; see also Miller,

personal property of such carrier.

Act of July 13, 1984, 68th Leg., 2d C.S., ch. 31, § 4, art. 4, sec. 1, 1984 Tex. Gen. Laws 193, 215-21

(hereinafter cited as Former Tex. Ins. Code art. 4.11).

4

A gross premiums tax is a tax based on a percentage of the gross receipts an insurance

company receives from premiums paid on policies. See, e.g., Tex. Ins. Code Ann. art. 4.10, §§ 1,

5, 10 & art. 4.11, §§ 1, 2(c), 5 (West Supp. 2003). “Occupation tax” is a general term describing all

taxes imposed for the purpose of “allowing . . . companies to pursue their business in Texas,” and

gross premiums taxes are a kind of occupation tax. See Millers’ Mut. Fire Ins. Co. v. City of Austin,

210 S.W. 825, 827 (Tex. Civ. App.—San Antonio 1919, no writ); Edmund Thornton Miller, A

Financial History of Texas 215-19 (1916) (describing the development of occupation taxes in Texas

after Reconstruction). “Franchise tax” refers to a tax levied on the value of the privilege to conduct

business in this state with a particular trademark and is also a type of occupation tax. See Bullock

v. National Bancshares Corp., 584 S.W.2d 268, 270 (Tex. 1979); Upjohn Co. v. Rylander, 38

S.W.3d 600, 603 (Tex. App.—Austin 2000, pet. denied).

4

supra, at 301-10 (outlining the development of various occupation and franchise taxes from 1881

to 1915). From 1905 to 1907, the legislature refined the method of taxing insurance companies on

their gross receipts by gradually increasing the tax rates. Miller, supra, at 313-14. This movement

culminated in 1907 when the legislature passed the act that included the earliest version of article

4.10. See Act approved May 16, 1907, 30th Leg., 1st C.S., ch. 18, § 8, 1907 Tex. Gen. Laws 479,

482 (Act approved May 16, 1907). In that statute, the legislature instituted a comprehensive reform

of the occupation taxes levied on railroads, owners of railroad cars, telegraph operators, gas, electric

and water providers, owners of stock cars, owners of oil or gas lines, mineral dealers, public

transportation providers, producers of intoxicating beverages, gun dealers, and printers of textbooks

and law books, among others. See id. §§ 1-7. It also overhauled its approach to occupation taxes

on insurance companies. See id. § 8.

As part of that general reform in 1907, the legislature adopted a specialized tax on

each of the affected industries as the occupational tax for that industry. See, e.g., id. §§ 1-3

(imposing gross receipts taxes as the occupation taxes on railroads, telegraph operators, and gas,

electric, and water providers). When considering occupational taxes on rail car companies, for

example, the legislature expressly provided that the new gross receipts tax would be “in lieu of all

other taxes now levied” on that industry. Id. § 7. Finally, within this context of occupation tax

reform, the legislature created a detailed approach to levying taxes on insurance companies. Id. § 8.

In doing so, the legislature exempted the affected insurance companies from all taxes and license

fees then “collectable” [sic] against them and directed that no occupation or other taxes, except for

taxes on real and personal property, could be levied by counties, cities, and towns. Id.

5

The legislature has amended this statute several times over the past ninety-six years.

See, e.g., Act of Oct. 31, 1936, 44th Leg., 3d C.S., ch. 495, art. 4, § 5, 1936 Tex. Gen. Laws 2040,

2074 (Act of Oct. 31, 1936); Act of June 6, 1951, 52d Leg., R.S., ch. 402, § XV, sec. 1, 1951 Tex.

Gen. Laws 695, 710-12 (Act of June 6, 1951). In 1981, the legislature included this statute in the

new insurance code as article 4.10. See Act of May 29, 1981, 67th Leg., R.S., ch. 389, § 36, art.

