November 30, 1988
Mr. Perry L. Adkisson OpiIliOIl No. JM-987
Chancellor
The Texas A&M University System Re: Applicability of
College Station, Texas 77843 the limited sales and
use tax to public
Honorable Bob Bullock entities (RQ-1363 and
Comptroller of Public Accounts RQ-1415)
L.B.J. State Office Building
Austin, Texas 78774
Gentlemen:
This office has received two requests for opinions
P
which ask a series of related questions concerning the
q&cability of certain provisions of the Texas Limited
, Excise, and Use Tax Act to public entities which
engage in transactions subject to the taxes levied under the
act. See aenerally Tax Code 55 151.001-151.801.
The Comptroller of Public Accounts requests our opinion
on the following issues:
(1) Whether state agencies, cities,
counties, independent school districts, state
colleges and universities or their auxiliary
enterprises, and special purpose districts
engaged in making retail sales of tangible
personal property and services subject to
taxation under the Texas Sales Tax Act must
collect sales tax on those sales?
(2) If [such entities must collect taxes
of retail sales,] then must they be issued
a sales tax permit [specified in section
151.204 of the Tax Code]?
(3) If so, are they subject to the same
rules as other taxpayers with regard to:
a) purchase of tax permits:
b) filing of returns:
Mr. Perry L. Adkisson
Honorable Bob Bullock
Page 2 (JM-987) .
c) penalty and interest on late filings;
and
d) enforcement procedures and other
matters.
Additionally, Chancellor Adkisson asks whether public
institutions of higher education are entitled to withhold a
percentage of gross sales and use tax receipts as reimburse-
ment for the cost of collecting the taxes. The statute
permits those who collect the tax on behalf of the state to
withhold one-half of one percent of the tax due. Tax Code 5
151.423.
I.
It is important to note at the outset that these
questions do not concern the taxation of any public body.
See, e.u Attorney General Opinion WW-1502 (1962). Rather,
the issu;; under review concern the applicability of certain
provisions of the Tax Code to public bodies that "sell@1 or
"retail" tangible personal property subject to the sales and
use tax. See, e.a., Tax Code 5 151.052: Part III, below.
Nor do the questions under examination pertain to
exemptions from the imposition of the sales and use tax for
governmental entities on purchases of tangible personal
property for their use. &g Tax Code § 151.309.
Of course, the application of the provisions of any tax
law, including enforcement provisions~with interest charges
and monetary penalties, to public bodies ma in fact promote
something like what one court has identified as the
"senseless process" of the sovereign taxing itself
[t]he net result of which would be but to
take its own money out of one pocket for the
purpose of putting it into another -- less
the cost of assessing and collecting the tax.
. . . accomplish[ing nothing] but the idle
expenditure of public funds.
Lower Colorado River Authoritv v. Chemical Bank and Trust
Co., 190 S.W.Zd 48, 51 (Tex. 1945) (citation omitted). See
also Attorney General Opinion WW-1502 (1962).
II.
Section 151.051 of the Tax Code specifies that a "tax
is imposed on each sale of a taxable item in this state."
P. 5042
Mr. Perry L. Adkisson
Honorable Bob Bullock
Page 3 (JM-987)
The tax is collected by those making sales of things subject
to the tax:
(a) A seller who makes a sale subject to
the sales tax imposed by this chapter shall
add the amount of the tax to the sales price,
and when the amount of the tax is added:
(1) it becomes a part of the sales price;
(2) it is a debt of the purchaser to the
seller until paid: and
(3) if unpaid, it is recoverable at law in
the same manner as the original sales
price.
Tax Code 8 151.052. Additionally, the Tax Code defines a
lVsellerllor "retailer I0 in relevant part as a
(a) . . . person engaged in the business of
making sales of taxable items of a kind the
receipts from the sale of wh~ich are included
in the measure of the sales or use tax
imposed by this chapter.
