Untitled Texas Attorney General Opinion

296 OFFICEOFTHEATTORNEY GENERALOFTEXAS AUSTIN Xoaorable Deoego 8. Sheppard Coslj7troll~r Of F-liblio Ao00unta Austin, Texas Dear sir; OplJaLon Bo LOthe Tedsral Qorernmoat, *This dapartnmnt has dirsated Joeke -08. Co. that they are llabla 0az the tar." Joske Eros'. letter sontalas, in part, t-ho follow- ing faotat 297 Bonmabla Gaorgs 9. Sheppard, png8 2 *We are oontinulng to sxpexlenoe a ipeat deal of difficulty In ooansatioa ulth the ool- leatlon or tares due under Artiols X of Houaa Bill 8 on aeles we mskr to the Uhited Statsa GorernReu t . *The Gorarnment ordara are aubmittsd to ua, me Pill them, end bill them for the amount of the male lnoludiq ths tax. In erexy lnatanoe they Zomnrd us a oheok In payment for the bill leas the amount of thn tax and snoloae with their aheck a tax exsnqtlon oertifloata. iEe repaatadlp adrlsed them that we hare eeoured Srom you l rul- Ilya. to the affeot that the atato oannot aoeept these tax exemption oertiiioatsth “Wo hav4 a vary axtsaclive file of oorreapond- oaoa on Wia aubjrot. The paeition takea br the Oorornmsnt in all of thare lattara la the eama. llany of there matter8 are aOil unaottled. Wa are &ill malntafning ths poaitlon that the anount or the tax mat be paid, ainaa WI cannot aubdb the t8~ 0Ortiri0at08 $0 YOW 0rrie8. "At the mu&g*stion or ca taia IL Q. Brom, Flaaaaa Offlcrar far Randolph Ir9 old a lotter waa wxlttan by him to the Comptrollsr 8anrral of thr United States on this aub eat. I aa anoloalng a copy of ths lqtter nhlah daptBl.8 Brom #ant to . mo aa I&aroh 18th advising that the nattsr had baa refcmod to the Ooeaptrollar GUXar81, and, ala@, hia 1aOter of April llrt addreaasd to ma adVia ma of thb daaisian reaahed after hs had rsOa%V 3 hia reply from tha Cantptroller tinera Of the United Statas." Captain Brown*s letter of April 1, 1943, Le 88 sollow8r *'WI,th refsrenoe to our trl~phoflo eOntOrM- tlon today, we will proaeed with paymat of YQUr lnvoiat under date of 1Pebruary 16, 1943, for the .aJnouJlt of fnvoloe leas tax. 298 - Honorable George T?. Sheppard, page 3 ‘Tour attention 18 invited to deoieion A-51249,~ Octobe 4, 1?3.3 ot Vbl. 13, pees 91 of Oeaisions of Comptroller General, whI& provides thst any atate ‘. . , la wft,hout authority to tax the United Stetoa on auah purohaseo as may be nsoaaarrg fo? tha oonduot of the buainosa of the Fedwal Oavermaat.*~ SeatIOn 1 Chapter 184, Artlola X Aota 1 4l, 47th Legislature (Oodkd by Vernon aa Artlola 70471 ? prolPidd#t w’RadIoa, oomnetloa, oardm; luxury sxolra tax; penalty ror nmking if3180 rspert 0r railura to report. ~SeotIon 1. Baoh eraon, partnerahlp, assoaIetlon, or oorjeat f on rellisf at rrtall new radio8 OF now oommtloa, &ml1 maka quart- erly on the flrst &ape of January, Aprll, Jull and Ootobar of saoh fear, a report to the tip- troller, under oath of the owner,, manager, or li h aorparatlou,a~ ofiieer Ohsrroi, #horIng the aggregate igrcw raoaipts f’rarp the anla ob MY o? the aborwmmd Iteas fOr thaw quarter next preceding; and shall at the sane tine pay to tha Comptroller a luxury asoise tsx equal to two (2) per aant of aaId gryoaa reoeipte as shorn by said report. *Every pmson, partnership, l880oiatIon, or oarporatIon, selling at retail, playing oaram ahall make quarterly report ae provided abovo showlug the total number of pas&! or