# NuStar Energy, L.P. v. Hegar Supreme Court of Texas, No. 24-0037 **NuStar Energy, L.P. v. Hegar, No. 24-0037 (Tex. Mar. 13, 2026). Holding: Section 171.103(a)(1) unambiguously sources receipts from sales of tangible personal property to Texas if the taxpayer yields possession and control of the goods to a buyer at a location in this state, even if the buyer later transports the goods elsewhere for use or consumption, so the Comptroller's rules are consistent with the statute and NuStar failed to overcome the presumption that they are valid.** Practice areas: tax, administrative law ## Key issues - Section 171.103(a)(1) sources franchise-tax receipts from goods to Texas when the seller yields possession and control to a buyer at a location in Texas, even if the buyer takes the goods elsewhere for use, so Comptroller rules making the transfer point determinative are valid. - NuStar's bunker-fuel sales delivered to foreign-registered vessels at Texas ports were properly sourced to Texas. ## Factual History Texas imposes a franchise tax on domestic and foreign entities doing business in the state, and the single-factor apportionment formula divides the taxpayer's gross receipts from "business done in this state" by its gross receipts everywhere (Opinion, PDF pp. 2-3). Section 171.103(a)(1) of the Tax Code sources receipts from each sale of tangible personal property to Texas "if the property is delivered or shipped to a buyer in this state regardless of the FOB point or another condition of the sale" (Opinion, PDF p. 4). NuStar Energy, L.P. sells high-sulfur bunker fuel for use in foreign-registered vessels and delivers it to the buyers at Texas ports, and it sought a franchise-tax refund because the nonresident buyers do not and legally cannot use or consume the fuel in Texas waters, so it argued these "dock sales" were not business done in Texas (Opinion, PDF pp. 4-5). ## Procedural History After the Comptroller denied the refund request, NuStar exhausted administrative remedies and sued the Comptroller and Attorney General for a refund and for a declaration that Comptroller Rules 3.591(e)(29)(A), (C), and (H) and 3.591(e)(31) are facially invalid because they conflict with Section 171.103(a)(1) (Opinion, PDF pp. 5-6). On cross-motions for partial summary judgment the trial court granted the Comptroller's motion, denied NuStar's, and declared the rules valid, and on permissive interlocutory appeal the Third Court of Appeals (Austin) affirmed, holding that the statute unambiguously apportions on a place-of-delivery basis (Opinion, PDF pp. 6-8). The vehicle in this Court is a petition for review filed by NuStar, argued September 10, 2025, and decided March 13, 2026 (Opinion, PDF pp. 1, 23). Justice Lehrmann did not participate (Opinion, PDF p. 1). ## Issues Presented NuStar presents one issue (Brief on the Merits (Petitioner), PDF p. 14): whether the court of appeals erred in holding that the phrase "in this state" in Section 171.103(a)(1) modifies "delivered or shipped" rather than "to a buyer," and whether it erred in holding that the Comptroller's rule is valid even though it implements a place-of-delivery test. The Court framed the question as whether the statute attributes sales to the location where the buyer takes delivery or to where the buyer uses or consumes the goods (Opinion, PDF pp. 1-2, 8-9). ## Standard(s) of Review Whether the challenged rules conflict with the statute is reviewed de novo under well-established principles of statutory construction, beginning with the statute's text and the ordinary meaning of its terms in context (Opinion, PDF pp. 8, 10). ## Legal Arguments **Whether Section 171.103(a)(1) uses a place-of-transfer or an ultimate-destination test.** **NuStar (Petitioner):** The Comptroller cannot evade the Legislature's demonstrated intent to apportion receipts from tangible personal property on an ultimate-destination or place-of-market basis, because the phrase "in this state" modifies "to a buyer" and not "delivered or shipped," so the statute reaches only sales to a buyer in Texas, and authority from sister states supports that construction (Brief on the Merits (Petitioner), PDF pp. 8, 23; Petition for Review (Petitioner), PDF p. 18). **Comptroller (Respondents):** The statutory text is clear and unambiguous: receipts from sales of tangible personal property are sourced to Texas where the seller physically transfers possession and control to a buyer at a location in Texas, and the court of appeals properly applied this Court's statutory-construction precedents (Brief on the Merits (Respondent), PDF p. 17; Response to Petition (Respondent), PDF p. 14; Opinion, PDF p. 7). **Whether the Comptroller's rules are invalid.