r


                                               . .. .
     ~).


Q.
“:                                          . ...:....
0
                  OFFICE   OF THE    AlTORNEY             GENERAL    OF    TEXAS
0
                                         AUSTIN




           Hanowbls Oeo. H. Shep,mrd
           Captrollo     OS PubaLa Accounts
           AUBt lo, ?ox8*

           Qe8r Sir:




                                                                  09, 8ddro8B8d to you,
                                                                  bore eeptlon end mm-
           dered our rdv                                     0 UJBOEX
                                                                    the f8QtB whloh you
                                                            t the80 opinlonr  8ro sll
                                                            lng them hereln.
                                                         lnlaw   oited    ebovo dealt   vlth

                                       lmtiom     vhich are edmittsdl~
                                        d instrumeatrlltlee,        euch ee the
                                        the ‘c;aP Dopllrtaont 8nd the De-
                                    orateton, an en&aged ia war vork in
                                    furthemnco     of their *otivitier,
                                  ion8 have ontored      into ‘e08t-plUem
                hmztxuaets with rarlous     private    aontmatora,      uuoh
                as the Fort Worth Aircraft. Asawmbig Pleat mad the
                libergenq   Plpe1lner,    Inc.    In generel there con-
                treata follov   a comon petters,        with provi8lom
                whereby the fedeml sgoncies reimburse the con-
                tmotors   tar matertils     and labor ured by the ~htter,
                                                                          567


Honorable   5eo.   H. Sheppard,   Page 2



     and, In addition,    p~iy to the contmcton    e
      atIgulated  profit.   Although the contrectr   nor-
     mally provide that, subject to aortain oontrols,
      the oontsmctors may themeelver pu~chess the nec-
      essary inatorlals,  the federal agencies reserve
      tho rlght to purohase such mstterihls and to fur-
     nld    them to tho contracton    vhenmor they clo de-
     Bee*

            Ulth reference   to the eativitloa     of the fod-
     ~‘,‘,“~~~t~~~~~~~~~Qr?~)                   %:ooz&~
     (LM rold to the fedexml agenoier and ueod by them;
      b)     motor fuels are sold to the fedoml     egwmiea
     and are then turned    over to the oontractore     for
     use by them; (0) motor fkele am cold to end wed
     by the oontrectors.     ‘phe queurtlona dleoussod In
     our former oplniona save orfsen In conaectlon vlth
     tholsso three ultuatlonB.
           Por purponer of this oplnlon vo roil that It 18 h-
materiel vhether theae f’uela are wed in vshlalsa owned by the
f’ederex agencfes, In vehlolm  ovaed by the oontreetom,  or ln
vehleloe oumd by tho federal ugenolor and leaeed to the con-
tmritoru.

                                  I,
          Motor fuels~sold to end used            fedajral a enelesr
Section 2(d) of the E tor Fuels Tax Act          Article  70 f!!5b V.A.
CA.) provides in ptwt 8s follova~
           “Ho tax shell be Imposed upon the eale, uoe,
     or dL6trlbutlan   of any IlIotor fuel.  the InposIng
     Of vhshichvould mnetitute     an unlevN    burden on
     lntemtate    camuerce and vhifkh Ia not subject to
     be texod under the Constltutl&n of the State of
     Texas and the Gnttod Stu toe. ”
           Although large inroads have been *de      on the doctrine
of Inter-governmental    tax Zmmunlty ae establlahed   by Chief
Justioe Uars~.aall In the aaee of’ MoCulloch v. Blarylati, 4 Wheat
3x6, 4 U.S. 57$(t.    Ed.), the dootrine at111 pereiata et least
to the exteri? or affosc!ing immunity frora utate taxation to the
                                                                                         568