4.10, sec. 5, 1981 Tex. Gen. Laws 1780, 1782 (Act of May 29, 1981). Significantly, the language

concerning occupation taxes, gross receipt taxes, and exemptions remained unchanged. Compare

Act approved May 16, 1907, ch. 18, § 8, and Act of Oct. 31, 1936, ch. 495, art. 4, § 5, with Act of

May 29, 1981, ch. 389, § 36, art. 4.10, and Act of June 17, 1993, ch. 685, § 3.11.

Although the legislature originally created one gross receipts tax rate for all insurance

companies, in 1936 it passed the first version of article 4.11 to create a separate gross receipts tax

rate for life, health, and accident insurance companies. See Act of Oct. 31, 1936, ch. 495, art. 4,

§§ 5b; Act approved May 16, 1907, ch. 18, § 8. In doing so, the legislature also adopted the

occupation-tax exemption language and applied it in the new statute. See Act of Oct. 31,1936, ch.

495, art. 4, § 5b. Although multiple minor amendments have occurred over time, none changed the

language concerning gross receipts taxes or exemptions. See, e.g., Act of May 20, 1971, 62d Leg.,

R.S., ch. 406, § 1, 1971 Tex. Gen. Laws 1535, 1535-37 (Act of May 20, 1971). The legislature

transferred this newer statute to the insurance code as article 4.11 at the same time that it codified

article 4.10 and did not alter the language of the gross receipts tax or of the exemptions. Compare

Act of May 20, 1971, ch. 406, § 1, with Act of May 29, 1981, ch. 389, § 36, art. 4.11. Finally, in

6

2001, the legislature removed the tax exemption language at issue in this case. See Act of May 26,

2001, 77th Leg., R.S., ch. 763, §§ 3, 5, 2001 Tex. Gen. Laws 1501, 1502, 1503.

No sales or use taxes existed in Texas when the legislature created the gross receipts

tax system in 1907. Rather, the legislature created the “broad-based” sales and use tax system in

1961 as a way to raise revenue for educational and health facilities. See Act of Aug. 8, 1961, 57th

Leg., 1st C.S., ch. 24, 1961 Tex. Gen. Laws 72 (current version at Tex. Tax Code Ann. §§ 151.001-

.713 (West 2002 & Supp. 2003)); James R. Soukop et al., Party and Factional Division in Texas 10-

11 (1964). The attorney general has interpreted the sales and use tax statutes as applying to

insurance companies since at least 1968. See Op. Tex. Att’y Gen. No. M-188 (1968). Since 1961,

USAA paid both the gross receipts taxes as required by articles 4.10 and 4.11 and sales and use taxes

as required by chapter 151 of the tax code.

On January 12, 2000, USAA filed claims with the Comptroller for a tax refund of

sales and use taxes, motor fuel taxes, taxes on the sale, rental, and use of motor vehicles, the

telecommunications infrastructure fund assessment, and other taxes in the approximate amount of

$200,000,000 plus interest. See Tex. Tax Code Ann. § 11.104 (West 2001). USAA then filed this

suit and ultimately limited its claim to include a refund only for sales and use taxes paid from 1994

through 1999, totaling $120,447,142. The Comptroller countersued, seeking a declaratory judgment

that the “no other tax” language in former articles 4.10 and 4.11 referred only to occupation and

franchise taxes. The district court denied USAA’s claim and declared in a final judgment that the

payment of gross receipts taxes under former articles 4.10 and 4.11 did not exempt USAA from

paying sales and use taxes. This appeal followed.

7

DISCUSSION

In its sole issue, USAA argues that the supreme court’s decision in Fleming Foods

of Texas, Inc. v. Rylander compels us to use only the narrow, “plain meaning” principle of statutory

construction. See 6 S.W.3d 278, 284-85 (Tex. 1999). USAA then relies on that interpretation of

Fleming Foods to argue that the plain meaning of the phrase “no other tax” in former articles 4.10

and 4.11 compels us to conclude that the legislature exempted USAA from paying sales and use

taxes. We disagree.

