March 12,
Honorable Robert S. Calvert Opinion No. (C-&l)
Comptroller of Public Accounts
Capitol Building Re: Whether a bonded supplier
Austin, Texas is liable to the State
for the collection and
payment of the tax on
special fuels sold and
delivered fn bulk
quantities to another
supplier who has not
secured and does not
hold a valfd supplier’s
permit for the current
year and related
Dear Mr. Calve&: questions,
You have requested the opinion of this office as to the tax
liability of a bonded supplier legally in possession of special
fuels who makes bulk sales to unlicensed suppliers (who usually
also operate as users), or who makes bulk sales to unlicensed
dealers and user8 whose purchases are predominantly for off-
highway use* or who makes bulk sales to purchasers for exclusive
non-highway use without securing the signed statement required
in subdivision (3) of Artfcle 10~06, Vernonss Cfvfl Statutes.
Article 10.06 makes ft unlawful to make bulk sales to any
person who (1) la not licensed as a supplier, or (2) is not
licensed as a dealer or user of special fuels, or (3) does not
furnish a signed statement that none of the special fuels pur-
chased will be delivered by him or permftted by him to be
delivered into the fuel supply tanks of motor vehicles.
In connection wfth your Pequest, you have submitted a
statement of the general construction and interpretation which
you have placed upon the statutes in admlnfsterfng the Motor
Fuel and Special Fuels Tax Acts. Since such administrative
Interpretation is entitled to great weight, 53 Tex.Jur.2d 259-
264, Set, 177, we quote the following statement thereof.
Honorable Robert S. Calvert, Page 2 Opinion No. (C-401)
“The legal Incidence of the tax on motor
fuel and special fuels is upon the ultimate
user of the fuels for the propulsion
- of motor
vehfcles upon the highways of Texas.
“But since there are millfons of highway
users the Legislature, wherever it is possible,
has imposed the, collection of the tax upon the
vendor who fs usually cdnstftuted and licensed
by law as a bonded fiduclar+y or agent of the
State for collection purposes.
“In the case of motor fuel (gasolfne) 95%
of the fuel consumed in the State is used
taxable on the highway so the tax collection
is impbeed on the first sale by the wholesale
distributor and tax refunds are authorized on
the 52 used off the highways.
“But in case of special fuels (diesel and
butanes) the highway use Is Just the reverse.
Only 5s to 10% of the total c~onsumptlon is used
taxable on the highways while 90s to 95s is
used off the highway for non-taxable purposes.
Hence9 the State could not afford to adopt the
motor fuel procedure of collecting the tax on
the first sale of all special fuels sold fn
the State and then paying back 90% to 95% fn
refunds to non-highway users. .
“Bat the Legfslature, after determfnfng
that most of the special fuels used taxable
on the highways was dispensed through retail
dealer statIons and storage facflftfes
maintained by bulk users such as bus and
truck lines, devised a plan of collecting
most of such tax at the wholesale level by
suppliers who ape licensed and bonded by
Article lO.ll(l) 60 make such coPleetfons ,fOr
the State and vhf& would eliminate most of
the tax ref”rPnds. .,
“TRfa was accomplfehed by setting up in
one category the dealers and users handling
taxable fuels mostly who pay taxes to the
supplIer, and settfng up in another category
the dealers and users handPing non-taxable
fuels mostly tie pay any fncfdental taxes due
directly to the State3 &b follows:
Honorable Robert S. Calvert, Page 3 Opinion No. (C-401)
I'-l* Dealers and bulk users whose
purchases of special fuels are predominantly
mostly) for delivery into motor vehicles
t for taxable use on the highways) are
required by Article 10.11(l) to secure non-
bonded dealer or non-bonded user permits and
are required by Article 10.03(3) to pay the
tax to the supplier upon delivery to their
respective storages. If any of such tax
paid fuel is thereafter used or sold for use
off the highway tax refunds may be filed for
such incidental diversions D
“-2. Dealers and bulk users whose
purchases are predominantly (mostly) for use
or resale for use non-taxable off the high-
way, but with some lesser quantities to be
delivered by the dealer or user into motor
vehicles for taxable use, are required by
Article lO..ll(l) to secure bonded dealer
OF bonded user permits (to purchase tax
free from suppliers) and are required by
Articles 10.03(k) and (5) to report and pay
directly to the State the tax on any
deliveries made into motor vehicles -
unless said taxes have been paid to the
supplier (as authorized by Article 10.03(3)).