Tax Code 9 151.008. 11Business11 is defined as "an activity
of or caused by a person for the purpose of a direct or
indirect gain, benefit, or advantage." Tax Code 9 151.003.
It is important to note that the Code Construction Act
mandates the inclusion of llgovernment,l' "governmental
agency," and "governmental subdivision" within the general
definition of U1personl'as that word is used in the relevant
provisions of the Tax Code. Gov't Code 5 311.005(2).1
When the legislature intends for governmental entities
to be treated differently from other persons in the Tax
Code, it specifically provides for distinctive treatment for
1. The first act imposing the limited sales and use tax
contained a definition of "person" which included the
VState, or any agency hereof, or any city, county, special
district, or other political subdivision of this State to
the extent engaged in the selling of tangible personal
property . . . .*I Acts 1961, 57th Leg., 1st C.S., ch. 24,
9 1, at 71.
p. 5043
.
Wr. Perry L. Adkisson
Honorable Bob Bullock
Page 4 (JM-987)
public entities whose activities otherwise fit within the
reach of the statute. See. e.a., Tax Code § 151.3101 (the
sales of amusements "exclusively provided: by this state,
municipality, county, school district, special district, or
other political subdivision of this state . . .I* are
exempted from the sales and use tax); and Tax Code 5 151.309
(exemption from payment of the tax by governmental
entities).
This office has noted, for example, that the sales tax
is applied to sales made by the Department of Highways
operating as a retailer selling tangible personal property
to purchasers in the general public. Attorney General
Opinion H-303 (1974). No general principle in the
Constitution or the Tax Code limits the application of the
sales and use tax simply because transactions subject to the
tax are entered into by public entities, or because the
public body must extract the tax from those purchasers who
owe it as a part of the purchase price of tangible personal
property.
Thus, when a governmental entity acts as a "retailer"
or "seller," section 151.052 of the Tax Code makes clear
that the l*sellerlqor "retailer*' is not initially liable for
the tax: rather, the purchaser is liable to the seller for
the tax as '*a part of the sales price." Accordingly, the
key operational definitions in the sales tax law apply to
public bodies that otherwise fit within their terms. The
provisions of the law are clear and unambiguous, and call
for no examination beyond the plain meaning of the words
used in the statute. Brazos River Authoritv v. Graham, 354
S.W.2d 99 (Tex. 1961).
III.
The collection of the sales and use tax and the deposit
of the tax receipts with the state depends on the specific
efforts of sellers and retailers mandated by the Tax Code.
Retailers must register with the comptroller, and all
sellers must obtain sales tax permits. Tax Code 55 151.106,
151.201.
Subchapter I, chapter 151 of the Tax Code specifies the
methods which must be used by retailers and sellers to
report the amount of the taxes they collect. The subchapter
also specifies the deadlines for making such reports and for
transmitting tax receipts to the comptroller. See Tax Code
gg 151.401, 151.409. Additionally, the code permits the
seller or retailer collecting the tax to deduct one-half of
one percent of the amount due for the cost of collecting the
P. 5044
Mr. Perry L. Adkisson
Honorable Bob Bullock
Page 5 (JM-987)
F .
tax and to qualify for certain discounts for some prepayment
of the taxes collected. Tax Code 00 151.423, 151.424.
Subchapters K and L, chapter 151 of the Tax Code
specify the procedures used to collect delinquent sales
taxes, mandate penalties to be levied for certain violations
of the sales tax law, and prohibit certain practices with
regard to the collection and payment of the tax.
The provisions of the Tax Code which place the burden
of collecting the sales tax on sellers and retailers do not
distinguish retailers and sellers in the public sector from
private retailers and sellers. Again, it appears that when
the legislature meant for different rules to apply to
governmental entities, it provided so in other definitional
provisions of the Tax Code. Sea the discussion at page 5,
above.