daaks o? auah aarda sold during the preaedlng quarter, and ahall at ths gsnrr t Ine ,m to the Comptrollar a luxury EXIST tax or rlvs f 5) aenta per raak or de& of euah ylaying cards 80 sold. *Hothing her&n ahall bs oonetrued a0 aa to require p,aymsnt of the tax on I;ross r*aeipta hma- In levIad 4ozce than o$los cm the jzoaesde of the sals of the sam artlole of ,mrohar;dls@. A retall aale a8 used herein, mmns a SS~S to 0~1s W.hQbws fw une or oonsu?optlon, and not for rarele. Croae readpts of n nelai mea8 tha rumwhloh the pumhaser pay8 or agram to pey for an ertfols or o-mdfiy bought et rats11 .aala.” The o~inlor. of ths Caarptrollu Oennrel, rr~tomod to in Captain Brown’a letter, wa8 datsd Ootobar 4, 1933, and altad ee autharltg Panhandle 011 Goixpaaf T. State oi Miaoiro- I.#, 277 0. 5. 218, 72 L. M. 857, 48 3. Ct. 451, 56 A. L. R. Ths oQrrucJtnssaOf the Pen&and14 oeau “14 nom opan to aeriaua qucstlon.m The tax imolted tn Coeyltrolles tknsrrl*a &eolalon wes e retell sales tax on the eonawar or purohaaa -not e vendolp'8 ker (es WI hate bsrcl), neeeure4 by &roe8 r@oaipt& Thlr, r)e&mrkowrt hold in o&tion O-4403A that $h. ter in qusetion wan a ro8s rs99ipta tax, not a sales tsr, end was riot lrriod a&a f nrt the retail pwahamr. Tuhen4l.r Oil away 0. Nlaaiani~pl 9upra, la- volvs4 lelu dfreatly to the Vnltad $lataa f9r t&a nra of its Coast me:-4 PIret ia aerrfcs in tha (lulf of Yaxleo an4 ita Veterans* Xou ltel at (irrrlipmt. ft awae under a law at the mete ot N&u e rasppi whi9h proli6ad the8 'any p6raon in cha buauinear of diatrlbutly feaolior, or rotall 4%% gasoline, a!mU pay r0r~ the pr T loge or aJlga&lag in lloah buaineee u1 nxoiao tax ot ld (on4 oeat) er gnllaa u oh* aale of gaaolino. . .* We oil cmapauy1 id not gay r a%oa on ru4h 44144 to tia t&alto4 Ststrr, an4 tha State brought 8ulb Tha aorrgarrr 4@mUo4 011 ti~a e.rwn4 that Phi8 statute, an4 it8 eaendaents,it aoastrurd to lx oaa taxes m ruoh aal~a, wao ?4pU@lSUt to thu F.U.ral conllt E tut%oa. That 4Qat4nblon w44 sustain64 in the trial 4emt, 4n4 tb,4 @tat6 4p oa,le4. %a &pram9 CttUrt of thr fraiOed 8Eat68 bald that t Rb f3Wta We8 l!Ot math4 to wlleot the kx from tha mnhanar4 Oil Wwm UP= the garrolias arrld by It to tha Federal Covnrnasat~ f,@. Jurrtioc, Butler, who wrota the me3OT%tF optaim of the Court, aaidr *me rieht of ths ~bited Stat68 to nak0 suoh pup&asses is 4eriVud frQlr tih4 &WI8titUtio:~. Ronorabla Deor(;e Xi. Sheppard, pa{;9 5 The petitioner’s ri&t to itake sales to the United Litatas was not &Pen by the atnts and doea ilat depend on stats laws; it reaulta iron t,h6 aut!lorfty of the national govern- ment under the Oonetitution to ohooae its own means end 8ouraetb of supply. While Zdlesiaa~ppi may impose obar~ss upon patitloasr for the privilege of oarrying on tra4e that is aubjsot to the newer of the ntmts, it nay not lay eny tax upoa trfmaactions by whioh ths Wit&4 States SSSUTSIIIthe things desired for its governmantel purpoclea. The validity oi the taras alalum la to be determinati by the praotiral eftoat of Unforaemsnt in respeot of sales to the &svarn- ment . w3gi.m v. Covington, 251 c. s. 9,5, 192, 64 L. 24. 