April 18, 1990 

Honorable Gibson D. (Gib) Lewis Opinion No. JM-1158 

Speaker 

Texas House of Representatives Re: Whether the purchase of 

P. 0. Box 2910 fuel by a company that proAustin, Texas 78769 vides transportation services for a school district 

is exempt from taxation 

(RQ-1807) 

Dear Speaker Lewis: 

You ask about the proper construction of amended 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 ask whether the tax exemption would apply to a 

purchase of motor fuel by a private transportation company 

if that 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 a copy of any actual contract. 

On the basis of attorney general opinions issued previously that construe a very similar exemption from the 

gasoline tax for the federal aovernment on aasoline used 

exclusively by it, we conclude--<hat gasoline purchased by a 

school district or by the agent of a school district for the 

1. Sections 6.12 through 6.17 of 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." 

P. 6110 
Honorable Gibson D. (Gib) Lewis - Page 2 (JM-1158) 

exclusive use of a school district will be exempt from the 

reach of the tax. Gasoline purchased by an independent 

contractor that performs services for a school district, 

however, will not be exempt from the reach of the tax. 

Chapter 153 of the Tax Code imposes a motor fuels tax 

on the first sale or use of motor fuels in this state. 

Subchapter B of chapter 153 governs the first sale or use 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 to gasoline: 

(1) brought into this state in the fuel 

tank of a vehicle with a capacity of less 

than 60 gallons when the tank is connected to 

the carburetor or fuel injection system of 

the power plant providing the propulsion of 

the vehicle: 

(2) delivered by a permitted distributor 

to a common or contract carrier, oceangoing 

vessel (including ship, tanker, or boat), or 

a barge 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 -imposed on the first sale or 

use of gasoline in this 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, if the first sale or use of gasoline escapes taxation, 

the comptroller may impose the tax on a subsequent purchaser. 

p. 6111 
Honorable Gibson D. (Gib) Lewis - Page 3 (JM-1158) 

(3) sold by a permitted distributor to 

another permitted distributor; 

(4) sold to the federal aovernment for 

its exclusive use: 

(5) delivered by a permitted distributor 

into a storage facility of a permitted 

aviation fuel dealer from which gasoline will 

be delivered solely into the fuel 

tanks of aircraft or aircraft 

SUPPlY 

equipment; 

servicing 

(‘5) sold by one aviation fuel dealer to 

another aviation fuel dealer who will deliver 

the aviation fuel exclusively into the fuel 

supply tanks of aircraft or aircraft 

servicing equipment; or 

(7) sold to a DUbliC school district in 

this state for its exclusive use. 

added.)3 

(Emphasis 

It is suggested that the exemption should be construed 

to reach, not just the sale of gasoline to a school district, but also the sale of gasoline to a transportation 

company when the fuel so purchased will be used exclusively 

to provide transportation services to a school district. It 

is argued that the evident intention of the legislature in 

enacting the exemption is the 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 do not agree that subsection (7) should 

be so construed. 

3. Senate Bill 417 contains two versions of section 

153.104, one that is in effect from the effective date of 

the bill until September 1, 1991, and another that goes into 

effect on September 1, 1991. The two versions are identical 

except that the version that goes into effect on September 

1, 1991, contains subsection (7), the subsection you inquire 

about. 

P. 6112 
Honorable Gibson D. (Gib) Lewis - Page 4 (JM-1158) 

The state tax on the first sale or use of motor fuels 

was enacted originally in 1941 and contained an exemption 

from the tax for gasoline 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 to perform services for the federal government. See, e.a+. Attorney General 

WW-1502 (1962); h-172 

Opinions C-694 (1966); 

(1957) i V-583 (1948). 

For example, in Attorney General Opinion V-1492 (1952), 

this office concluded that the motor fuels tax may be 

imposed upon a purchaser of gasoline that was 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 of a 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 from c Ca uth v. 

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 to distinguish, 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 in the manner in which he performs his work. 

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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Honorable Gibson D. (Gib) Lewis - Page 5 (JM-1158) 

The language of subsection (7) of section 153.104, 

which exempts from the motor fuels tax gasoline sold to a 

school district for its exclusive use, is substantially 

identical to that of subsection (5), which exempts gasoline 

sold to the federal government for its exclusive use. 

conclude that a court construing subsection (7) probaby; 

would construe the exemption in the same fashion as the 

previously-cited attorney general opinions have construed 

subsection (5) and hold that gasoline purchased by a public 

school district or its agent for the 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 a contract with a public school 

district to perform services, however, is not so exempt, 

even in an instance in which the gasoline so purchased will 

be used exclusively to perform the contracted services. 

SUMMARY 

Gasoline purchased by a public school district or its agent for the exclusive use of 

the district will be exempt from the state's 

first sale or use tax on motor fuels that is 

imposed by chapter 153 of the Tax Code. 

Gasoline purchased by an independent contractor that has entered into a contract with 

a public school district to perform services, 

however, will not be exempt, even in an 

instance in which the gasoline so purchased 

will be used exclusively to perform the 

contracted services. . 

JIM MATTOX 

Attorney General of Texas 

MARY KELLER 

First Assistant Attorney General 

JUDGE ZOLLIE STEAKLEY 

Special Assistant Attorney General 

RENEA HICKS 

Special Assistant Attorney General 

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