r 

~). . . . . 

Q. 

“: . . . . :.... 

0 

OFFICE OF THE AlTORNEY GENERAL OF TEXAS 

0 AUSTIN 

Hanowbls Oeo. H. Shep,mrd 

Captrollo OS PubaLa Accounts 

AUB tlo, ?ox8* 

Qe8r Sir: 

dered our rdv 

09, 8ddro8B8d to you, 

bore eeptlon end mm0 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 Deorateton, 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 contreata follov a comon petters, with provi8lom 

whereby the fedeml sgoncies reimburse the contmotors 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 normally provide that, subject to aortain oontrols, 

the oontsmctors may themeelver pu~chess the necessary inatorlals, the federal agencies reserve 

tho rlght to purohase such mstterihls and to furnld them to tho contracton vhenmor they clo deBee* 

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 hmateriel 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 contmritoru. 

I, 

Motor fuels~sold to end used fedajral a enelesr 

Section 2(d) of the E tor Fuels Tax Act 

CA.) provides in ptwt 8s follova~ 

Article 70 f!! 5b V.A. 

“Ho tax shell be Imposed upon the eale, uoe, 

or dL6trlbutlan of any IlIotor fuel. the InposIng 

Of vhshich vould 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 l kk 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 

l gea oaJld 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 upcrm auah nlar OP uaea. 

II. 

Motor faola aold to toderrl 4uwlom uul uati W 

oantrrotona Won c~~motorfwlr Lua males Lu, doubtma 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. 

""t 

WP, OUP %a7 tax pla iBBeP0 

. moti6a 20) of tba t8x rtatutepPwldea 

in partt 

l nlePedullk a a dlBhePmb 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& tee & the 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 atrtute (Aat6 1993, 43r4 Lag., p. 

?8 

ah. 44, 88 ammded by hots 

1935, 44th Leg., p. 558, ah. 2 j m¶.@t hva m oanatruod, 

wo em utIrfled that tb legal Inoldonoo of tha prosent tax 

ir upon tba tlltlmate usor or uomumr of motor -16 8ad t&t 

th6 6tatutorllJ dafixmd %l8tributor” of l wh 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 

70 tuod. 

aubamt “uam’ of l uoh 

fuelm vhleh right aonatltuttona1l.y 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 l wh fuels. 

That awoh mat-plus oontraatora l u noithec agonaloa 

nor %natruwntalItIoa of ths fodorrl gov*nrmt la va iael, 

l ettlod W the OC.S~S of 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 tamp8olvos 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 l gema~ or 

lnatnmonta1l.t~ alnae the 8mwit of the tax will ba nilmated 

In th8 lnoruud oost of the mtwlal6 to the organIution6 

which oaploy l wh oontrrretora. 5% r o w0 OS l ua h 8n arguwnt 

Is deatroywl when eonaldrrrd in the ll@tt of the nuwroua resent 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 sttrlbutable 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 Government, 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 BOOBctP t%ASe, b OOIltW68iO~ Of the ~VOXllment and on authority, the Cozmtltutlon, wlthout 

lmplemmtatlon by oongresslonel legislation, doen 

not prohibit a tax upon Oovernwnt contractors because lta burden Is pssaed on economlcelly by the 

term6 of the oOntr8Ot or othervise a6 a 

the conrrtruotion oost to the Oovernmsnt. 

~thetlcal vord added) 

“r&nSee 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& 

Board of Equslleation, 11 C&l. (26) 156, 78 P. ph 26) 731. 

co. v. state 

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 

Rcootiblm 0.0. H. Sheppaxdd. Page 6 

III. 

HOtOr fUO16 sold t0 and used w the aOntmatOm8 

~Tbs abon disouaston aapalr tbo oonaluslcm tint 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 l ltwtlw. 

This oplnlen wnly amplltioa ant4 asrim8 the aonolualma raaabod in 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 aonfllata vhloh may have existed In the oplnlwa of thla 

dopwtamt, w am 

vary truly yew6 

A¶ToltxY -0FTXA8