157, 167, 40 Sup. DC. Rap. 93. I. ohares st the prescribed rat6 is tie&a, QD a@OwDt at wary gnllon aoqulred by,tha Vnitsd Statas. It la lmmtsrlal that the sellas an4 r.ot the puroheaa+ is required t3 report an4 m-&a payment to tha state. Sale 6nd ;urahase oouatituta a trenaaotlan by whiah the tax is suaaaureO aad on whlah the burdau~ smite. Thr ualount of Awlmy llairaad b the stete rises at4 falls praalaaly as doer t iia quantity of gaaollna so scoured by tha Covommut. It depsnda ioaebiately upon tha nuaber 05 gallons. The nuoeaaery opsretlon of there enaatmuta when so omrbrua4 is dirsotly to retard, iapede emd burden the erertiou bg tha &itm4 Statm of Its aonstltutlonal powers to oparata the fleet and haa;ital. N*Cullooln 12 -%arylsnd,supra, 436 ( L. 3%. 608); Glllaepf~~*~ Oklahom aupra, 505 ( if6 L. M. 3&O, 42 Sup..Ct. Rep. 17lj; Jaybird Min. Co. v. i;‘eir, 271,Ui 8. tW&, 613, 70 L. ~4,. lU2, lU4r 46 SUP. Ct. Rap. To use the number of ~;alloaa @Old th* Unlkd States CLBtn aearmre of the pTiVilS6S tax 1s In substencs and legal effaot to tax the @al*. :Ie8tarn U. ‘felrg. Co. V. Texas, 105 IL 8. 260, 26 L. Ea. 1067; Frlok v . Pennsylvania, 268 v. 80 473, ~94, 69 L. ~a. 1058, 1064, 42 A. L. R. 316. 301 &fi Sup. Ct. Rep. 603. And that is to tax the tilted StnCes--‘bo 6xaot tribute on Its tramactlone and rpply the aame to the sup- port Of the- Ptfit@. Vhs exsatlonlr doarnded from gwtltloaer i lnfrlr&w it8 right to have th8 ooa8titutloaal lndapandenoe 09 thr United State8 in rsapsot Of SU&I ~xuoha668 re&8ia untramwlcd. Oeborn v. Bank of UnlteQ Statea, 9 ‘wheat. 736, 867, 6 L. Ed. 204, 2345 Western U. Pole&. Go. t. Texas, rupra. Cf. Twraoo v. Thompson, 263 U. S. 197 216, 6 L. lw. 255, 274, u sup. Utr Rap. is. ketitiOU@W im not liabls far the taxes olnlnmd.* out ltce aotlrltlcs in the Rats 02 :?orth Dakota. ThQ lhnk contended tlmt Ihs tax 0wa not be sonstltuthxmllg fitqmeod upan thn daalsr far any o&or vehlolr rue1 whlob it pnrehaaod frost bin for tha ppTpo8* or oarrglng PII It3 a~thorlzed'aotlritlo~ *rlthln the Stats, and that ~onw- qusntly the dealer @@it oat ChrZEg9 the amunt ai rush tar aa a part of the prlae. Ths uefentbuha ihRoehfor&‘cnb 6ho State Auditor on the other hmd; oox-hssde d %it the zotor rshialo fuel soid by DqRaohfmd to the PbdadL Land pknlf au6t be ln- aJ,uded in co+&&& the tax a&d OOSl8iBqUUltl#’ DeEoohford a&&t i,nO1ti8 th elmo o nt of suah tnx in. the p?IOiL The Court mfdt Honorable George H. Sheppard, pa&e 7 of North Dekota hae the right to legoee upm e licensed dselsr in motor vehlole fuel 8 lloaaee tax or thrae oante per fgarlan upon motor vehlole fuel eold by such dealer to a Paderal land Bank foi UN In autolnoblles owned by eeld Bank and opsrattwl by it inold8ntel to its eetlrltise in the State." II. . . . Tfhe dealelona of the Unit& States Supraae Court are bFndine upon thie Ooctrt a114 definitely eetablleh, (1) that 8 Federal Land Bank is an inetrumantality oi the national eovernncnt, areated by Oongrtaes, aoti8g within its oonetltutlanal powers to pertom 8uthorlmd governmen funotlone, aa4 (21 that 8u8h bank 18 oonetltutlonall~ endowed with the eaae inaunity frora etatA kx~tion, that the national gorarnmnt itself weuht hate b a en ladowed~rith, if it had enmged in euah satirity dlreatly.