This argument requires us to construe sections of the tax code regarding the sales and

use taxes and their exemptions and sections of the insurance code concerning gross receipts taxes,

occupation taxes, and exemptions. See Tex. Tax Code Ann. §§ 151.051, .301-.354 (West 2002);

Former Tex. Ins. Code art. 4.10, §§ 1, 14; art. 4.11, §§ 1, 9. Statutory construction is a matter of law,

which we review de novo. Johnson v. City of Fort Worth, 774 S.W.2d 653, 656 (Tex. 1989). The

primary rule of statutory interpretation is to look at the intent of the legislature and construe the

statute so as to give effect to that intent. Fleming Foods, 6 S.W.3d at 284; Union Bankers Ins. Co.

v. Shelton, 889 S.W.2d 278, 280 (Tex. 1994); Sharp v. Clearview Cable TV, Inc., 960 S.W.2d 424,

426 (Tex. App.—Austin 1998, pet. denied). Disputed provisions are to be considered in context, not

in isolation. Texas Workers’ Comp. Comm’n v. Continental Cas. Co., 83 S.W.3d 901, 905 (Tex.

App.—Austin 2002, no pet.); see also Fitzgerald v. Advanced Spine Fixation Sys., 996 S.W.2d 864,

866 (Tex. 1999). Texas courts are to consider, among other factors, the language of the statute,

legislative history, the nature and object to be obtained, and the consequences that would follow

8

from alternative constructions, even when a statute is not ambiguous on its face. Helena Chem. Co.

v. Wilkins, 47 S.W.3d 486, 493 (Tex. 2001); Union Bankers Ins. Co., 889 S.W.2d at 280.

Tax exemptions are to be strictly, though reasonably, construed against the taxpayer.

North Alamo Water Supply Corp. v. Willacy Co. Appraisal Dist., 804 S.W.2d 894, 899 (Tex. 1991);

Clearview Cable TV, Inc., 960 S.W.2d at 426; Sharp v. Tyler Pipe Indus., Inc., 919 S.W.2d 157, 161

(Tex. App.—Austin 1996, writ denied). When considering the scope of a tax exemption, we

consider the types of taxation that could have been contemplated by the legislature when it granted

the exemption. See, e.g., Millers’ Mut. Fire Ins. Co. v. City of Austin, 210 S.W. 825, 827 (Tex. Civ.

App.—San Antonio 1919, no writ). Tax exemptions are subject to such strict construction because

“they are the antithesis of equality and uniformity and because they place a greater burden on other

taxpaying businesses and individuals.” Bullock v. National Bancshares Corp., 584 S.W.2d 268, 271-

72 (Tex. 1979).

In contrast, the essence of USAA’s argument is that Fleming Foods has narrowed our

rules of statutory construction to one element—a consideration of “plain words” as they appear on

the page, without reference to the context or purpose of the statute, and without a comparison of

older versions of statutes with the newer versions.5 See 6 S.W.3d at 284, 285-86. A close reading

5

We discern USAA’s argument from several sections of its brief when viewed as a whole.

First, USAA relies on Fleming Foods to argue that the words “no other tax” mean “no other tax”

under the plain meaning rule. See Fleming Foods of Tex., Inc. v. Rylander, 6. S.W.3d 278, 284 (Tex.

1999). Thus, USAA believes that its payment of gross receipts taxes exempted it from paying all

other taxes imposed by the legislature, except those taxes specifically listed in former articles 4.10

and 4.11. In support of this view, USAA argues that the words “no other tax” are specific and

unambiguous and should therefore not be construed by a court to mean something other than the

meaning of the plain words unless there is a typographical error or the application of those words

would produce an absurd result. See id. In addition, USAA argues that the historical background

9

of the supreme court’s opinion in Fleming Foods does not support this rigid approach. The supreme

court in that case considered a particular problem of statutory interpretation that arises when the

Texas Legislative Council writes statutes as part of the legislatively mandated codification program.

