M&Y 26, 1966
Honorable Robert S. Calvert Opinion NO. c-694
Comptroller of Public Accounts
Capitol Station Re: Whether motor fuel pur-
Austin, Texas chased and used by the
Texas Educational Founda-
tion, Inc., on roads and
highways of the Gary Job
Corps Training Center and
on highways of the State
of Texas is exempt from
Dear Mr. Calvert: the State motor fuel tax.
By letter of April 15, 1966, you request an opinion of
this office on the following questions:
"1. Will the use of motor fuel by the Texas
Educational Foundation, Inc. on roads and high-
ways of the Gary Job Corp Training Center -
which are not closed to the public as a matter
of right for vehicular travel - be subject to
the State tax under the terms of the motor fuel
tax law and the Federal Highway Aid Act, as
amended by 4 United States Code Annotated 104
(the Buck Act)?
"2. Will the use of motor fuel in vehicles
operated by the Texas Educational Foundation,
Inc. on the highways of the State of Texas be
exempt from the State motor fuel tax as an
exclusive use of such motor fuel by the United
States Government?"
The Job Corps rogram was created by the Economic
0 portunity Act of 19E4, Public Law 88-452, August 20, 1964,
7 8 Stat. 508. A section of this act specifically authorizes
the Director of the Office of Economic Opportunity to:
"(a) enter into agreements with any Federal,
State, or local agency or private organization
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.
Hon. Robert S. Calvert, Page 2 (C-694)
for the establishment and operation, in
rural and urban areas, of conservation
camps and training centers and for the
provisions of such facilities and ser-
vices as in his judgment are needed to
carry o;t the purposes of this part
. . . . and to
"0') arrange for the provision of educa-
tion and vocational training of enrollees
in the Corps: Provided, That, where
practicable, such programs may be provided
through local public educational agencies
or by private vocational educational
institutions or technical institutes where
such institutions or institutes can provide
substantially equivalent training with re-
duced Federal expenditures;
"(c) . . . .'I
Pursuant to the above authority, the office of Economic
Opportunity entered into a contract with the Texas Educational
Foundation, Inc., a Texas non-profit educational corporation,
for the operation of the Gary Job Corps Training Center at
Camp Gary, Texas, and the Texas Educational Foundation, Inc.,
hereinafter called the Contractor, is presently engaged
solely in the operation of such Job Corps Training Center,
The contract entered into between the above parties is of a
tvoe similar to a cost-olus-a-fixed-fee contract, and provides
f&ther that the Contractor is licensed to use the facilities
and all personal property belonging to the Government and
located on lands constituting the former Gary Army Air Force
Base.
A careful analysis of the contract reveals that the
contract requires the Contractor to provide educational and
vocational training for the enrollees of the training center,
and to provide for the support and the maintenance of such
training center during the term of the contract. Paragraph 11
(B) of Exhibit B, attached to amd made a part of the contract
is a representative provision pertaining to supplies.
"B. Logistical Support
In accordance with OEO policies, and
Contractor operational policies approved by
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Hon. Robert S. Calvert, Page 3 (C-694)
the Contracting Officer, the Contractor
shall requisition, receive, warehouse
and store, issue and account for and in
general manage the following areas:
Materials
ii: Clothing
Supplies
2: Equipment
Facilities
8: Vehicles
&I Fa%nery
9. Otherthings as identified by OEO
policies or directed by the Con-
tracting Officer"
The Contractor uses Government property in the per-
formance of its duty, and the contract provides that the title
to such property shall remain in the Government, and further
provides that title to all property purchased by the Contractor,
for the cost of which the Contractor is entitled to be reim-
bursed as a direct item of cost under this contract, shall
pass to and vest in the Government upon delivery of such pro-
perty by the vendor.
In the performance of its duties, the Contractor pur-
chases motor fuel and the same is used in vehicles operating
both on and off the premises of the Gary Job Corps Training
Center. It is the tax levied and imposed by the provisions of
Article 9.02, Title 122A, Taxation-General, Vernon's Civil
Statutes, that prompts the first question in your opinion
request.
Section (1) of Article 9.02, supra, provides in part:
"There shall be and is hereby levied and imposed
(except as hereinafter provided) upon the first
sale, distribution, or use of motor fuel in this
State an excise tax of five cents (54) per gallon
or fractional,part thereof so sold, distributed,
or used in this State. Every distributor who
makes a first sale or distribution of motor fuel
in this State for any purpose whatsoever shall,
at the time of such sale or distribution, collect
the said tax from the purchaser or recipient of
said motor fuel, in addition to his selling price,
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Hon. Robert S. Calvert, Page 4 (c-694)
and shall report and pay to the State of
Texas the taxes collected at the time and
in the manner as hereinafter provided. . . .
In each subsequent sale or distribution of
motor fuel upon which the tax of five cents
(5g!) per gallon has been collected, the said
tax shall be added to the selling price, so
that such tax is paid ultimately by the per-
son using or consuming said motor fuel for
the purpose of generating power for the
propulsion of any motor vehicle upon the
public highways of this State."
Article 9.01 (8), Title 122A, Taxation-General, Vernon's
Cl.vil Statutes defines a public highway, in part, as follows:
"'Public highway' shall mean and include
every way or place of whatever nature
open to the use of the public as a matter
of right for the purpose of vehicular
travel . . . ."
From the facts stated in your opinion request as well
as the accompanying letter of the attorneys for the Contractor,
the motor fuel is purchased from a distributor and delivered
to the Texas Educational Foundation, Inc. on the Gary Job
Corps Training Center premises. Under the provisions of
Article 9.02, a "first sale" of such motor fuel has been made;
taxes thereon have accrued; and the distributor is obligated
to collect the taxes due thereon and pay the same to the State
of Texas, unless such sales were for the exclusive use of the
Federal Government, as provided for by the provisions of
Article 9.05, Title 122A, Taxation-General, Vernon's Civil
Statutes.
