January 3, 2022 OPINION Before ore QUINN, C.J., and PIRTLE and DOSS, JJ. Appellant, RTU, Inc., appeals from the trial court’s judgment denying its motion for summary judgment and granting the motion for summary judgment of Appellees, Glen Hegar, Comptroller of Public Accounts for the State of Texas, and Ken Paxton, Attorney General of the State of Texas (hereafter “the Comptroller”).[1] The underlying suit resulted from RTU’s unsuccessful exhaustion of administrative proceedings attempting to establish an exemption from paying sales tax for electricity it consumed between 2007 and 2011. RTU presents three issues in its original brief challenging the trial court’s final judgment and by its reply brief, it argues against the Comptroller’s position that it was not entitled to an exemption as to the payment of sales tax. By its first two issues, RTU asserts the trial court erred in granting summary judgment in favor of the Comptroller and rendering a take-nothing judgment. Pivotal to resolution of issues one and two, is issue three by which RTU questions whether its printing of third-party advertising on the reverse side of register tapes qualifies as “manufacturing” under section 151.318 of the Texas Tax Code which exempts it from sales tax for electricity use. We reverse and render judgment in favor of RTU, in part, and remand, in part. Background RTU, a manufacturer of cash register tapes, was founded in 1989. At that time, it was predominantly a marketing company that sold advertising and outsourced all the printing for and production of register tapes. In 2003, however, RTU transitioned into the printing business and began producing register tapes and selling them to grocery stores, restaurants, and retail stores for use in their point-of-sale machines. Grocery stores comprise the largest segment of RTU’s customer base. According to deposition testimony from RTU’s CEO, the company’s former comptroller suggested conducting a “predominant use” study on electricity consumption to accelerate depreciation on its building at its plant located at 17015 Park Row in Houston. RTU hired an engineer to conduct a twelve-month utility study to ascertain “whether the electricity was predominantly used to produce register tapes and/or to light, heat, or cool the manufacturing area of the plant.” The study spanned a twelve-month period from July 2010 to June 2011. The result of the study was that 66.74 percent of the electricity consumed at the plant was used to power exempt manufacturing equipment and to light, heat, or cool the manufacturing area. Based on that percentage and apart from the depreciation issue, the engineer concluded that RTU was also entitled to an exemption from sales tax on electricity purchased from its provider for its Houston plant. Based on the predominant use study and the engineer’s conclusion, RTU filed a claim with the Comptroller for a tax refund in the sum of $68,178.90 for the period beginning November 1, 2007, through November 30, 2011. RTU argued that based on certain provisions of the Texas Tax Code, it qualified for a tax exemption because over fifty percent of the electricity used during that period was for manufacturing. When RTU’s refund claim was denied, it requested and was granted a hearing on the claim. At the initial administrative level the claim was again denied and, in April 2017, RTU’s motion for rehearing was also denied. RTU then filed its original petition seeking a refund of sales tax paid for electricity purchased between 2007 and 2011. In its petition, RTU alleged it was a manufacturer and that based on the results of the predominant use study, it was entitled to an exemption for sales tax paid on its use of electricity at its Houston plant during the relevant time period. According to RTU’s pleading, the Comptroller agreed that the machinery and equipment used to print and cut blank register tapes and tapes with customer-only advertising qualified for the manufacturing exemption. However, the Comptroller refused a sales tax refund on the ground that third-party advertising printed on the reverse side of register tapes did not qualify for the Tax Code’s manufacturing exemption. Both parties filed motions for summary judgment. The Comptroller reasoned that the predominant use study was flawed because it included the imprinting of register tapes with third-party advertising as nontaxable manufacturing. It concluded that RTU failed to meet its burden to clearly show it was entitled to an exemption from payment of sales tax for electricity consumption. After considering the competing motions and summary judgment evidence, the trial court granted the Comptroller’s motion and denied RTU’s motion. A take-nothing judgment was rendered against RTU resulting in this appeal. Issue Three—Does Printing of Third-Party Advertising Qualify as Manufacturing? We address RTU’s issues in a logical rather than sequential order. Thus, we first address issue three, which RTU contends is the ultimate point of disagreement. It contends that its printing of third-party advertising on certain register tapes as opposed to customer-specified advertising does not preclude it from qualifying for the manufacturing exemption under section 151.318 of the Texas Tax Code. Applicable Law Texas law requires that every sale of property be taxed unless it is exempt. See TEX. CONST. art. VIII, § 2. See also TEX. TAX CODE ANN. § 151.051(a) (imposing sales tax on all taxable items). The purchase of electricity is generally subject to a sales and use tax. Geo Grp., Inc. v. Hegar, No. 03-15-00726-CV, 2017 Tex. App. LEXIS 7559, at *1 (Tex. App.