** **NuStar (Petitioner):** The rules transpose statutory text in ways that decouple "in this state" from "a buyer," impose a place-of-delivery test, and create a carve-out for delivery to a common carrier (Opinion, PDF pp. 20-21). **Comptroller (Respondents):** The rules are consistent with the statute and NuStar's challenge, which depends on its construction of the statute, fails to overcome the presumption that the rules are valid (Opinion, PDF p. 20). ## Stated Reasons the Court Should Take the Case NuStar argued that the court of appeals' reading departs from the Legislature's demonstrated intent to apportion receipts on a place-of-market basis (Petition for Review (Petitioner), PDF p. 18). The Comptroller answered that the Third Court correctly applied the Court's precedents and no important issue remains to resolve (Response to Petition (Respondent), PDF p. 14). ## Practice Area Tags tax, administrative-law ## Procedural Posture/Vehicle Petition for review from the Third Court of Appeals (Austin) in a permissive interlocutory appeal from cross-motions for partial summary judgment; argued September 10, 2025, and decided March 13, 2026 (Opinion, PDF pp. 1, 6-8, 23). ## Amicus Involvement None ## Holding Section 171.103(a)(1) unambiguously sources receipts from sales of tangible personal property to Texas if the taxpayer yields possession and control of the goods to a buyer at a location in this state, even if the buyer later transports the goods elsewhere for use or consumption, so the Comptroller's rules are consistent with the statute and NuStar failed to overcome the presumption that they are valid (Opinion, PDF pp. 2, 9, 20-23). ## Court's Reasoning **Plain meaning.** "Delivered" means to carry and turn over goods to the intended recipient or to yield possession and control, "shipped" is an alternative way of effecting delivery, "to a buyer" distinguishes the intended recipient from a mere intermediary, and "in this state" refers to a location in Texas, so the statute sources receipts to Texas when property is handed over to a buyer in Texas (Opinion, PDF pp. 10-11). The prepositional phrase "to a buyer in this state" modifies the verb phrase "delivered or shipped," specifying where delivery to the buyer takes place, and an ultimate-destination reading would require looking beyond the transfer point and add recordkeeping burdens, but that is not what the text says (Opinion, PDF pp. 11-13). **Omitted words and context.** The statute says nothing about the buyer's domicile, the property's "ultimate" destination, or the buyer's consumption or use, and where the Legislature wanted a residency limitation elsewhere in Chapter 171 it said so clearly, so the notion that the formula should capture the customer market comes from unstated policy, not the text (Opinion, PDF pp. 13-15). **UDITPA and other states.** Section 171.103(a)(1)'s language resembles the model act's, but Texas's franchise-tax statute differs in significant ways, other jurisdictions are not uniform, and while there may be tension with decisions elsewhere, the statute's plain language trumps unstated policy goals, and any remedy is legislative, not judicial (Opinion, PDF pp. 15-19). **The rules.** The rules transposed the statutory phrase to "delivered in Texas to a buyer," but under either phrasing the destination is the same, the location where the buyer took possession and control, so the transposition made no substantive difference and the rules are consistent with the statute (Opinion, PDF pp. 20-23). ## Disposition Court of appeals' judgment affirmed and the case remanded to the trial court for further proceedings consistent with the opinion (Opinion, PDF p. 23). ## Vote Breakdown Justice Devine delivered the opinion of the Court, with no separate writings; Justice Lehrmann did not participate (Opinion, PDF p. 1). --- Source: The SCOTX Report, https://scotxreport.com/cases/24-0037. 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