* I. . . . “Jh the Aot proHdfag for the eetabltehaent oi 1Cedrral Lead Beak8 (?e&oral Farm Loan Act) t&me Ia a alwx intiootfon that ma1 eetetr *a- u&ad by a Federe:l Land Bank ln the oouree o? Pte operation8 wd+r th8 Aat eh8ll be eubJeot to taxationi and thsro Is a epeolfla doolarrtlon that *otery Federal land bask . . . ln8ludlng the capltel end reeerve or 8urpJ.w therein and t& lnotxae d6rlrad therclrxom, . . . flmt kwrtgagee ersuutetl to Federal. land benka, . . . an& fum loan bonds . . . end th6 laoom derlvwl thsre?rom ohall be exempt troa . . . State, mwfOlpa1 aud lwal taxation.' *It 18 reaeonstle to amew th8t rhsn GOn- grew eald that a etats iol.ght not tax a Poderal Lend Bank, its oapital, rewrve o? ewplw, or the lncocue derived therefmsi, or tiret .~QY%W”ee sxecutsd to ths Benk, or ?am loen bond8 or &- 00x0 derived therefro-r, it had in rnlnd &act and Honorable Gsorga IL Sheppard, pa&a 8 dlsoemibls tazcea, end that It did not have in mind taxes imy:osed upon arid oolleoted rrom other persons with whom the Bmk might tram+ eet buslnsue, whtah night lndireatly result In mme sllghht inoreaea in the operating er- penees of the Bank. The tox in question here is not a fat upon a Fedora1 Iand Bank, or upan its Oadtal, r eser ove r lurplua or the lno~sls derived therefrom. fIelther 14 it a tax upon mortgagee exaouted to such Rank, or upon farm loan bonda, a~ upon th6 inoom derlted thera- tl-OS. The tax i% ore upon a dealer la motor vehicle fuel, who hne applied for, and who haa barn granted, a lbmsr under the laws of this State, to engage In bnske#a as II dealer la aotor vehlole fuel. The tax involvrsd hrre Is a tax irnpocred on dealers for t-56 privilege of engaging In tha burlnem of selling motor vahiole fuel, and the amount ai the tax lo measured by the nuaher ot gallons *used and sold’ by the dealer. It 1s not a tax upon a Pederal Land &mk or upon any function *hioh laoh Bati ie authorlaad to per- iOtm. It irr not a tax upm any ot the powera with which the Bank is vented. The i&u& nay exsreias every ftanatlon and feriorm every rot that it wau orsated to 8xaarc ae en4 perform without cne cent of lte fuade belag expended or one sent of its prorita be1n.g taken away hauau~s of this tax. The tax oamot be laid directly upon asp aetlvity 0r the Bank unlesr it ansagem in business aa a lieeared dealer of lootor vrhlola fuel in this State, aad the Bank was not Or8atad for the purpose of en(ga@9gln rash buainrso. ‘f7ha only Way In whleh the funds of the Bank iitrrp ba ~expended, even indtreotly, ln the paymsnt of the tax will be if the Bank puroba8~ motor v@hiola rue1 from a dealar wha lnoludee the anowt of the tar in the salea prlae. But ii the operating ex- onsea of the Bank are inorsaeaa beoauae of the L npositi05 of the tax up05 a dealer Wan oboe the ~hnlr purchases sotor vehlcl4d fwl, that effect la 0~1~ inoldentel nn& remote end cannot be aaid to ““Y Honorable George ii.Bhsppard, pge 9 be a tax upon the Barik, Its oapital, remwva or 6lurplus, or upon any of tho opsrationm of the Benk. %sry tax laid upon l dealer will, of oourse, to some extent be reilected in the rice whloh he ohargas for the co.moditp nhlo Ii he aella. =. . . . " . . . the Buprwnr Court of the Unite6 State6 hen held that en ooonpatlcan tax m~asursa by &roam inown@, rhero Inpo8ed by 8 &ate upon a aontraotor with the Uhitad EJtates, I# mot intall a m l tax apen the Taaerrl Goveracat aad its oporatlonr, eta UrorrQa the lqw~sItioa of the tax MT lntwoasr the 0-t to the V-a- Mate Jamar t. EZOTOUontrqatlng Co., 3r 2 I?. 8. ix, 160, 56 s. ut. 2~8, 62 L.~ Ed. 155, 172, u A* t. R. 318 atma ** Johnurn, 282 a. 8. 