Honorable George I-I. Sheppard 

Comptroller of hblio Accounts 

Austin, Texas 

Dear Sir: Opinion No. O-3923 

Rer Is the holder of a "oontraot oarrier" permit, issued under the 

authority of the Railroad Commission of Texas, subject to the ocaupation tax on gross receipts 

levied by Article ?066b, Vernon's 

Texas Civil Statutes, despite the 

fact that suah grose reoeipts are 

derived exclusively from trensporting property for hire or oompensation for the United 3tates 

Army, on shipments originating and 

terminating at srmy camps, posts, 

depots and sites but passing through 

two or more inaorporated cities, 

tomns or villages? 

Your letter of March 10, 1942 submits for our opinion the following question, which we quote therefrom; 

%rtiale XIV of House Bill No. 8 of the Forty-seventh 

Legislature provides for P quarterly gross receipts taxi of 

2.2% on~bcsiats earned by Contract Carriers and such Contra& Carrier being identified in Chapter 277, Acts of the 

Regular Session of the Forty-seaond Legislature. 

"This department has been holding that a Contract 

Carrier, operating under a permit from the Railroad Commission, rho makes hauls between one incorporated town 

and another incorporated town within this State is subject 

to the gross receipts tax. 

"I now have an inquiry from Spears, Taylor & Spears of 

San Antonio, Texas, copy of which I am enclosing, on behalf 

of one of their clients who hauls commodities for the United 

States Army. You will note they state that none of the merchandise bs picked up or delivered in inoorporated towns or 

cities, but it is my understanding that they may traverse 

through tmo or more inoorporated toaas to reaoh their destination. 
",Ploesc tell me if, in your opinion. the faot that 

the receipts are earned on hauls for the -United States 

:~rey would exempt them from payment of gross receipts tax 

es provided for in Article XIV of House Hill No. 6 of the 

Torty-seventh Legislature." 

You also attach copy of letter from Spsars, 'luylor end kjpoers, 

Attorneys of Sen Antonio, l’exeS, pointing cut that the hauls made by 

the contract carrier in question era not picked up or delivered in incorporated cities or towns but are exolusive~ly for the IJnited States 

Army, originating end terminating in army camps, depots, posts and sitos. 

It is suggested therein that in view of such ciroumstances, said carrj,er 

does not fall within the scope and purview of the taxing Aot. 

Article 7066b, Vernon's Texas Civil Statutes, levies the following ocoupetion tax upon the gross receipts of each "motor bus company," 

"motor carrier" or "contreat carrier:" 

"(a) Each individual, partnership, oompeny, assoc;ati,on, 

or corporet$on doing business as e 'motor bus company' es defined 

in Chapter 270, Acts Regular Session of the Fortieth Legislature, 

as amended by the Acts of 1929, First Called Session of the 

Forty-first Legislature, Chspter 78, or es 'motor c&wrier* or 

'contract carrier' es defined in Chapter 277, Acts Regular Session 

of the Forty-seoond Legislature, over end by use of the public 

highways of this State, shell make quarterly on the first day of 

January, April, July, and October of each year, a report to the 

Comptroller, under oath, of the individual, partnership, company, 

essocietion, or corporation by its president, treasurer, or 

secretary. showing the gross amount received from intrastate 

business done within this State in the payment of charges for 

transporting parsons for compensation and any freight or commodity 

for hire, or from other souroes of revenue reoeived from intrestate business within this Stats during the quarternext preoeding. 

Said individual, partnership, company, assoaietion, or corporation 

et the time of making said report, shall pay to the State Treasurer 

en oocupetion tax for the quarter beeinning on said date equal 

to two and two tenths (2.2) per cent of said gross receipts, as 

shown by said report. l'rovided, however, carriers of parsons or 

property who era required to pay an intangihlc assets tax under 

the laws of'this State, are here'by exempted from the'prcvisions 

of this Article of this Act." 

The above tax Act refers to Chapter 277, Ants, koeular Soss5.on. 

42nd Legislature, Artj~cle Sllb, Vernon's Texes i'ivil :itatutes, for tha 

cic?inition Of a 

. "contreot .ccirrieren sub-loot to the tax ttiereby lcvied. 

ho quatc said definition from the stetuto edviscd to: 

"(h) v)!e <pi".! 'aontract carrjer' m031':s n'~y m&or cnrrjcr 
Iionorable George H. Sheppard, page 3 O-3923 

as hereinabove defined transporting property for compensation 

or hire over eny highway in this State other than 88 a common carrier.' 

"Motor carrier" as used in the foregoing definition, is, in 

turn, defined by subdivision (g) of said Act as follows; 

"The term 'motor carrier' means any person, firm, ccrporation, wnpany, co-partnership. association or joint 

stock association, and their lessees, reoeivers or trustees 

appointed by any Court whatsoever, owning, controlling, 

managing, operating or causing to be operated any motor 

propelled vehicle used in transporting property for compensation or hire over any public highway in this State, 

where in the course of such transportation a highway besen two or mere incorporated cities, towns or villages 

is traversedi provided that the term'motor carrier' as 

used in this Aot shall not include and this Aat shall not 

apply to motor vehicles operated exclusively within the 

incorporated limits of cities or towns." (Emphasis curs) 

The requirements of the statutory definition of a "motor carrier," underlined above, have, by cur opinion No. O-1692, been held to 

be met and satisfied where two or mere incorporated cities, towns or 

villages em involved or traversed by e person, firm or corporation transporting property for hire, even though such incorporated oity, town or 

village is not the point of origin or the terminus of the shipnent. We 

believe such opinion to be determinative of the status of the subject 

concern es * "motor Carrier," subject to the jurisdiction of the Railroad 

Commission and this gross receipts tax, despite the fact that the goods 

transported ere picked up and delivered on army posts, camps, depots and 

sites and not in incorporated cities, towns or villages, provided two or 

more incorporated cities, towns or villages are traversed en route. We 

enclose e copy of such opinion for your aonsideration. 