“WPth this statutory arrangement the
law then specifically provides in Article
10,03(3) that the supplier shall collect the
tax on each gallon delivered to non-bonded
dealers and users - who are those persons in
category 1, whose purchases are predominantly
for delivery by them taxable into the fuel
supply tanks of motor vehgcles.
“The above is the only provfsfon in the
law which speciffcally states that the
supplier shall collect the tax on a delivery.
“In the next psragraph, Article 10.03(b)
and (5) provedes that every dealer and every
user, respectively, shall report and pay to
this State the tax on ,each gallon of special
fuels delivered by them into the fuel supply
tanks of motor vehicles - unless said tax
has been uafd to 3 licensed euDD,lfer.
-1893-
Honorable Robert S. Calvert, Page 4 Opinion No. (C-401)
“As this Division has heretofore con-
strued the lawp Article 10.03(3), places a
mandatory duty upon every supplier- to
collect the tax on each gallon of special
fuels delivered to dealers or users whose
purchases are predomPnantly for delivery by
them into the fuel supply tanks of motor
vehicles - and regardless of whether such
dealera or users had exercised thefr duty
of securing the non-bonded permits that the
law required them to secure to perform such
functions .
“Conver8ely, if the supplier made such
deliveries to unlicensed dealers or users
whose purchases were predominantly for use
or resale fOr use non-taxable off the high-
way tar which bonded dealer or bonded user
permits ape required by law, the; supplier
would not become liable for the tax on
such deliveries (most of which would be
presumed to be consumed off the highway)
since Articles 10,03(h) and (5), provide
that every dealer and every user shall
remrt yd Da; to this State the Gn
each gal on o special fuels delivered by
them into the fuel supply tanks of motor
vehicles - where such taxes have not been
paid to a lfcexissd eupplfer,
“CUP thought that the Legislature
Intended to punish such unlawful sales by
misdemeanor or &atuPtoPy civil penaltfes,
rather than by making the selling supplier
liable for the tax. thereon, was based on
the fact that in Ahe usual course of
operations by far the greater portion of
the fUe1 purchased will move ultimately
into non-taxable channels off the highway.”
We are in agreement tith your conclus%on Snsofar as non-
taxable us8 Is concerned for ths reason that no tax ever
accrued absrent such taxable uBie* It is well settled that the
tax in question is an indirect or “excise” tax snd that for
any tax to be due the 3ta%es the special fuels must be used
Honorable Robert S. Calvert, Page 5 Opinion No. (C- 401)
in motor vehicles operated on the public highways of this
‘State. State v. City of El Paso, 135 Tex. 359, 143 S.W.2d
366 (1940). We do think* however, that the bonded supplier
would be liable for any taxes that did actually accrue by
virtue of any taxable use as well as subject to the mis-
;;m;f?c)r and civil penalties imposed by Articles lo.25 and
. .
More specifically therefore, our conclusions are as
follows :
(1) Even though there Is no specific provision in the
Special Fuels Tax Act which requires a bonded supplier to
collect the tax on special fuels sold to an individual
supplier, the bonded supplier has made an unlawful bulk sale
under Article 10.06. We hold that the liability of a bonded
supplier who has made such an unlawful sale to an unlicensed
supplier Is limited to the amount of the tax which accrued
on such portions of the special fuels as were actually put
to a taxable use by the unlicensed supplier’s permitting
the use of raid fuel8 in motor vehicles on the highway.