Id. Although the Legislative Council is directed not to alter the sense, meaning, or effect of a statute,

on some occasions the statutory language differs between the original and codified versions in ways

that do, in fact, substantively alter the statute. Id. In that context, the supreme court considered a

very narrow question: “[w]hat effect should be given to clear, unambiguous statutes that were

drafted by the Legislative Council as part of the codification process but that depart from prior

law?” Id. (emphasis added). The court reasoned that, when the language of a newly codified version

of a statute changes prior law, the enactment of the codified version repeals the prior law. Id. at 284.

As a result, the supreme court decided that courts should construe such statutes from their “plain

words” unless it is obvious that the change itself was the result of a typographical error or that the

application of the literal words would produce an absurd result. Id.

The holding of Fleming Foods, then, is a narrow one. It mandates a particular method

of statutory construction for recently codified statutes—when the language of a codified version

clearly changes the meaning of a statute from that of its former version, courts may not ignore those

of this statute is irrelevant and that there is no need to compare older versions of the statute with

newer versions. See id. at 285, 286. USAA believes that the intent of the legislature can only be

gleaned from the words of the statute as they appear on the page. It cautions that the gross receipts

tax “is a particularly onerous burden” and that it is “entirely rational” that the legislature intended

to exempt insurance companies from all other taxes it might impose. Finally, USAA argues that the

legislature, in recognizing that “insurance companies pay millions of dollars in taxes[,] . . . balanced

that tax burden with a tax exemption that covered all other taxes.” However, in making this claim,

USAA refuses to consider what could have been contemplated by the legislature when it created the

tax exemption and urges us to limit our consideration of the issue to its narrow view.

10

changes by relying on the Legislative Council’s general mandate not to alter the meaning of statutes.

Id. at 285. “When there is no room to interpret or construe the current law as embodying the old,”

courts are to consider the prior law repealed and apply the traditional rules to the “plain words” of

the codified statute. Id. at 286. Conversely, when the current law reflects no substantial change from

the language of the prior law, and therefore can be interpreted or construed as embodying the prior

law, the Fleming Foods directives have no application.6 Id.; Johnson, 774 S.W.2d at 655; Texas

Dep’t of Transp. v. City of Floresville Elec. Power & Light Sys., 53 S.W.3d 447, 454 (Tex.

App.—San Antonio 2001, no pet.).

We have already noted that the language imposing gross receipts taxes and providing

for an exemption from “other taxes” did not change through the codification process. Compare Act

approved May 16, 1907, ch. 18, § 8, and Act of Oct. 31, 1936, ch. 495, art. 4, § 5, with Act of May

29, 1981, ch. 389, § 36, art. 4.10, and Act of June 17, 1993, ch. 685, § 3.11; compare also Act of

6

USAA also argues that we cannot consider the legislative history or the circumstances

under which these statutes were originally enacted. Because the code construction act prescribed

such consideration when construing statutes enacted by the sixtieth or a subsequent legislature, and

former articles 4.10 and 4.11 were originally passed before the sixtieth legislature, USAA believes

that we are prohibited from considering any factors other than the words of the statutes as they

appear on the page. See Tex. Gov’t Code Ann. § 311.023 (West 1998). We note, however, that

Texas courts developed a body of common law for construing statutes long before the legislature

enacted the code construction act and often considered issues such as those objected to by USAA.

See, e.g., Kansas City Life Ins. Co. v. Love, 109 S.W. 863, 864 (Tex. 1908) (considering the “intent

and meaning” of the original version of former article 4.10 and the context of the insurance industry

at the time the statute was enacted to determine that out-of-state insurance companies were subject

to the gross receipts tax); Texas Co. v. Stephens, 103 S.W. 481, 486 (Tex. 1907) (considering the

context of a taxed industry when defining the meaning of the word “dealer” differently than the

plain-meaning, dictionary definition available in 1907); Millers’ Mut., 210 S.W. at 826-27

(reviewing the legislative history of a tax exemption and placing that exemption in the context of the

creation of a system of occupation taxes). Thus, USAA’s argument is without merit.

