Texas court dismisses sales tax refund claim


On Aug. 30, 2022, the Third District of the Texas Court of Appeals affirmed a lower court’s dismissal of a sales tax refund lawsuit brought by class representatives and assignees of a retailer.1 The court held that the assignees lacked standing to bring the suit because the retailer had already assigned its right to a tax refund.


Background and procedural history


The retailer, Best Buy Stores, Inc. (Best Buy), operated a rebate program for certain goods between 1998 and 2007. While Best Buy partially refunded the retail price to customers who submitted rebate forms, it did not refund the sales tax customers paid on the full retail price. Instead, Best Buy remitted the sales tax to the state. In 2002, several individuals filed a class action lawsuit in state trial court seeking a refund of tax directly from Best Buy, but later sought an assignment of rights from Best Buy to request a refund directly from the Texas Comptroller of Public Accounts (Comptroller) as permitted under Texas law.2 In reaching a settlement, the parties agreed that Best Buy would assign its right to bring a tax refund claim to the individual class members.


In 2008, class counsel filed a tax refund claim with the Comptroller for approximately $11 million on behalf of the class representatives and members. The Comptroller denied the claim and the trial court later dismissed the lawsuit, finding that class counsel lacked the authority to file individual refund claims on behalf of the individual class members.


In a separate proceeding, Best Buy sought a refund of sales tax paid covering the same tax period for procedural reasons. In 2017, Best Buy executed an assignment of its right to a refund to the individual class representatives from the initial refund claim as part of an agreement to be dismissed from the suit. However, the Comptroller denied the refund on the grounds that Best Buy had not refunded the sales tax in question and because the claim had already been assigned. An administrative law judge recommended that the refund be denied on the basis that Texas law did not authorize a class action refund claim. The Comptroller adopted the recommendation, and the assignees then filed a tax refund lawsuit in trial court. In response, the Comptroller argued, among other things, that: (i) the individual customers could not receive a refund because Best Buy never refunded the sales tax; (ii) Best Buy had already assigned its right to a tax refund prior to bringing the underlying administrative refund claim; and (iii) Texas law does not provide for a class action tax refund lawsuit.


The trial court dismissed the tax refund lawsuit, and the Court affirmed the dismissal in an April 2021 opinion. The assignees then filed a motion for rehearing, arguing that the 2008 assignment was void based on counsel’s lack of authority to represent the assignees and file individual refund claims on their behalf, which would therefore not preclude the effect and validity of the 2018 assignment.


Appellate court decision


The sole issue before the Court on the motion for rehearing concerned whether Best Buy had already assigned its right to bring a tax refund claim in 2008, therefore making the 2017 assignment invalid. The Court pointed to the plaintiffs’ concession that Best Buy and the class attempted to assign Best Buy’s claims to a group of individuals in 2008 but also argued that the 2008 assignment was void. The Court further clarified that its earlier decision that class counsel could not represent the assignees in their individual refund claims did not address or expressly void any assignment of right.


In the Court’s view, the class counsel’s lack of authority to represent the assignees and file individual refund claims in the initial proceeding did not impact the validity of the 2008 assignment. Accordingly, the Court concluded that Best Buy failed to establish that the assignees of the 2008 assignment had reassigned or disclaimed the assignment or that the assignment was void. For these reasons, the Court affirmed the trial court’s judgment dismissing the refund claim.



A case with a long and complex procedural history, this decision illustrates the important principle that the right to seek a refund of sales tax cannot be reassigned where the retailer previousl hasy assigned its right to a tax refund. In this case, Best Buy initially assigned its right to seek a refund to class members who later brought a class action in filing their refund claim with the Comptroller. However, the Comptroller denied that claim and the trial court later dismissed the lawsuit on the basis that class counsel lacked the authority to file individual refund claims on behalf of the individual assignees. When Best Buy later assigned its right to the individual class representatives, the trial court determined and the appellate court agreed that the individuals lacked standing to bring the refund claim because Best Buy had already assigned its right in the initial proceeding. Accordingly, the dismissal of the case leaves the individual customers without further recourse to pursue a refund.


Although the individual customers were precluded from bringing a separate refund claim because Best Buy had already assigned its right to bring the initial refund claim, it is important to note that the initial refund claim was denied because Texas law does not authorize a class to file sales tax refund claims, and the Comptroller lacks the authority to grant class-action refunds. As a result, individual customers are limited to filing refund claims individually with the Comptroller, which can be a procedurally inefficient and administratively burdensome process. In many cases, the costs of filing a refund claim may exceed the amount of the potential refund sought on an individual basis. The procedural issues presented in this case may provide potential arguments for adjusting the administrative tax appeals process to allow for class action lawsuits in cases where retailers agree to assign their rights.



Piazza et al. as Assignees of Best Buy Stores, Inc. v. Hegar, No. 03-19-00246-CV, Texas Court of Appeals, Third District, Aug. 30, 2022.
2 Tex. Tax Code § 111.104(b).




Kelsie White

Dallas, Texas

Service Experience
  • Tax
  • State and local tax


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