,,. 

:,,‘.No$ember : 13,, $3 

.,:, ,,: ,,, ..’ : ~. 

~, ,, .,:. 

,,, ,,. 

The H&orib:Le’ Jack ,&is& 

Chief Clerk in. ,:~,I,, 

,,, 

“.‘bpinion,:I\lo~.IIH- ( $f’ ~’ 

; 

,General,,L&d Office:, .:I’,. :l., ., .., ,,~~. 

Austin,, Texa.s .78701, ,~~:~.. 

,,, .,:,Re: ., ,: .~$abllity .of ,St+te and 

:.: ,,, :.:, ~:~..: .,,,, ~ ,~. .Its a~gencles ,for A.irway 

..~,,,T, 

Dear Mr.~‘Giberson: 

..,.. ~. ,, : ,,.. i]‘se Tax’on civil aircraft 

.: 

Your letter requesting.our’opinion asks ,whether the General Land 

Office, as +,n,agency ,of the State.of Texas, #&required as.a matter of law, 

to pay an Airway Us,e..Tax on state-owned ai&craft~a$d”:if it is, whether 

the agency ib.o’bligat&d to :pay interest and pen&ties”& the amount not 

timely paid.; ,/ ~,:: 

As bagkgfound to:this request .are. the factk ~that in a cause tried in 

.the United states~.DistFict.,,Court,:~or th.:‘:~estcrn1,~i5tljct of Tellas styled 

Stat.e of T.&xas,,v.. United State6..of .Aineii&, ~..,thk’::State:,questianea its liabili.ty 

under $4261 of Title 26 of the United States ‘&&y Internal Revenue Cod,e 

of 1954, fqr taxes. impo’se~d upon,the amount paid .by~~emp.loyees of the State 

for transportation.?n off+al.State ,business.: The State k’ought a refund. 

,. 

Tha$.suit was,,$ermi&&d.dy a’.jtidg&ntlof &United States District 

Court in June,:of ..1?,72, denying the c:laim ,o! the state. That deci,sion was 

affirmed by the ,Uni,t,e,d,zSt+tes Cou,rt.of Appeals f.or,.t&&f’th Circuit, per 

curiam, in December,.,,$9?2, &d is’now a final judg&&nt. 

....~ In the~meantime,. when the p,uestion:of your+gency’s ,Liabili.ty for the 

. tax on the use of civi:l aircraft, .imposed’by 5 4491 of Tit,ie 26,~ ,was ,brought 

to the attention, of the Att,orney ,G&eral’s office, : y&~&$$&vis’ed apparent:ly 

that this office ,was challlenging the 1iabi:tity of Sta’te age&d; &I payment of 

..such taxes an+ that you shou:ld not pay the tax. 

..~..~’ 

In the pribr suif, which’& &ce,‘fii&b, ‘it ‘was “’ ”Our c&e&ion that the 

tax levied upon transportation of State employees on State business was 

p. 697 
The Honorable Jack Giberson, page 2 (H-149) 

unconstitutional as being violative of an implied governmenta immunity. 

The United States District Court, in its conclusions of law, r,ejected this . 

contention holding that the tax could be imposed constitutionaIl:ly upon 

individual State employees traveling on official State business. The Court 

pointed to the fact that the purpose of these taxes was to provide additional 

revenue to finance increased government outlays in the expansion and 

deve.lopment of airport and airway systems and to impose those additional 

costs upon the users of the system. It held that whether the tax was considered as an exercise by Congress of its power to ,re,gu.late interstate 

commerce ‘or as an exercise of the taxing power, it was constitutional as 

applied to employees of the State of Texas. 

“The airway user charge is not a tax ins the 

traditional sense, but instead is a charge for services 

rendered and represents a quid pro quo, and as such, 

is outside the scope of the doctrine of implied intergovernmenta, tax immunity. . . . ” 

“Nothing in the historical basis of dual sovereignty underlying the principle of state immunity from 

federal taxation requires that the states continue to 

receive the benefit of airwayfaci,lities and services 

actual:ly used by states but furnished by the Federal 

Government without bearing their equitable share of 

the costs incurred in providing those particular benefits. Even employees of the Federal Government must 

pay the air transportation charge. No :logical reason 

exists why all users of the air transportation system 

should not pay their fair share of such costs. ” 

Since the issues are not identical, the State of Texas is not estopped 

fromquestioning& imposition of the tax on your aircraft. Nevertheless, it 

is our opinion that it would be unfruitful to question the tax. 

Your letter requesting our opinion also asks whether you. will be 

ob:ligated to pay interest and penallties on the unpaid portions of the tax. 

p. 690 
The Honorabh Jack Gibeison,: ‘page :3” !.(H-149’) 

Section 660,l ,of’ Title 26 of the United States Code, the 1nt:ernal j 

Revenue Code of 1954, requires the payment &interest at the rate of 6% 

per annum in the event any tax imposed by the Code is not paid on or 

before the date prescribed for its payment. The interest is co:llected 

as a compensation for use of the money, and not as.a penalty. Vick:v. 

Phinney. 414 F. 2d 444 (5th Cir. 1969); 

Penalties,, which are governed by 5 6672 of ,Title 26 are assess’ed 

in the nature of punishment for failing to collect and pay over a tax when 

due. By the ,terms of the section, those, liab:k are’ “shy person’! defined 

in $6671 as including”‘an officer or employee .of a corporation, oi'a .member or employee of a partnership, who as such officer, ‘employee or member ,is under a duty to per:form the act in respect of which the violation 

occur.3. ” Governmental agencies are not included. Cascade County v. 

Pemdl, 67 F. S~pp. 253 (D. C, Mont., 1946). 

It is our opinion, therefore, ‘that your agency should pay the tax 

imposed by 5 4491, et seq., of Title 26 of the United States Code, imposed 

for the use of c.ivil aircra.ft and owes interest on’those taxes from the time 

they were due.: It is, further our opinion that the State is not liable for 

penaltic,s. 

SUMMARY 

Under the decision in State of Texas v. United States 

of America that the governmental immunity of the State of 

Texas and the doctrine of dual sovereignty do not exempt 

the State from liability for federal taxes upon the use of 

civil aircraft where the taxes are imposed for the purpose 

of constructing and operating airports and airways, the 

Land Office shou,ld pay,similar taxes levied on a stateowned aircraft. The State may be liable for interest on 

the unpaid taxes but is not liable for any penalty. 

Attorney General of Texas 
~~ 

- .-, .,,,--.-I ~--,..-.,, ~-~ .,,,.-..-,,...,- ~- .._._, _ ..,_, ,.__,._,,_ 

The Honorable Jack Giberson, page,4 (H;149) 

APPRQVED: 

DAVID M. KENDALL, Chairman 

Opinion Committee 

,. 

p.’ 700