11

May 20, 1971, ch. 406, § 1, with Act of May 29, 1981, ch. 389, § 36, art. 4.11. Thus, the language

of former articles 4.10 and 4.11 can be construed as embodying that of the pre-codified versions.

As a result, Fleming Foods has no application here.

We now turn to the statutes themselves. The sales tax is a tax of general applicability,

imposed on the sale of each taxable item in this state. See id. § 151.051(a) (West 2002). The use

tax also applies in a general way to tax the storage, use, or other consumption of taxable items

purchased from a retailer. Id. § 151.101(a) (West 2002). Within the tax code, the legislature created

certain explicit exemptions from sales and use taxes for some kinds of transactions, for governmental

entities, Indian tribes, religious, educational, and public service organizations, and for transactions

involving particular items such as newspapers, magazines, airplanes, and timber, among others. See

generally id. §§ 151.301-.355 (West 2002). Outside of the tax code, the legislature has made

specific provisions exempting certain entities from the sales tax. See, e.g., Tex. Water Code Ann.

§ 15.954(f) (West Supp. 2003) (exempting nonprofit water supply or sewer service corporations

“from payment of any sales tax”); Tex. Transp. Code Ann. § 452.108(e) (West Supp. 2003)

(exempting regional transportation authorities from “all sales, use, and motor vehicle taxes imposed

by this state”); Tex. Rev. Civ. Stat. Ann. art. 5190.6, § 4D(l) (West Supp. 2003) (stating that sales

and use taxes created in the tax code do “not apply to tangible personal property purchased by a

person for use in a spaceport”). Significantly, when the legislature means to exempt a transaction

or an entity from the sales or use taxes, it indicates its intent by direct reference to those taxation

provisions. See Tex. Water Code Ann. § 15.954(f); Tex. Transp. Code Ann. § 452.108(e); Tex. Rev.

Civ. Stat. Ann. art. 5190.6, § 4D(l).

12

In contrast, in former articles 4.10 and 4.11 the legislature imposed taxes that were

narrow in scope. See Former Tex. Ins. Code art. 4.10, § 1; art. 4.11, § 1.7 They described a system

of taxation on insurance companies meant to function as an occupation tax and calculated on the

gross receipts of those businesses. See Former Tex. Ins. Code art. 4.10, §§ 1, 14; art. 4.11, §§ 1, 9;

see also Act approved May 16, 1907, ch. 18, § 8; State v. National Lloyds, 368 S.W.2d 765, 766

(Tex. 1963). In doing so, the legislature exempted the affected insurance companies from all taxes

and license fees then “collectable” [sic] in 1907 and directed that no occupation or other taxes be

levied on them. Act approved May 16, 1907, ch. 18, § 8. Former articles 4.10 and 4.11 both contain

language that further clarifies the narrow focus of this taxation scheme by defining the gross receipts

taxes as a replacement for other occupational taxes. See Former Tex. Ins. Code art. 4.10, § 14; art.

4.11, § 9; see also Millers’ Mut., 210 S.W. at 827.8 Thus, the statutes themselves make clear that

the “gross premiums tax like the franchise tax is a charge which corporations subject thereto must

pay for the privilege of engaging in business in Texas.” National Lloyds, 368 S.W.2d at 766.

7

Because the history of former articles 4.10 and 4.11 shows that the legislature created

former article 4.11 out of earlier versions of former article 4.10, and because neither party urges us

to treat the language in former article 4.11 any differently from that in former article 4.10, we

consider the purpose and intent of the gross receipts taxes and the exemptions provided for in these

articles to be identical.

8

The court in Millers’ Mutual considered “no other tax” language found in a statute

providing for a gross receipts tax on mutual insurance companies. 210 S.W. at 826-27. Although

it indicated that the Texas Constitution at that time prohibited an exemption from property taxes, the

court did not hold that the “no other tax” language violated the constitution. Id. Rather, the court

considered the context within which the legislature created the tax exemption and determined that

the tax exemption language did not reach to property taxes because the “taxation of property was not

in the contemplation of the legislature when the exemption from further taxation was granted.” Id.