—Austin Aug. 10, 2017, pet. denied) (mem. op.). An exception to the general rule to impose a sales tax on electricity is found in the following statutes: Section 151.317. Gas and Electricity Subject to [certain sections], gas and electricity are exempted from the taxes imposed by this chapter when sold for: * * * use in powering equipment exempt under Section 151.318 or 151.3185 by a person processing tangible personal property for sale as tangible personal property, other than preparation or storage of prepared food described by Section 151.314(c-2); use in lighting, cooling, and heating in the manufacturing area during the actual manufacturing or processing of tangible personal property for sale as tangible personal property, other than preparation or storage of prepared food described by Section 151.314(c-2)[.] * * * (d) Natural gas or electricity used during a regular monthly billing period for both exempt and taxable purposes under a single meter is totally exempt or taxable based on the predominant use of the natural gas or electricity measured by that meter. The comptroller may prescribe by rule the procedures by which a purchaser must establish the predominant use of the natural gas or electricity. Section 151.318. Property Used in Manufacturing (a) The following items are exempted from the taxes imposed by this chapter if sold, leased, or rented to, or stored, used, or consumed by a manufacturer: * * * tangible personal property directly used or consumed in or during the actual manufacturing, processing, or fabrication of tangible personal property for ultimate sale if the use or consumption of the property is necessary or essential to the manufacturing, processing, or fabrication operation and directly makes or causes a chemical or physical change to: the product being manufactured, processed, or fabricated for ultimate sale; * * * [i]n addition to the other items exempted under this section, pre-press machinery, equipment, and supplies, including computers, cameras, photographic props, film, film developing chemicals, veloxes, plate- making machinery, plate metal, litho negatives, color separation negatives, proofs of color negatives, production art work, and typesetting or composition proofs, that are necessary and essential to and used in connection with the printing process are exempted from the tax imposed by this chapter if they are purchased by a person engaged in: printing or imprinting tangible personal property for sale . . . . TEX. TAX CODE ANN. § 151.317(a)(2), (3); § 151.318(a)(2)(A), (t). To aid in enforcing section 151.317, the Comptroller promulgated tax Rule 3.295. See 34 TEX. ADMIN. CODE § 3.295 (Natural Gas and Electricity); Tex. Citrus Exch. v. Sharp, 955 S.W.2d 164, 167 (Tex. App.—Austin 1997, no pet.). The predominant use (i.e., use greater than fifty percent) determines whether all of the electricity flowing through one meter is exempt or taxable. Cafeteria Operators, L.P. v. Rylander, 96 S.W.3d 460, 461 n.2 (Tex. App.—Austin 2002, pet. denied) (on reh’g). It is an all-or-nothing proposition for each meter. Spencer Gifts, Inc. v. Bullock, 766 S.W.2d 593, 599 (Tex. App.—Austin 1989, no writ). A business may have both taxable and non-taxable uses of electricity. Id. If a meter measures both kinds of uses, then the taxpayer must demonstrate that more than fifty percent of the use is non-taxable to claim an exemption. Id. A taxpayer demonstrates that its predominant use of electricity is exempt by performing a utility study. Rylander v. Haber Fabrics Corp., 13 S.W.3d 845, 849 (Tex. App.—Austin 2000, no pet.). “The study must list all uses of the utility, both exempt and nonexempt, the times of usage, the energy used, and whether the use was taxable or exempt.” Id. The study must cover a period of twelve consecutive months and be certified by an engineer. Id. The business owner must certify that all items using the utility are listed and that hours of use for each item are correct. Id. Analysis The Comptroller’s motion for summary judgment was supported by deposition testimony from RTU’s CEO and copies of agreements between RTU and three of its largest grocery chain customers—Kroger, H-E-B, and Albertson’s. The Comptroller also included a copy of RTU’s predominant use study certified by the engineer who performed the study. RTU filed its own motion for summary judgment on the same day but subsequent to the Comptroller’s motion. It presented as the threshold issue whether its electricity purchases for its Houston plant were exempt from sales tax. RTU asserted it was a “manufacturer”[2] and posited that its electricity purchases “involve[d] equipment directly used in the production of thermal tapes sold to customers and [did] not involve advertising.”[3] It also alleged, that in addition to its pre-press equipment (computers), its printing press, ultraviolet dryers, and convertors qualified for the manufacturing exemption because they were “necessary and essential” to the production of the register tapes and were directly used to create a physical or chemical change to the register tapes sold. In support of its motion for summary judgment, RTU included copies of its pleadings and an affidavit from its CEO attesting to facts that corresponded with his deposition testimony. RTU also submitted as evidence a copy of the predominant use study, its electricity bills from its plant for the relevant years with proof of payment, and copies of agreements with Kroger and H-E-B. The deposition testimony and affidavit from RTU’s CEO presented the following facts: RTU has a single electric meter at its Houston plant located at 17015 Park Row; RTU is a “print vendor,” and a “register tape provider”; RTU owns the equipment used to make register tapes, specifically, a printing press, an automatic splicer, a converter roll, ultraviolet dryers, and a computer; RTU purchases jumbo rolls of thermal paper; the jumbo rolls are fed through printing presses where ink is applied; the ink is dried with ultraviolet dryers; the jumbo rolls are then fed through a converter that cuts and cores each jumbo roll into 3,264 individual register tapes;