It remains to be determined whether or not the "contract oarrier" in question is exempt from reporting and paying the occupation tax 

levied by Article 7066b, Vernon's Texas Civil Statutes, by virtue of the 

fact that its gross reoeipts. upon which said tax is computed under the 

Aot, are derived exclusively from payments or compensation from the 

TJnited States of America for the transportation of property for and on 

behalf of the Army of the United States. The only theory upon which 

such immunity from State taxation could rest in the instant oese would 

be thet the levying of such tax upon gross receipts derived from the U. S. 

Treasury would be tantamount to e tax burden upon the United States 

Government or an agency or instrumentality thereof and therefore unconstitutional. We will address ourselves to that point. 

The incidence of the tax levied upon a "contraat carrier" f*llS 

squarely upon suoh carrier, for the privilege of conducting the business 

ellcmd by its permit and there is no 'requirement in the statute that 
Ecncreble George H. Sheppard, page 4 o-392:5 

such tax should be passed on end collected from the shipper or the 

person peying for such transportation services. The tax is en cccupation tax directly upon the person, firm or ccrpcreticn pursuing the 

described business, end the quarterly gross receipts tire merely used 

es e medium for cwputing such tax, the source of such receipts Fair? 

of no materiality. hven though the amount of such tax should, es s 

matter of sound business prsctice, be passed on the the Federal Gcvernment, es part of the cost or compensation for transporting goods for 

the Army, nevsrtheless, such tax or burden would be too remote and indirect to be aonsidered unconstitutional. 

The situation is analogous to that before the United States 

Supreme Court in James v. Dravc Construction Co., 302 IT. S. 134, wherein 

it was held that the State of West Virginia might collect a tax of 2% 

on the gross receipts of e contractor from work performed by him in the 

construction& dams and locks for the Federal Government in the State. 

Chief Justioe Hughes, in the opinion in that case declared, et page 160: 

"But if if be assumed that the gross receipts tax may 

increase the cost to the Government, that fact would not 

invslid,ete the tax. With respect to that effect, e tax on 

the oontreotor's gross receipts would not differ from e tex 

on the oontraotcr's property end equipment necessarily used 

in the perfarmenoe of the contract. Ccncededly, suoh a tax 

may validly be leid. Property taxes *r-e naturally, es in 

this ease, reckoned as a pert of the expense of doing the 

work. Texes mey validly be laid not only on the contractor's 

machinery but on ths fuel used to operate it. In Trinity 

Farm Construction Cc. v. Grcsjean. 291 77. S. 466, the taxpayer entered into e contract with the Federal Government for 

the construction of levees in aid of navigation and gasoline 

was used to supply power for taxpayer's machinery. A state 

excise tax on the gasoline so used vs.8 sustained. The Court 

said that if the payment of the stats taxes imposed on the 

property end operations of the taxpayer 'affects the federal 

government et all, it et most gives rise to a burden which is 

consequential end remote end not to one that is necessary, 

immediate or direct.' But 8 tax of that sort unquestionably 

increases the expense of the acntractcr in performing his 

servioe end may, if it enters into the contractor's estimate, 

increese the cost to the Government. The fact that the tax 

on the gross receipts of the contractor in the Alward case 

(Alward v. Johnson, 282 U. S. 509) might have increased the 

cost to the government of the carriage of the mails did not 

impress the Court es militating against its validity." 

While the Dravc cese was decided by e divided court. its 

authority cannot now be questioned, having .been recently cited with epprove1 by the United States, Supreme Court in the opinion by Chief Justioe 

Stone, announcing the unanimous decision of the court in Alabama v. Ring 
~cncrable George H. Sheppard, page 5 o-3923 

& Boozer, 86 L. Ed. 1, wherein a state sales tax of 2% upon building 

materials wea susteined as applying to materials purchased by 8 con-* 

tractor engaged inconstructing an army oamp for the United States 

under 8. "cost-plus-a-fixed-fee" contract. We quote from the opinion 

in the King & Boozer oese: 

"So far es such e nondiscriminatory state tax upon 

the contra&or enters into the cost of the meterials to 

the Government, that is but a normal incident of the 

organization within the same territory, of two independent taxing scveieignties. The asserted right of the one 

to be free of taxation by the other does not spell immunity 

from paying the edded costs. attributable to the taxation 

of those who furnish supplies to the Government end who 

have been granted no tax immunity. So far es a different 

view has proveiled, 444 Panhandle Oil Cc. v, lvIississippi 

(277 U. 5. 218) and Graves v. Texas Co. (298 IJ. S. 393). 

we think it no longer tenable." 

We think the question submitted by you is foreclosed by the Phove decisions and should accordingly be answered in the negative. 

Yours very truly 

ATTOR%Y GN!XAL OF TEXAS 

BY s/Pat M. Neff, Jr. 

Pat M. Keff, Jr. 

Assistant 

Pm:ej:ro 

ADPROVEO APLlIL 8, 1942 

s/Grover Sellera 

FIRST ASSISTAN' 

ATTORNEY GEWRAL 

Approved Opinion Committee By B!"IB Chairman