Hon. Robert S. Calvert Opinion No. V-1371 Comptroller of Public Accounts Austin, Texas Re: The validity of ad valorem tax on intangible assets of an interstate bus or truck Dear Mr, Galvert: company.

Your request for an opinion states that two **out-of** State motor carriers have requested an exemption from the payment of the intangible assets and property tax imposed by the provisions of Article 7105, Vernon’s Civil Statutes. The particular facts with respect to these two carriers reflect that each is authorized to use the highways of Texas in interstate commerce pursuant to interstate certificates of convenience and necessity issued by the Railroad Commission of Texas. The certificates allow the carriers to **operate interstate**  only in accordance with the authority granted to them by the Interstate Commerce Commission. Neither has offices or shops in Texas, nor do they have tangible personal property permanently located in this State. On the other hand, each has a designated resident service agent in Texas, and each is operating over the highways of Texas for compensation and hire under the certificates issued by the Railroad Commission of Texas. One of the carriers is authorized by the Texas Railroad Commission to operate one hundred twelve (112) trucks over our highways while the other carrier is authorized to operate thirty-three (33) tracks. Each has purchased from the Commission the identification plates required by Article 91lb, 

### V,,C.S. Each transports interstate freight into and out of Texas, 

### using Ynsuch operations the highways of this State.

Based upon the above facts, you ask: May the State Tax Board validly assess for tax- :: sation a proportionate share of the intangible assets _.

‘..and property of an out-of-State motor carrier under -, Article 7105, V.C.S. (such tax to be allocated on the basis of the miteage traveled in Texas compared to the total mileage traveled and the resulting percentages multiplied by the total intangible assets of the company, or some comparable method) although the company has no permanent tangible property in Texas on Jaswrp 1of the tax 

### year in question?.-



### Hon. Robert **S.** Culvert, Paga **2 (V-1371)** 

Article 7105, V.C.S., was amended 

### in 1941**(Acts** 47th Leg., R.S. 1941, ch. 184, p* 269, at p. 295) so as te **make** subject to the Intangible Tax Act
,s~o*each ‘motor bus company,’ as defined in ~. ~ [Art. 91la] and each ‘common carrier motor carrit er’ operating under certificates of convenience and necessity issued by the Railroad Commission of Tex-

‘as, doing business wholly or in part within this State * * *

. The intangible taxable values of said motor bus companies 

### and said common carrier motor carriers shall be apportioned to the counties in or through which they operate in proportion to the distance in milea 

### ofthe higbwaya traversed by aaid carriers in 

### each rsapective county.” The Supreme Court oftheUnited States has conoirtentlyheld thatinterstate 

### commerce canbe made topay its way 

### by bearing a nondiscriminatory share ofthetaxburden which each state may impose ontheactivities OPproperty within its bordess, Western-Life-Stock **V.** 

### Ru~eau of **Reve&m;30< U.S.**  **250 (1938),**  

### and cases therein cited. Inther¢ cape ofOttv. Mississinni Valley Barge Line CQ., 336 

### U.S. i69 (1949), its udana andN~ewO~lean# could levy an ad valorem taxonbargea used ininterstate caaunerce, busiedonthenumber ofmile6 of huge Rues in Louisfuuu mudNew Orleans inrelation to thetotal **milwge ”** **uf the** lima. This purccntaSe **wae**thenapplied tothetotul pnopertp ofthatir#a Rue **to**determine what portion ofthe property wao 

### pcranuuutl7 ,withintheStateduring thetauin~ 7ear aod **aabject to**  **taxa%&** The **Laafeiana** 

### l **tatute, like**  **the** Texas 

### we, pw~kies.

UAssermnents

l bull be mpde onthebe&r ofthe coudltfou of thingaafatfng onthe 1stday ofJanuary of eachyear.”