We reiterate that the bonded supplier In such instances is
subject to misdemeanor and civil penalties as imposed by
Articles 10.25 and 10.1%.
(2) Where a bonded supplier makea bulk sales and
deliveries of special fuels to unlicensed dealers or users
whose purchases are predominantly for off-highway use,
the bonded supplier has made unlawful bulk sales under
Article 10.06. The bonded supplier is liable by reason
of said unlawful eales for the amount of any taxes nhich
did accrue by virtue of taxable use and..fs further subgect
to the misdemeanor and civil penalties Imposed by Articles
10.25 and 10.18.
.?‘.
(3) In those instances in which a bonded supplier makes
bulk sales to purchasers for exclusive non-highway consumption
without securing the signed statement required by sub-
division (3) of Article 10.06 that none of the special fuels
purchased will be delivered by him or permitted by him to be
delivered into the fuel supply tanks of motor vehicles,
such sales are unlawful. By virtue of this fact, the bonded
supplier is liable for such taxes as accrued by virtue of
taxable use of sny portion of aaid fuels on the public highways
of this State, Again the bonded supplier is subgect to the
;ns~$meanor and civil penalties imposed by Articles 10.25 and
0 0
-P895-
Honorable Robert S. Calvert, Page 6 Opinion No. (C-401)
Yo have asked that we advise you as to the method of
determf 2 ing the amount of the bonded supplier’s tax liability
in cases of the type heretofore cp$@dereda Article 10~16
provides that when any supplier, dealer or user falls to keep
the records, iseue the invoices or file the reports required
by Chapter 10, there is a prima facie presumption that the
special fuels shown by duly verified audit by the Comptroller,
+r his authorized representative, to have been delivered to
such supplier, dealer or user and unaccounted for at each
place of business or of storage from which special fuels were
sold, delivered or used for any taxable purposes. The
Comptroller Is authorized to,,fix the amount of the taxes,
penalties and interest due the State from such records of
delivery or from any information available to him. If the
tax claim so established is not paid, the claim and any audit
~made by the Comptroller or any report filed by the supplier,
.Xealer or user is admissible in evidence in any judicial
‘:, proceedings filed by the Attorney General as prima facie
evidence of correctness of s&id claim or audit. However,
Article 10.16 further expressly provides “that the prima facie
presumption of the correctness of the olaim.may be overcome,
upon the trial, by evidence adduced by said supplier, dealer or
user o’
Since under Article 10.21 the Comptroller is expreesly
siyen the power and authority to promulgate rules and regulation8
not inconsistent with this law”, we thfnk that ff the bonded
eupplier in the above fnstances fUrnished the Comptroller with
acceptable evidence or proof as to that part of the fuel unlaw-
rully sold and put to non-highway use, you could allow a credit
against the tax liability charged to him, and thus avoid the
court proceeding contemplated by Article 1~9.16.
You have directed our atten$ion to Opfnion No. WI-845
:(l%O) fn connection with the special fuels,tax law as ft
pertains to “user permits” 0 The Opinfon states that “No
Provision of the law requires or authorfzes the supplier to
onerating
upplfed)
.fnsofar as
Opinion No. C-328 held that the tax &u&be collected by, the
‘~supplier even fn cases where the dealers and users were.acting
in the capacity of bonded dealers ,wd bonded ~86~8 but had not
been properly licensed,
I ,
Honorable Robert S. Calvert, Page 7 Opinion No, (C-401)
Opinion No. W-845 made the following ruling:
“A special fuels ‘user’ who is
laalntaining storage tanks In Texas
and purchasing epeclal fuels from
supplLers in bulk quantities predominantly
for delivery into fuel supply tanks of his
motor vehicles, and is also operating a
number of the motor vehicles, in interstate
commerce, necessitating Importation of
special tie18 In the fuel supply tanks of
such vehicles, is required to obtain both
a non-bonded user permit and bonded user
Import permit. ”
We quote the following paragraph from pages 2 and 3 of
'Opinion WW-845:
“A wholesale supplier may sell only
to those holding permits as bonded or
non-bonded uaera or dealers. He is
required by Article 10.03(3,) to collect
the tax on each gallon of special fuels
delivered to non-bonded users. No pro-
vision of the law requires or authorizes
the supplier to collect the tax from any
bonded user, or any person operating
only in the capacity of a bonded user.”
