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Are detention facilities residences? Texas judge says no, demands GEO pay up on extra taxes.

A lawsuit by a private prison company seeking a refund of sales tax has been denied, according to documents from the Third District of the Texas Court of Appeals.

 

The GEO Group, one of the largest private prison companies in the U.S., filed a lawsuit against Glenn Hegar, Comptroller of Public Accounts for the State of Texas, and Ken Paxton, the state Attorney General. The lawsuit was seeking a refund of sales tax on gas and electricity used in GEO's detention facilities. GEO Group said it was entitled to the sales tax exemption for residential use under a specific section of the State Tax Code.

 

Following an audit, the Comptroller found that GEO needed to pay additional sales and use tax for the period of May 1, 2001, to April 30, 2005, due to a disagreement on the GEO facilities being residential and therefore tax exempt. GEO paid the extra funds under protest. They then filed the suit against the Comptroller after he denied their request to refund the amounts paid. GEO sought $1,367,377.14 plus interest as their refund.

 

The GEO Group said they fell under the residential tax exemption because the prisoners resided in their detention facilities, therefore making them residences. They also argued that owners of each facility, whether GEO Group or a government body, used the gas or electricity, which satisfies the requirement that it is used by the owner.

 

The Comptroller argued that a prison cannot be labeled as a residence because, "while a home is one’s castle, a prison is a cage. The Comptroller also asserts that because the prisoners have none of the fundamental rights or attributes that non-prisoners have in their homes, they do not occupy the facilities 'as a home or residence.'"

 

The court agreed that GEO did not establish that it was eligible for the residential sales tax, and that the Comptroller was correct in requiring them to pay the extra sales and use tax.

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