The method oeed by Louisiana is similar tothemathod popuaud fccptaxing theintan@blem ofthecompanies inqueation. We thfnkit 

### in propup for 

### a proportionate ebare oftheintansiblou ti k allocated toTexas for tauutiou,**juet as**  **it was**  

### propep to **allocate** to Locrktisna 

### its proponrtionateshare of the tangible

r**roperty** of the barge iine. Pn**Curry** v. McCanless, 307 U.S. 357 

### f939), Itwae rtated, *The taxpayer 

### who is 

### domiciled inone state bet camies onbuttiness in **awther** 

### is subject toa tax there mea‘- wed by the **value** of the intangfblea 

### used inhia buaineacl.* The carrier8 are 

### mimittedly doiuS iutepstate business inTexan, Theref&bee, Tame may **valldky** 

### llrr a prepw poatiou oftheir intangible **valw.** 

### 334**U.S. 653**  

### tax levied by. .

Hon. Rob,ert S. Galvert, Page 3 (V-1371)

New York on the gross receipts of a common carrier from transportation between two points in New York but over routes that utilized the highways of Pennsylvania and New Jersey. It was contended “that since the taxed transportation was interstate commerce, New York may not constitutionally tax the gross receipts from such transportation.” Although the Court held that New York could not tax the entire revenue from such transportation, it held that
a,

. . a The tax may be ‘fairly apportioned’ to the ‘business done within the state by a fair method of apportionment. ’ Western Life St&k v. Bureau 

### of Revenoe, 303 U.S. 2n), 255. There is no disoute as toftasibility in apportioning this tax. On th; record before us the tax may constitutionally be sustained on the receipts from the transportation apportioned as to the mileage within the State-. See Rat&man v. Western Union Telegraph Co., 127 U.S. 411, 42 1-428. 1334 U.S. at 663.)
In discussing the right 

### of New Jersey and Pennsylvania to tax the proportionate part of the transportation over the highways of those states, the Court said: 

### ‘“IfNew Jersey and Pennsylvania could claim their right to make appropriately apportioned claims against 

### thatsubstantisl part of the business of appe1Iant to which they afford protection, we do 

### not see how on principle and in prec- 

### ,edeA such a claim could be denied.” (334 U.S. at 662.)

We think the reasoning set forth in the above cases is applicable here and supports the right of the State of Texas to levy the intangible tax in question, since, in 

### QW opinion, Texas is the **situs** for tax purposes of a proportionate share of the intangi

### bk assets of a company doing interstate burintss in this State.

That the rule applicable to intangibles is not different from that of tangible property is demonstrated by the following paragraph from Commonwealth of Virginia v0 Imperial Coal Sales Co., 293 U.S. 15n934):
-

“Such taxation may embrace intangible as well as tangible property. Adams Express Co. v. Ohio State Auditor, 166 U.S. 185, 218, 219, 17 S.Ct. 604, 41 L.Ed. 965; Gudahy Packing Co. v. Minnesota, snpra; Wells, Fargo & Ce. v, Nevada, supra. It is not the character of 

### theproperty that makes it nubject to such a tax, but the fact that the property has its situs w,ithin the state and that the owner should give appropriate support to the government that protects it. That duty is not less when the property is intangible. .

Hon. Robert S. Calvert, Page 4 (V-1371)

than when it is tangible. Nor are we able to perceive any sound reason br holding that the owner must have real estate or tangible property within the state in order to subject Lts fntangible property within the state to taxation.”
In light of the above, the answer to your question is that the State Tax Board may validly assess for taxation a proper share of the intangible assets of a foreign corporation doing interstate business in Texas.

SUMMARY
An out-of-State common carbier motor carrier operating over the highways of Texas under a certificate of convenience and necessity issued by the Railroad Commission of Texas i.s subject to the intangible tax provided in Article 7105, V.G,S., regardless of the fact that it has no permanent tangible property in Texas on January 1.
**Yours very**  **truly,**
PRICE DANIEL Attorney General

APPROVED:
Jesse P, Luton, 

### Jr. Reviewing Assistant
Charles D. Mathews First Assistant Assistant

LPL/mwb