509, 51 8. Uc. 27 I , 75 L. Rd. 496, 75 A. L. R. 9. *. . . . The tax is geeoral qnd non4ircrrldaatory. Thr law lcapomr the sama llmnnre tax upon all motor vehiole fuel mid by l UOU.W~ deeloa without regardto whom the puraheaormay bo. Tn this oem the doelet (DoRoahfcsrd) ?Ixad the prioe whioh he charged for the gaaollar that he mold to the Luxl I&nk wf# ths tax in ralnd, that is, Ln Siting the priae hs added the abuut I lio,norable George 11. Shepporti, paw 13 absolut% immunity) the proposition that, although the federal tar map inoreese ooot of state gov%xnm%nt%, it may be lmpossd Lt It does not curt.aIl fun&Ions s%o%ntIal to their sxI%t%no%. Expre%ol9 or lub oIl%ntIo, it orsrrulsa a a%ntury o? preaedento.( 304 0. 8. at page 429, 430, 58 EL Ct. at pago 980, 82 L. Fd. at peg% l&42. *aTha sw%%pJng ohang* of ooaotruotIon of th% oonstltution’ , and’ th% applioatlon o? the ooatrollIng prlnolpler, rnnounoed la Oh% deslo- Ione that deorasd suoh %h%ngo, 049~1 to 08 to leave. no subetantlal baaia for th% iul% an- nouuoed In Panhandle Oil Company v, Mleolooip 1 ex ml, Knox. It o%%m%to u% rather that tha 4 deoIoIon, In effaat, hse been overruled. 1. . . q "ZZm Isposition or the taz,Is not an ereroise or ari attempt to exismiee by ths o.tktcC. es any power *by taxation or bt erwlae, tocr%- tara, impsde, bwdbn, or In cuiy.,~pepnbl P oontrol the operation8 ot’ (4 Wheat. $t pages &2+437, 4 L. Isa. at pages 607-609) The Foboral Farm Loan Aaa. If regard *b% ha8 to rabatanas and dlreat effeoiys’, and ‘m%rel9 th%orsti%al eon- 0egtlons of iatt3rffmmab rfbh tha tuno0fono of i30~4m~iaent' be lafd %%I&,%‘theq% Lo no wSilb:mt ground for holding that the d$$ct upua the gorsrn- m4nt is other than ixidfreot aniLrsm6tr2 at pages 386, 387, 5S.S. ct. at gee 62,,3w*si L. .Fid. at page 914. Ths Imp001 tp”on of the tut*upon a dealer for @aaollns mold by hfa to a Fedora1 Land Ban&c *nsither.preoludm nor thrsatans unr%d- sonrbly to obatruot any funotloa e%e%ntl~al to th6 eontimed slfatenas’ a? the Bank. ETsIth%r doe% It operste to oontrol, hlndlbr, or Impedo the Bank In lit;9 psrZormfmo6 of an9 ~e%r*la% that It *8% %at&blIIshed to psrform ror th* govwm3ntc If any of tha burdem oi the tax that I8 l.mpfkti upon the d%al%r indirectly reaehee the Land Bank that Honorable George Ji. Sheppard, pags 15 and consequently reduce that government’s revenues to a proportionate extent. ThlS view is in harmony with the oases herein- abovs ofted which reaognlze and define the inherent ltitations or the ,dootrine of iamuIl~ty, and r0ii0ws the pronouno4m4nts OF the Supreme aourt of the Unltad States la its more reoent decisions formulating It4 oon- .oluslons on the epplloebllity of the prlnolplo anU Its limitations In relation to other taxing James P. Dravo Contraotlng Go. 302 %.Ut:;i 58 S Ct 206 211 82 L Ed i55 14 A. L, ‘R. ,G, r~ir0Ga ingsilae’Mas& co: ‘ 3no*, v, Tax Commlselon..of Washington, 302 0. 9. 186, 58 S. Ct. 233, 82 L. Ed. ‘187, and Atkinson vr Stat4 Tax Commlssfon or Oregon, 393 U. S. 20, jta. Ct. Q9, 82 La Ed. 321, Jan. 31, 1938. “We are awar that statements *oh night be said to support a oontrary 4oaolaelon have b44n +ade in the oases of Panhandle Oil Co. v. Misalsalppl ex rrl. Wnox, 277 0. 8. 218, 48 S; Ot. 151, 72 L. Ed. 857, 56 A. Lv R. 583, fadian Motooyol4 Co. v. Unltail SOates, 283 0. 8. 