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### EY GENERAL

HonorableRobert S. Calvert Comptrollerof Pub1 ,ic Accounts Opinion Ro. 

### (c-346) Capitol Station Re: Whether under stated facts Austin, Texas a "lessor"of motor vehicles propelledwith special fuels which are leased to and operated entirelyby the "lessee" or his drivers in interstatecommercemay be construed to be the "user" of the special fuels delivered to such vehicles or imported in the fuel supply tanks of the motor vehicles and consumed on the Texas Dear Mr. Calve&: highways.
We quote the following excerpts from your letter requesting the opinion of this office on the above captionedmatter:

"A number of truck leasing companiesare engaged in the business of leasing commercialtrucks and trailers owned by said companiesto carriers for use **in** interstate commerce. The truck owner or 'lessor'enters into contract with the 'lessee' under which said lessor agrees to furnish everythingnecessary to the proper operationand maintenanceof the vehicles includingthe special fuels consumed in the operation of said motor vehicles. Under the agreement the lessor delivers the fuel to the vehicles from various bulk storagesmaintainedby said lessor wheneverpossible and agrees to reimburse the lessee for the cost of any special fuels necessary for the lessee to purchase elsewhere.

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HonorableRobert S. Calvert,,Page 2 Opinion No. (C-346)

"The lessors of such vehiclesurge that the furnishingof special fuels from lessor’s storage to leased vehicles owned by the lessor or reimbursement to the lessee fom cost of fuel purchased elsewhere qualifies the lessor as user of the fuel as the term )userl is defined and that said lessors should be authorizedto furnish bond and secureuser-import permits to report and pay taxes accruing on special fuels used in such leased vehicles and to claim refund of the tax paid on special fuels purchased in Texas and used in such vehicles in other States. In fact, some of the lessors acting under the above impression have filed applications and secureduser-importpermits under which they have filed refund claims for tax paid special fuels used in such leased vehicles in other States.
“For ready:

reference,it appears that it will be necessary to examine the followingprovisionsof the special fuels tax law - Chapter 10, Title 122A, Taxation-GeneralI

'Article10.03(l) imposes the tax upon the use of special fuels for the propulsion of motor vehicles upon the public highways of this State.

‘Article 10.03(3) requires the supplierto collect the tax on all special fuels deliveredto non-bonded users - who 10.11 (1

f are classifiedby Article as persons who purchase special fuels predominantlyfor delivery into fuel supply tanks of motor vehicles owned or operatedby said user.) 'Article10.03(5) requires every user to report and pay taxes to the State on all special fuels imported in fuel supply tanks or motor vehicles owned or operatedby said users (who are classifiedas bonded userimportersby Article 10.11(l).)

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HonorableRobert S. Calvert, Page 3 Opinion No. (C- 346)

tArticle10.02(8) defines 'user'as follows: “(8) 'user'means and includes every person who deliversany special fuels into the fuel supply tanks of motor vehicles owned or operatedby him. 'User*also means any person who imports special fuels into this State in the fuel supply tanks of motor vehicles owned or operatedby him." 'Article10.07. Tax Liability on Leased Motor Vehicles. "Any user who as lessee, in furtheranceof his business, enters into a lease or contract or other arrangement with another person for the operation of a motor vehicle, the operationof which will create a liabilityfor the tax herein imposed, shall be deem to be the operator of said motor vehicle and shall report and pay the tax accruingby reason of the use under such lease or contract. This provision shall not be construedas relievingany lessor or person acting as a user from the payment of the tax herein imposed in cases where the lessee is not qualifiedas a licensedand bonded user as requiredherein. Nothing herein shall be construedas requiring the filing of more than one (1) report coveringa given special fuel use operation or as,requiringthe payment of the tax herein imposedmore than once on the same special fuels." (Note: See Comptroller Rule and RegulationNo. VII, in reference to Article 10.07 attached.) 'Article10.08. Optional Computationof Tax. "In the event the tax herein imposed on special fuels imported into this State in the fuel supply.tanks

of motor vehicles.