Thus, absent specific language creating an exception
for governmental entities, all of the provisions of the
limited sales, use, and excise tax law apply to governmental
entities entering into transactions subject to the provi-
sions of the Tax Code, with the exception discussed in Part
F--
IV, and subject to the general qualifications set out in
Part V.
Specifically, public institutions of higher education
when they act as l*sellersE' or "retailers** by conducting
transactions subject to the sales tax, should be treated by
the comptroller as any other "seller" or "retailer" engaged
in the kinds of transactions subject to the tax. They are
entitled to all of the benefits extended to "sellers" and
"retailers" in the Tax Code, and subject to all of the
burdens of the law. Accordingly, they are entitled to
withhold the statutorily prescribed amount permitted to
sellers and retailers who collect taxes, to reimburse them
for the costs of collecting the tax on behalf of the state,
and to qialify for any bounties provided for the prepayment
of taxes. Tax Code 55 151.423, 151.424.
Additionally, the comptroller asks specifically whether
governmental entities must purchase sales tax permits.
Section 151.202 of the Tax Code provides that a "person
desiring to be a seller in this state shall file with the
comptroller an application for a permit for each place of
business." See also Tax Code 95 151.201, 151.2021 (governs
fees to be charged for issuance and renewal of sales tax
permits). There is no language in any of the provisions of
the sales and use tax law concerning permits to indicate
that the legislature intended for governmental entities
13. 5045
or. Perry L. Adkisson
Honorable Bob Bullock
Page 6 (JM-987)
conducting business as sellers to be exempt from either the
permit requirement or the fees to be charged for new and
renewed permits. Attorney General Opinion JR-973 (1988).
IV.
Subsequent to the enactment of the Tax Code, the
legislature adopted the State Funds Reform Act. Gov't Code
3s 404.091 - 404.094. The State Funds Reform Act applies to
state agencies, defined as:
an office, institution, or other agency that
is in the executive branch of state govern-
ment, has authority that is not limited to a
geographical portion of the state, and was
created by the constitution or a statute of
this state, but does not include an institu-
tion of higher education as defined by Section
61.003, Education Code.
Gov't Code § 404.092. The act applies to state agencies
only "to the extent that they are not otherwise required to
deposit funds in the treasury." The act does not apply to
funds. specified in section 404.093 (b) of the Government
Code, none of which are relevant to this inquiry.
In essential part, the state Funds Reform Act requires
that:
(a) Fees, fines, penalties, taxes, charges,
gifts, donations, and other funds collected or
received by a state agency under law shall be
deposited in the treasury . . . . A deposit
shall be made at the earliest possible time
that the treasury can accept those funds, &&
not later than the seventh dav after the date
of receint.
(b) Money that is required by this sub-
chapter or by another law to be deposited in
the treasury shall be deposited to the credit
of the general revenue fund unless the money
is expressly required to be deposited to
another fund, trust fund, or special account
not in the general revenue fund. This sub-
section does not affect the authority of the
comptroller or the treasurer to establish and
use accounts necessary to manage and account
for state revenues and expenditures. (Emphasis
added.)
p. 5046
Mr. Perry L. Adkisson
Honorable Bob Bullock
Page 7 (JM-987)
P
Gov't Code 5 404.094. Sales tax receipts collected by
sellers and retailers "shall be delivered to the office of
the comptroller.n Tax Code S 151.409. At present, the
comptroller's rules require taxes collected by state
agencies to be deposited in the treasury within seven days.
Comptroller of Public Accounts, Revenue Accounting Rule 12.
This practice of the comptroller is consistent with the
State Funds Reform Act. Although the Tax Code specifies
that sellers and retailers must send sales tax receipts to
the comptroller on either a monthly or a quarterly basis,
the comptroller may require that receipts be submitted on a
different basis, if he deems that to be necessary "to
facilitate the collection of taxes due." Tax Code
55 151.401, 151.405. Thus, the present practice which
requires taxes collected by the state and its agencies to be
deoosited in the treasury within seven days is authorized by
the Tax Code. This practice is also consistent with the
provisions of the Government Code requiring that taxes
collected or received by state agencies must be in the
treasury within seven days of receipt.