It is evident that the last sentenoe above quoted was un-
necessary to the holding of the Opinion, Further, it is in
conflict uith the first sentence of the above quoted paragraph
and with Article 10.09. Under the provisions of Article 10.09,
only a person who has acquired a permft can legally act in the
capacity of. a bonded user. Article 10.09 reads as follows:
‘Every person defined herein as a
supplier, dealer or user shall secure
from the Comptroller the kind and class
of permit required herein to act in such
capacities or to perform such f7anctions.”
We therefore affirm that Rortion of Opinion No. ~~-845
insofar as It pertains to the user permits involved. We are
specifically not in accord tith its statement as to persons
operating only "In the capacity of" bonded twers. Opinion No.
C-328 is predicated upon the proposition that a taxable use
was made of the special fuels Involved. Its statement to the
effect that the tax must be collected by the supplier even when
-1897-
,. .
Honorable Robert S. Calve&, Page 8 Opinion No. (C-401)
the dealers and users were acting in the capacity of bonded
dealers and bonded users but had not been properly licensed,
“I..is consistent with the result reached. It is therefore
reaffirmed.
JMXJEARY
---
A bonded supplier who has made an unlaw-
ful bulk sale to an unlicensed supplier
liable for the amount of tax which
~,;-’
fa
accrued on such portions of the special
fuels as were put to a taxable use by
the unlicensed supplier and is subject
to misdemeanor and civil penalties. A
bonded supplier who has made unlawful
bulk sales and deliveries of special
.fuels to unlicensed dealers or users
whose purchases were predominantly for
off-highway use is liable for the amount
of tax which accrued by virtue of taxable
use and Is subgect to misdemeanor and
civil penalties. A bonded supplier who
made bulk sales to purchasers for
exclusive non-highway consumption with-
out securing the signed statement
required by Article 10.06(3) that none
of the special fuels purchased will be
delivered by him or permitted by him
to be delivered into the fuel supply
tanks of motor vehicles is liable fop
such taxes as accrued by virtue of
taxable use and is subQeet to mfs-
demeanor and civil penalties. When
any supplier, dealer OP user fails to
keep the records, invoices or reports
required by the Special Fuels Tax Acts
there is a pplma facie presumption that
the special fuels shown by the Comptroller”s
audit to have been delivered to such
supplier, dealer OP user and unaccounted for
at each place of business or storage have
been used for taxable purposes. If the
claim so established is not paid, the prima
facie presumption of its correctness may be
overcome in any suit fop the collection
thereof by evidence adduced by the supplier,
dealer or user. The Comptroller has
authority to promulgate rules and regulations
=na,%s-
. .i.
Honorable Robert 9. Culvert, Page 9 Opinion No. (C-401)
for the enforcement of the Special Fuels
Tax Law. If the Comptroller is furnished
with proof as to that part of the fuel
unlawfully sold and put to non-highway use,
the Comptroller may allow a credit
the tax cl im. Opinions No.
and C-328 't1964) are reaffirmed.
Yours very truly,
WAQQONEZ? CARR
Attorney General of Texas
MMcQP:dl
APPROVED
BY OPIHIONCOMMITTEE
W. V. Geppert, Chairman
John Banks
Jsmes Broadhurst
SsmKelley
Grady Chandler
APPROVED
FORTHEATTORNETGE%ERAL
Bg: Stanton Stone
-1899,