The constitutional issue was one part of the context the court analyzed.

13

Because the scope of the gross receipts taxes is narrow, the exemptions created in

tandem with them must be read in the same narrow context. See Millers’ Mut., 210 S.W. at 827.

The actual language of the exemption sections supports this approach. See Former Tex. Ins. Code

art. 4.10, § 14; art. 4.11, § 9. In each, the exemption language establishes that the gross receipts tax

was intended to substitute for occupational and other kinds of business taxes rather than an addition

to those taxes. Id. art. 4.10, § 14; art. 4.11, § 9. For example, former article 4.10 states specifically

in the context of the exemption from the “occupational tax” that “no other tax shall be levied or

collected.” Id. art. 4.10, § 14. Likewise, former article 4.11 refers first to the gross receipts taxes,

creates an exemption from “all taxes and license fees,” and then makes some exceptions that would

allow some limited types of business taxes to the affected insurance companies. Id. art. 4.11, § 9.

Each exemption section also includes mandates that the statutes do not prohibit the

levy and collection of taxes on the real and personal property of insurance companies. See id. art.

4.10, § 14; art. 4.11, § 9. These mandates, like the exemptions themselves, are embedded in the

creation of a specialized occupational tax system for insurance companies. Id. arts. 4.10, 4.11. Thus,

we must consider the context in which these mandates arose in order to perceive their meaning. The

first version of the mandates appeared in the original version of article 4.10. See Act approved May

16, 1907, ch. 18, § 8. At that time, only a few types of taxes existed in Texas: (1) the taxation of

property; (2) occupation, license, and franchise taxes; (3) a poll tax; and (4) an inheritance tax. See

Miller, supra, at 264-321. When the legislature indicated that the tax exemption was not to impact

the ability of the state or any political subdivision of the state to collect property taxes, the other kind

of tax to which insurance companies might be subject at the time, it acted to establish the parameters

14

of the exemptions—that the gross receipts tax replace other occupation or franchise taxes but not all

categories of taxes.

Thus, when we consider the language of the statutes in their historical context, the

nature and object of the tax exemptions in former articles 4.10 and 4.11 become clear. Former

articles 4.10 and 4.11 state that the legislature—in 1907 and in the ensuing years—intended to

subject insurance companies to these specific gross receipts taxes in lieu of any general occupation

and franchise taxes. Sales and use taxes were “not in the contemplation of the legislature when the

exemption from further taxation was granted” because they did not exist at that time. See Millers’

Mut., 210 S.W. at 827. Certainly, provisions constructed to exempt insurance companies from

occupation and franchise taxes can have no effect on the responsibility of those insurance companies

to pay later-enacted taxes of general applicability. We overrule USAA’s issue on appeal.9

CONCLUSION

We are persuaded that former articles 4.10 and 4.11 created a system of occupation

taxes specific to the insurance industry. As a result, we find that the exemptions found in those

articles acted only to exempt the insurance industry from general occupation and franchise taxes.

Those exemptions did not act to exempt the insurance industry from the full range of non-occupation

9

The Comptroller offers additional arguments in the event we were to find that the tax

exemption language applied to sales and use taxes. Because we find that the exemption language

did not apply to sales and use taxes, we will not reach the merits of those arguments. In addition,

USAA directs our attention to caselaw from several other jurisdictions to support their position.

Because we hold that Texas law is dispositive, we need not address those cases.

15

and non-franchise taxes the State subsequently imposed, including sales and use taxes. We affirm

the judgment of the district court.

__________________________________________

W. Kenneth Law, Chief Justice

Before Chief Justice Law, Justices B. A. Smith and Patterson

Justice Patterson concurs in the judgment only.

Affirmed

Filed: November 6, 2003

16