    f0th~i 80-mt              it80u    d         to    th000    r040m ag02kt310~
    and laatmmenklltl~a    whlah Coajpora lm8 ohown to declare
    tax oxompt, Pittman v. H. 0. L. c., 508 U.S. 21, 84 L. M.
    11, 60 aup. Ct. 15. Typltml of ti l8tter typa at 4eney
    is tho 4foa~o   Plant Corporcrtlon, whloh la saatlon 610 of
    Tlt10 15, U.S.O.A., the aongPoaa hr 4loakPed to he exempt
    into all   H~OB,    wo,       atom&e     and       -H         tax.8   lmpoaed   by
    any lkk    or polltiM    8ubdlvlolarr.   We are of the oplalon
    that tuB &ootPlae    @ad tb above qwted pPovl*ltfa of mm
    tax rtatcto p~~aluao tbo irporltian 0r ommotor       a018 tax
    upon Sal.8 0Pua.l    er the fml~lwlgov*rmuitmd~         radonrl
    lg e a o aJld
              lo il
                  lnat-ta11ti.a       vhloh Csagrera b&a oxapted.
    ConaoquemtS~,yms m-0 napoetfull~       ad*imd tlmt  a0 tu
    should k lwlad or eolleoted upcrmauah nlar OP uaea.
                                           II.
               Motor faola aold to toderrl 4uwlom uul uati W
    oantrrotona    Won c~~motorfwlr       Lua  males Lu, doubt-
    ma th-r0d0~i ~OVOPXBIW~~~OXOBP~~~~~~~ 40mea                 urd
    lad-talltlea       oould pwobB~0   the fu.1 w    pmlu~l~~    wo
    by tholr aaaItMotoM lahaut     th4 l.aeuPPwam
    llat&lyf&rBl&ah     ax.        WP, OUP tax pla %a7   iBBeP0
                     .  moti6a""t20) of tba t8x rtatutepPwldea
    in partt
                l
                nlePedullk a a dlB h e P m b y levLo dua
         posti (axoopt aa benlwtter     prov&M) apon the
         riw   ~10, ai8tributiak    or ~0 0f rotor lhui in
                                      or oxoin  tu of PmIP



         g8llQab*beello0llMted*                       the rid    tax ahsllk
         a d& te
              e&th e
                   l*ll.iry p




I
Hcuio~blo 0.0. R. Sheppard, Fag. 4


           I(oroovoc, SootIon (d) provldu    In part:
            “In tha wont this Artlole Is In oonfliat
      vlth tha Conatltutlon or any law ot the 0hIt.d
      Stat.8 vlth ns~at       to the tax lovhd upan the
      rim    ~ls,  di6ttibai0tb     0~ ~0   0f wt0r  ~1
      ia thI6 aata,    then it ti brro~ doolasod to k
      the IntentIon of thie Artiolo     to Impore the tax
      1evi.d horan   upon tb rirot     6ubrequeJat aale,
      dI6trIbutlon, or us0 of aaid rotor fwZ vhloh
      may be rubjoot to beln# tutod.”