. .can be more accuratelydeterminedon a mileage basis (that is by determiningand using the total number of miles traveled and the total gallons of fuel consumed),or in case it is more practicableto so determine the tax, the Comptroller is hereby authorizedto approve and adopt such basis." (Note: the mileage basis-

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HonorableRobert S. Calvert, Page 4 Opinion No. (C-346)

average miles per gallons - was necessarily adopted as the most accuratemethod of computing the tax due or refundableon s ecial fuels used in interstate

vehicular travel

P . 'Article10.14 provides that, '.

. .any licenseduser who shall have paid said tax upon any fuel which has been used by such user for any purpose other than propellinga motor vehicle upon the public highways,may file claim for a refund of the tax or taxes so paid.

. . .' 1 , . . . "The Comptroller'sinterpretation of the law under discussionis set out in Rule and RegulationNo, VII, attachedhereto. The ruling did not take into considerationthe claims now'advancedby the lessors that they would delivermost of the special fuels consumed in said leased vehicles from their own storage facilities or would contractwith retail dealers to make such deliveries for the lessor's account into the fuel supply tanks of the leasedmotor vehicles which are owned by said lessors - though operatedby the lessees. 11 II

. . . Ruling No. VII is headed as follows: "Construing

the Law as it applies to:
TAX LIABILITYOF A LESSEE ON SPECIAL FUELS IMPORTEBAND USED ON THE HIGHWAY IN LEASED MOTOR VEHICLES." This ruling was adopted September 1, 1961 and filed with the Secretary of State November 15, 1961.
In quoting the statutorydefinitionof 'user"' as it applies to user-importers- the ruling underscored "or operated" in the phrase "motorvehicles owned or operated.

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We quote the following excerpt from the ruling: "Therefore,

a person who actually imports the special fuels in motor vehicles operated exclusively by himself, or by his employeedrivers,becomes the 'user'of the fuel, as user is defined; and is required by Article 10.03(5),above cited, to report and pay the tax on each gallon of special fuels so importedand used or consumed in the operationof such motor vehiclesupon the Texas Highways,and regardlessof whether such motor vehicles are owned by him or are leased from another person. "The fact that a lessor of motor vehicles enters into a private contract or agreementwith the lessee to pay for or furnish the special fuels used in the operationof the leasedmotor vehicles, or to reimburse said lessee for the cost of such fuel, would not change or alter the status of the lessee as the statutory luser*of the fuel consumed in the operation of said leasedmotor vehicles;nor could such agreement be construedas constitutingor qualifyingthe lessor as the user of special fuels consumed in motor vehicleswhich said lessor does not operate or direct the course of operationsin any manner. "However,the Legislatureobviouslyrecognized that there are cases where a lessor contractsor agrees to lease to a lesseemotor vehicles to be operatedby the lessor, or by drivers furnished by the lessor, in which the lessor will purchase or furnish the special fuels used but will operate such leasedmotor vehicles entirelyunder the directionand control of the lessee,which would present a legal question as to whether the lessor operatinghis leasedmotor vehicles, or the lessee directingand controllingthe course of operations, or both, would come within the statutorydefinition of aluserl. The Legislatureresolved the question by fixing the legal incidenceof the tax liability and its payment to the State upon the lessee of such motor vehicles by the enactmentof Article 10.07 which reads as follows:

11

. . .rQuoted, supra, at page 37

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"The above article does,not relieve a 'lessee'from securing the bonded user-dmporpermit required to import and use special fuels in leased vehicles operatedby him or under his directionand control,nor does it relieve him from liability for the tax imposed, or of the penalties or impoundment

prescribed for operatingwithout a permit. But if a 'lessor'acts as .a user of special fuels imported in vehicles leased~a~e%~v oneratina said vehicles for and under the direction of such-lessee, he must make certain that said lessee is licensedas a user-importer to be relieved of liability for the tax. The use tax is secured by a preferred lien upon each vehicle in which the taxable fuel is used - regardlessof ownership of the vehicle. Johnson-Burnham v. State 95 S.W.2d 144."
You have submittedthree questions for our consideration. The first of which reads as follows:

"Where the owner and lessor of motor vehicles leased to and operatedby interstatecarrierswill furnish and deliver into the fuel supply tanks of such motor vehiclesmost of the special fuels consumed therein from storage facilitiesof the lessor or from dealer-stations under contract to make such delivers for the account of the lessor, then, in such cases,may the lessor be construedto be the luser' of such specialfuels as the term 'user' is defined, and thereby be licensedas a user and userimporter liable for the tax due and authorizedto file claims for refund when refunds are due?"
We have concludedthat under the submittedfacts the lessor is a "user"within the meaning of the Special F'uels Tax Iaw. Article 10.02(S)makes ownershipas well as operationa criterion of a "user".'

