April 18, 1990

Honorable Gibson D. (Gib)Lewis Opinion No. JM-1158 Speaker Texas House ofRepresentatives Re:Whether the purchase of P. 0. Box 2910 fuelby acompany that proAustin, Texas 78769 vides transportation services for a school district isexempt from taxation (RQ-1807)

**Dear** Speaker Lewis:

You ask about the proper construction ofamended section 153.104 of the Tax Code, which exempts public school districts from the state's motor fuels tax, effective September 1, 1991. S.B. 417,Acts 1989, 71st Leg., ch. 813, 5 6.16, at 3720 [hereinafter Senate Bill 417l.l Specifically,YOU askwhether the tax exemption would apply to a purchase of **motor** fuel by aprivate transportation company ifthat fuel were used exclusively for the public school transportation services that that company has contracted to provide to a school district. You do not specify precisely what sort of contractual relationship is involved, nor do you include acopy of any actual contract.

On thebasis of attorney general opinions issued previously that construe a very similar exemption from the gasoline tax forthe federal aovernment onaasoline used exclusively by it,we conclude--<hatgasoline purchased by a school district orby the agent ofa school district for the

1. Sections 6.12 through 6.17of Senate Bill 417 amend sections 153.104, 153.119, 153.203, 153.222, 153.3021 of the Tax Code and subsection (b)of section 21.181 of the Education Code. Section 7.01 of Senate Bill 417 sets forth the effective date provisions of the bill and provides in relevant part: "Sections 6.12 through 6.17 take effect September 1, 1991."

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exclusive use ofa school district will be exempt from the reach of the tax. Gasoline purchased by an independent contractor that performs services fora school district, however, will notbe exempt from the reach of the tax.
Chapter 153of the Tax Code imposes amotor fuels tax on the first sale oruse ofmotor fuels in this state. Subchapter Bof chapter 153governs the first sale oruse of gasoline.2 Section 153.104 sets forth exceptions to the reach of the tax and will provide the following, effective September 1, 1991:

The tax imposed by this subchapter does not apply togasoline:
(1) brought into this state inthe fuel tank of avehicle with a capacity of less than 60gallons when the tank isconnected to the carburetor or fuel injection system of the power plant providing the propulsion of thevehicle:
(2) delivered by apermitted distributor to a common or contract carrier, oceangoing vessel (including ship, tanker, orboat), or abarge for export from this state if the gasoline is moved forthwith outside the state:

2. Section 153.101 of the Tax Code imposes the gasoline tax and provides:

(a) A tax--is-imposedon the first sale or use ofgasoline inthis state.
(b) If the tax imposed by this section is not paid at the time of the first sale or use, the comptroller may assess all applicable tax, penalty, and interest against any person buying the fuel for further resale.
Thus, ifthe first sale oruse ofgasoline escapes taxation, the comptroller may impose the tax ona subsequent purchaser.

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(3) soldby apermitted distributor to another permitted distributor;

(4) sold to the federal aovernment for its exclusive use:
(5) delivered by apermitted distributor into a storage facility of a permitted aviation fueldealer fromwhich gasoline will be delivered solely into the fuel tanks of aircraft or aircraft SUPPlY equipment; servicing

(‘5) soldby one aviation fueldealer to another aviation fueldealer who will deliver the aviation fuel exclusively into the fuel supply tanks of aircraft or aircraft servicing equipment; or
(7) sold toa DUbliC school district in this state for itsexclusive use. added.)3 (Emphasis

It is suggested that the exemption should be construed to reach, not just the sale ofgasoline to a school district, but also the sale ofgasoline to a transportation company when the fuel sopurchased will be used exclusively toprovide transportation services to a school district. It isargued that the evident intention of the legislature in enacting the exemption isthe reduction of school districts' transportation costs and that construing the exemption to reach such gasoline purchasers will effectuate that purpose. Based upon previously issued attorney general opinions that construe an exemption provision substantially similar to subsection (7),we donot agree that subsection (7) should be so construed.

3. Senate Bill 417 contains twoversions of section 153.104, one that is ineffect from the effective date of thebill until September 1, 1991, and another that goes into effect on September 1, 1991. The twoversions are identical except that theversion that goes into effect on September 1, 1991, contains subsection (7),the subsection you inquire about.

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The state tax on the first sale oruse ofmotor fuels was enacted originally in 1941 and contained an exemption from the tax forgasoline sold to the federal government for its exclusive use. Acts 1941, 47th Leg., ch. 184, art. XVII, 5 2,at 304. The exemption was retained in subsequent codifications of the statute. w V.T.C.S. Tax.-Gen. arts. 9.01-9.27, 10.01-10.25 (1960). Every attorney general opinion that has considered the question has construed this exemption to reach the federal government and its agents, but not to reach independent contractors who had entered into contracts toperform services for the federal government. See, e.a+. Attorney General WW-1502 (1962);h-172 Opinions C-694 (1966); (1957)iV-583 (1948).

For example, inAttorney General Opinion V-1492 (1952), this office concluded that themotor fuels tax may be imposed upon apurchaser ofgasoline thatwas deemed an independent contractor of the Reconstruction Finance Corporation, an administrative agency of the federal government. The independent contractor, United States Rubber Company, entered into a contract with the Reconstruction Finance Corporation for the lease and operation ofa synthetic rubber plant owned by the company. The opinion discussed and reaffirmed earlier opinions that concluded that agents of the federal government shared in the federal government's immunity from taxation, but that independent contractors who entered into contracts with the federal government for the performance of services are not so immune. Quoting fromCa uthv. c mCo., 221 S.W.Zd 584, 592 (Tex. Civ. App. - Eastland 1949,writ ref'd), the opinion declared:

An independent contractor and an agent are not always easy todistinguish, and there is
no uniform criterion by which they may be differentiated. Generally, however, the relations are distinguished by the extent of the control which the employer exercises over the employee inthe manner inwhich he performshiswork.
Attorney General Opinion V-1492, m, at g-10; see also Attorney General Opinions O-6964 (1946); O-5569 (1943); O-5309A (1944) (overruling Attorney General Opinion o-5309 and reaffirming Attorney General Opinion O-4389): O-5214 (1943);O-4731, O-4689, O-4389 (1942).

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The language of subsection (7) of section 153.104, which exempts from the motor fuels tax gasoline sold to a school district for itsexclusive use, is substantially identical to that of subsection (5),which exempts gasoline sold to the federal government for itsexclusive use. conclude that a court construing subsection (7) probaby; would construe the exemption inthe same fashion as the previously-cited attorney general opinions have construed subsection (5)andhold that gasoline purchased by a public school district or its agent forthe exclusive use of the district will be exempt from the state's motor fuels tax on gasoline. Gasoline purchased by an independent contractor that has entered into acontract with a public school district to perform services, however, is not so exempt, even inan instance inwhich the gasoline sopurchased will beused exclusively toperform the contracted services.

SUMMARY
Gasoline purchased by apublic school district or itsagent forthe exclusive use of the district will be exempt from the state's first sale oruse tax onmotor fuels that is imposed by chapter 153 of the Tax Code. Gasoline purchased by an independent contractor that has entered into a contract with
apublic school district toperform services, however, will not be exempt, even in an instance inwhich the gasoline so purchased will be used exclusively to perform the contracted services.
.

JIM MATTOX Attorney General of Texas

MARY KELLER FirstAssistant Attorney General

JUDGE ZOLLIE STEAKLEY Special Assistant Attorney General

RENEA HICKS Special Assistant Attorney General

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