While it appears that the motor fuel is used by the
Contractor in carrying out a program of the Federal Govern-
ment, there is nothing in the contract that attempts to make
the Contractor an agent of the Federal Government in the
performance of its duties under the contract. No authority is
expressed in such contract designating the Contractor as its
purchasing agent; and no claim of exemption from taxes of any
kind is asserted therein. A most careful examination of the
contract in its entirety leaves us with but one conclusion,
and that is, the Texas Educational Foundation, Inc.,is an
independent contractor and not an agent of the Federal Govern-
ment.
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Hon. Robert S. Calvert, Page 5 (C-694)
Would the use of motor fuel by the Texas Educational
Foundation in the performance of its contract with the Federal
Government be sufficient to exempt the motor fuel from taxa-
tion, upon the proposition that taxes imposed upon the Con-
tractor, for which such Contractor was to be reimbursed, in
effect, would be taxing the Federal Government? We think
not. The leading cases on the question of taxing cost plus
constractors are Alabama v. King & Boozer, 314 U.S. 1
(1941);and Curry v. United States, 314 U.S. 14 (1941), 140
A.L.R. 615, b21 Th two cases have been followed by
decisions too numeroiEeto enumerate and most recently by the
Su reme Court of the United States in United States v. Boyd,
37 ?I U.S. 39 (1964).
In the Alabama v. King & Boozer case, supra, the Court
said:
"The asserted right of the one &overnment7
to be free of taxation by the oTher does iiot
spell immunity from paying the added cost
attributable to the taxation of those who
furnish supplies to the government and who
have been granted no tax immunity. So far
as a different view has prevailed, see
Panhandle Oil Co. v. Mississippi, and Graves
v. Texas Co., supra, we think it no longer
tenable."
Likewise, in Curry v. United States, supra, the Chief
Justice said:
"If the state law lays the tax upon them
frost plus contractors7 rather than the
Individual with whom &ey enter into a cost
plus contract like the present one, then it
affects the Government, like the individual,
only as the economic burden is shifted to
it through operation of the contract. As
pointed out in the opinion in the King &
Boozer case, by concession of the Government
and on authority, the Constitution, without
implementation by congressional legislation,
does not prohibit a tax upon Government con-
tractors because its burden is passed on
economically by the terms of the contract or
otherwise as a part of the construction cost
to the Government."
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Hon. Robert S. Calvert, Page 6 (C-694)
See also James v. Dravo Contracting Co., 302 U.S. 134,
(1937) 58 sup. Ct?!Bank of St. Paul
v, De Rochford, 267 R.$. 522'(Ii:D.143 -Western Lithograph
0. v. State Board of Equalization, 11 Cal.2d lyb, 78 P.2d
731 (1938) .
As heretofore stated the motor fuel is purchased from
a distributor and delivered to the Texas Educational Founda-
tion, Inc. at CSJllQ Gary, and used by the Foundation in
vehicles on roads within the reservation as well as on other
public highways of the State of Texas. What is the effect,
if any, of the use of such motor fuel in vehicles operating
only within the Camp Gary reservation. A deed of cession
covering the Gary Air Force Base (Camp Gary) was executed
by the Governor of the State of Texas on September 23, 1954,
and appears of record in Volume 1, page 30 of the Records
of the Secretary of State of the State of Texas. The deed of
cession reserves unto the State of Texas and other Texas local
taxing authorities,
"full power to collect in the area above
described herein sales and use taxes appli-
cable to purchases made therein and levied
by the State against persons who are not
exempted by Federal or State law from pay-
ing such taxes. The agents of the State
and its local taxing authorities shall
have full power to enter upon the said
area for the purpose of effecting such
tax collections to the same extent and
to the same effect as though no cession
had been made."
The same authority is granted by Chapter 4, Section
105 of the U. S. Code, and being a portion of what is commonly
known and referred to as the "Buck Act", which provides, in
part, as follows:
"(a) Ro person shall be relieved from
liability for payment of, collection of,
or accounting for any sales or use tax
levied by any State, or by any duly con-
stituted taxing authority therein, having
jurisdiction to levy such a tax, on the
ground that the sale or use, with respect
to which such tax is levied, occurred in
whole or in part within a Federal area; and
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.
Hon. Robert S. Calvert, Page 7 (C-694)
such State or taxing authority shall have
full jurisdiction and power to-levy and
collect any such tax in any Federal area
within such State to the same extent and
with the same effect as though such area
was not a Federal area."
Under the clear provisions of the Motor Fuel Tax Act,
taxes are due on sales of motor fuel to the Texas Educational
Foundation, Inc. on gasoline used by the Foundation in vehicles
operating upon the public highways of this State.
Under the authority of the Buck Act, taxes are due
on gasoline purchased from a distributor located outside the
area of Camp Gary but used by the Foundation in vehicles
operating only within the confines of Camp Gary.
Based upon the above authority, and cases cited and
discussed herein? we answer your first question "Yes", and your
second question 'No".
SUMMARY
The Texas Educational Foundation, Inc.
engaged in the operation of the Gary Job
Corps Training Center,is not exempt from
the payment of taxes imposed on the use of
motor fuel by Article 9.02, Title 122A,
Taxation-General, Vernon's Civil Statutes.
Yours very truly,
WAGGONER CARR
Assistant
GCC/fb/cf
APPROVED:
OPINION COMMITTEE
W. V. Geppert, Chairman
Kerns B. Taylor
Arthur Sandlin
Harry Gee
Mario Obledo
APPROVED FOR THE ATTORNEY GENERAL
BY: T. B. Wright
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