V.
The comptroller also asks whether the enforcement
provisions in subchapters K and L, chapter 151 of the Tax
Code apply to governmental entities, including the state,
its agencies, counties, cities, and independent school
districts. In particular, the comptroller inquires about
the application of provisions levying penalties and interest
for the late filing of required reports and the late payment
of taxes to such taxpayers.
The enforcement provisions of the Tax Code make no
distinction between public and private entities subject to
the code in any of the sections touching on the enforcement
of the sales and use tax, including the provisions
concerning the levying of penalties and interest.
The Constitution forbids payments to be made from the
public treasury except pursuant to a specific appropriation.
Tex. Const. art. VIII, 5 6. Additionally, appropriations
may be made only under the authority of previously adopted
legislation. Tex. Const. art. III, § 44. The state is not
liable for interest on claims made against it, unless a
statute authorizes the interest. See, e.a., State v. El,
Paso Natural Gas Comoany, 300 S.W.Zd 170 (Tex. Civ. App. -
Austin 1957, no writ).
D. 5047
Mr. Perry L. Adkisson
Honorable Bob Bullock
Page 0 (JM-987)
The Tax Code requires all of the entities subject to
its provisions to pay interest on certain tax returns filed
late: the state is such an entity. The Tax Code also does
not discriminate between public and private entities in the
provisions governing the imposition of penalties. There-
fore, the code authorizes the state to pay both the interest
and penalties which may be levied against it under the
enforcement provisions of the sales and use tax law. This
means that the comptroller may impose penalties and interest
in the appropriate circumstances specified by the Tax Code.
Satisfaction of a levy must await action by the legislature
to aooronriate funds to pay any levies against the state or
one of its arms. Again, while the imposition of such a
penalty by the state against itself may be a pointless
process, it is not forbidden by any provision in the law.
Lower Colorado River Authoritv v. Chemical Bank and Trust
Co., 190 S.W.2d 48 (Tex. 1945).
Counties must adopt annual budgets which provide
details of planned expenditures for the county. See aener-
u Local Gov't Code, ch. 111. Expenditures may be made
only "in strict compliance with the budget." See Local
Gov’t Code 55 111.010, 111.041, and 111.070. This means
that all payments, including fines and interest due because
of violations of the Tax Code, must be provided for specif-
ically in the budget adopted by the county commissioners.
A similar pattern applies both to municipalities and
school districts. See Local Gov't Code § 102.009; Educ.
Code OS 17.29, 17.56, 23.42, and 23.47.
SUMMARY
The Limited Sales and Use Tax Law applies
fully to the state, including its agencies
and political subdivisions, to munici-
palities, and to independent school districts
entering into transactions which fit within
the terms of the Tax Code. All entities
subject to the provisions of the sales tax
law are entitled to any benefits extended .by
the statute, including the provision which
allows sellers and retailers who collect the
tax to withhold a specified percentage of the
taxes collected as reimbursement for the
costs of collection. The State Funds Reform
Act, sections 404.091 through 404.094 of the
Government Code, apply to the handling of -.
sales tax receipts collected by the entities
subject to the act. Penalties and interest
p. 5048
Mr. Perry L. Adkisson
Honorable Bob Bullock
Page 9 (JM-987)
levied against public entities pursuant to
the Tax Code may be paid by the entities only
pursuant to law.
Very
JIM MATTOX
Attorney General of Texas
MARY KELLER
First Assistant Attorney General
Lou MCCREARY
Executive Assistant Attorney General
JUDGE ZOLLIE STEAKLEY
Special Assistant Attorney General
RICK GILPIN
Chairman, Opinion Committee
h
Prepared by D. R. Bustion, II
Assistant Attorney General
P. 5049