Article~lO.OY;

after declaring that a tax liability on leased motor vehiclesmay attach to a lessee user under a contract,expressly states that thl.s provision of the statute is not to be conr&i%+ued aw-relieing azSylessor or~person~acting as a user from the payment of the tax imposed in caseswhere the lessee is not qualifiedas a licensedand bonded user. Under the facts stated to us, the lessee is not qualifiedas a licensedand bonded user. Therefore,necessarilythe burden of reportingand paying the tax must fall upon the lessor who is also entitled to make applicationsfor refunds if any.

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HonorableRobert S. Calvert, Page 7 Opinion No. (C- 346)

Article 10.03(5) contains the followingprovision: "Everyuser shall report and pay to this State the t&x,.&t the rate imposed, on each gallon of special fuels deliveredby him into the fuel supply tanks of motor vehiclesunless said tax has been paid to a licensed supplier." The lessor in the instant case deliversmost of the special fuels involved into the leased vehicles from its own storage facilities. In this instancesthe tax has been paid to the supplier. When delivery is not so ma&the lessor controlsand directs the supply of fuel by written agreementswith retail suppliers, both within and without the state, and pays the taxes due. With re ard to special fuels imported into this state,Article 10.03(5 e;designates ownership or, in the alternative,operationas a criterion of texability.
As you have pointed out, Article 10.03(l) imposesa tax upon the use of special fuels for the propulsionof motor vehicles upon the public highways of this State. We think that the lessor in the case under consideration is, in fact, engaged in a businesswhich in large part, is dependentupon and directly connectedwith the use of special fuels for the propulsion of motor vehicles upon the public highways of,this State. We think that said fuels, which are owned by the lessor, are used by him in his business for the taxable purpose of propellingmotor vehicles upon the highways of this State ragardlessof the fact that a third person,, the lessee, furnishes the drivers of said vehicles and has no interest in the operation of the lessorqs business. Since we have determinedthat the lessor is a "user"within the meaning of the Special Fuels Tax Law, he may file claim for refunds under the provision of Article 10.14 in those instances in which the special fuels have been used for propellingthe motor vehicles upon public highways other than those of this State. The exhibitsyou have furnished. us show that claims for such refunds are based upon trip reports, state line crossing reports,delivery receipts for ,fuel received from lessor or his appointedagent or similar documents or declarations. One of the foms furnishedus constitutesa recap of miles traveled and gallons of fuel purchased,by state, for each truck by month.

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HonorableRobert S. Calvert, Page 8 Opinion No. (C-36)

Since we have concludedthat the lessor is a "user" within the meaning of the Special Fuels Tax Law, he may be licensedas a non-bondeduser and accorded a bonded user import permit. We do not reach your second two questions which were predicatedupon a negative answer to your first one. SUMMARY -e--m-- Under stated facts, a lessor $f motor vehicles propelledwith special fuels is a user" within the meaning of the Special Rae18 Tax Law and may be licensedas a non-bondeduser and bonded user-importer even though the leased motor vehicles are operated entirelyby the lessee or his drivers. The lessor in question is liable for all special fuels taxes and is authorizedto file claim for refunds when refunds are due.
Yours very truly,
WAGGONER CARR Attorney General of Texas

MMcGP:sjl
APPROVED:
OPINION COMMITTEE
W. V. Geppert, Chairman Arthur Sandlin Cecil C. Rotsch Roy Johnson Robert Lemens APPROVED FOR THE ATTORHEY GENERAL By: Roger Tyler

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