570, ‘51, 0. Ot. 601, 75 L, Etli 1277, and Graves v. Texas Uo., 298 U. 9. 393, 56 S.-t%. 818, ‘80 L. IL 1236. Those oas*a involved, respeotlvely, alar or )d[issisaippi imposing an exoia4 tax 0r one o4nt par gallon upon the sale of gaaollne, a statutr of Maasaohueetts Z4vging an exoisa tax on sales and a gasoline tax aot of Alabama. *In the ease of Je~31esv. Dravo (Iontraating oompsny, supra, the oourt had beroro it ror oon- sldaration the Gross Sales and Inoome Tax Law of’ Weat Virginia, Code W. va. 1931, ‘11-13-l 8t sap., as amended dots 1933, let Ex. Seas., o. 33, whfoh provided ror annual privilege taxes on ao~oount or ~bueFnae4 and other activities.’ ~That law imposed upon the oontraotlng oompanr a tax equal tom 2 per cent. or the grost inoome from Its bueinees. The 312 Honorable George H. Sheppard, page 17 and further that theretofore thoee oame had been distlngulehsd and must be deeaed limited to their partloular islots. Notwith- standing the holdlnge or exprearsious in the oases distinguishad, it must here be eonolud~ tbnt a proper OOllStrQctiOnof the Ratail Sales Pax Aot of Callrornla 18 that tha tax IS not ill the rale, but rather that it 1s a tax in the sama aategory aa property and oxoise taxes payable by an lndapsndent oontraator engaged in the buslneaa of retail sales whlah, although they am reileotad in the higher aost of the produot or oommditg offarad, must be aonsidered msralp as a neoessary expense of aonduotlng the business. St is a tax oouiputsd on the gross rscelpt,s frwn thp~:oonduct of the. bnsinesa at the retail merahiquti,:, Eaaan- tially, as intimated fn Metaa1.i k E$‘dp v, Mitchell, supZa there does not appear to be ruiy sound basis for a di&otlon beoaans the reosiptr affording the nieasure of the fax are derlred from thr rstafl business oonduoted by an indspendent ocrlltraator or aerohemt, rather than from tbo nrle of 8ervlo68, where otherwiee the larpblrltioa %r nonriienrkmlnat~y. Clearly the icnpo8ltion Of a prirllage tax an the retailer of ooaooditlslr doe8 not Intartar with the pewer of the garernamt to borrowmoney; nor doas it aiteot in any eubstautlal siannor ths eftiolanoy aI itrr agenog in the psrtomumae of Its dutielr, nor the ability of the persona taxed to dlsoharge their oontraotual obligations to the gooarnmant, nor the ability of’ t+he government to proomre the sqloes of private individuals to aid theat la their under- talringa* Tollowlng the path pointed by tha oourt in thr Dravo Case, uu conolude that the tax on the retailer unds~ the Rata11 Sales T!ax Aot Of this stata lmposad on the basis of a return whiah in- alludes receipts dsrlred from salea of tangible personal property to ths bank, a fe4dsral instru- mantallty, doas nat unduly burden the Saileral government nor intsrfere with the axarOi60 Ol’ th6 governmental t unotiona Alelagated to ita instruman- tality, and was therefore Yalidly ilapoSa.” 314 Haaornbl~Gborgo p..Shwpatd, pa@* 19 not in tact the *purahars?’ within &ha meaal~ of thr tex stntute.w Soo l&C A. L. R. 621 itw a! uxod.leclt Mnotatioa. In rlar or the above la 8h o r rro ity,lr* o? #a. opinionthat you carisot1y8dVti6d;loalcr 3x08. CO. that it ra6 liableimp the tax. ‘84am further ot tha o&ion tk8t the Comptrol~et c?ensrel~a 4edlalon is nrrt arpllanblo to thd tads involved tn your o~lnioa nqaert. Ruimag thst the above fully