           lbghdle88 of how our to&r       motor ml6    tax atrt-
ute (Aat6 1993, 43r4 Lag., p.        ah. 44, 88 ammded by hots
1935, 44th Leg., p. 558, ah. 2?8 j m¶.@t    hva m      oanatruod,
wo em utIrfled      that tb legal Inoldonoo of tha prosenttax
ir upon tba tlltlmate usor or uomumr      of motor -16    8ad t&t
th6 6tatutorllJ   dafixmd %l8tributor”    of lwh fuel.a I# wrml~
a bonded ftdualary or agent of the Stak for tha purpou of
aiding tn the sollootlon of the tax. Moreovo~, In vleu of the
portlam of Sekotlan (d) quoted supm, w feel that own: though
the "6alo" oi motor    fuolr to the fodorrl govemmmt or aortain
o$’Its IrgonaIo6 might 80 tas oxmpt, it nr the lskmtloa of
the legIa&rtum to levy 8 tax on          aubamt     “uam’ of luoh
fuelm vhleh right aonatltuttona1l.y70     tuod.   It ml.lu    to k
soon uWtber the tax mar aonatttut%65ally bm loviod upon 00~1
tmatura of the typo     under diaouaaion who use lwh fuels.
            That awoh mat-plus   oontraatora lu noithec agonaloa
nor  %natruwntalItIoa of ths fodorrl gov*nrmt       la va iael,
lettlod W the OC.S~Sof Alabara v. Xlng & Booaer, 62 Sup. Ct.
43, 66 L. M. la snd Ckwy v. Wted        stataa, 62 mp.. ct. 48,
86 L. gd. 9. Thase waw        am quoted end disowud    at loagth
in our Oplnian Ilo. O-4389, and ve adhan to the ana1~606 of the
086.6 thorn made. Hovover, oven though the aantmoton        tamp-
8olvos are nelthor fedelrl agamI*a m-t* InatmmaitalItIoa,       tlaa
aqpmont ia r&o that a tax upon the use of rator%alr by aort-
~1x16 aontrrotor6  Is i;l offoot 6 tu upon * hdorel    lgema~ or
lnatnmonta1l.t~ alnae the 8mwit of the tax will ba nilmated
In th8 lnoruud     oost of the mtwlal6    to the organIution6
which oaploy lwh oontrrretora.     5% r o w0OS lua h  8narguwnt
Is deatroywl when eonaldrrrd in the ll@tt of the nuwroua re-
sent oases tmlah hold that a general, mm-diaarkixmtory       tax
16 not const:tutiomlly     objectionable    merely because its
imp~oait:on upon G vendor or contractor      may reeult in a
slight  incream in the cost of goods or services acquired
by the federal ~overnmcnt.      Tnus, in ; l&ama v. King F:
Boozer,  stipra,  Chief Juatlce   Stone ecrldr
           “The mlrerted right of tks one (government)
     to be free of taxation by the other doea not
     spell lmmunlty from pay*     th6 added co*t sttrl-
     butable to the taxation of thosa who fUurai6h cup-
     ~1106 to the government and vho have been granted
     no tax Inanun1ty. so far an 0 d!.ffbrent viev ham
     prevailed,  608 Panhandle 011 Co. v. )II66i68lppi
     and Graves v. Texar Co., supra, ve think It no
     longer tenable. * (Parenthetical   word added)
           LIkevise,     in Curry v. United States,         aupm,    the
Chief Yustios aaid:
             “If the atats law laya the tax upon tti
      (coat-plus   contractors)    rather than the indivld~l
     with whom they enter into a cost-plus             oontmot
     1lJm the present one, then it affect8             the Govern-
     ment, like the indlvldual,         only a6 the eoonomlc
     burden is shifted       to It through operation of the
     contract.     As pointed out In the opinion in the
     gin&J  $2 BOOBctPt%ASe,   b  OOIltW68iO~    Of  the   ~VOXll-
     ment and on authority,       the Cozmtltutlon,        wlthout
     lmplemmtatlon      by oongresslonel      legislation,       doen
     not prohibit    a tax upon Oovernwnt contractors              be-
     cause lta burden Is pssaed on economlcelly              by the
     term6 of the oOntr8Ot or othervise a6 a
     the conrrtruotion oost to the Oovernmsnt. “r&n-
     ~thetlcal vord added)
See also James v. Dravo Contmcting   Co., 302 U.S. 134, 58 Sup.
ct. 208, 82 L. I%%. 155; Federal Lsnd ~cnk of St. ma   V. CQ
Rochford, 287 E.W. 522 (E.D.); Western LithoUr&    co. v. state
Board of Equslleation,  11 C&l. (26) 156, 78 P. ph
                                                 26) 731.
            Conaequontly, you are reopectfully edvised that when
n tax exempt fedeml agency purchase8 motor fuel6 in this State
and permits the u6e of such fuel6 by It6 cost-plus    contractors,
our motor fuels ttax attaches to the use of such fuels nnd the
contractors   are llebte  for nuoh tax.
                                                                                      571


                          Page 6
Rcootiblm0.0. H. Sheppaxdd.


                                    III.
           HOtOr    fUO16    sold   t0   and used w         the aOntmatOm8
~Tbsabon disouastonaapalr tbo oonaluslcmtint the rotor
fwla  tax aoorwa in a sltwtion when motor fuolo are both
sold to and used by a aoat-plw    aontrrator   of the typa wdor
dlaowalen,  and rou arm napoatfully     advised that tha tu Is
duo in a wh   a   lltwtlw.

                            amplltioaant4asrim8 the aon-
           T h is oplnlenwnly
olualma raaabodin our oplnlonlo.0-4I&P,ud In lnnowy
lntmdod torlkrruob0piaIon.     8iaoo thla oplnloala in
dlmot o&lot   ylth moat of tba statemoats awl eonolwIonm
Inoro&lntw~~0-5309,                 the latter   @pinion       la hereby      over-
                        .
           Trusting    that    the iongol@g      aatiafaetorllf           na6lvma
my aonfllatavhloh may have existedIn                  the    oplnlwa      of thla
dopwtamt, w am


                                                  vary       truly     yew6

                                             A¶ToltxY        -0FTXA8
