March 12, 

Honorable Robert S. Calvert 

Comptroller of Public Accounts 

Capitol Building 

Austin, Texas 

Dear Mr. Calve&: 

Opinion No. (C-&l) 

Re: Whether a bonded supplier 

is liable to the State 

for the collection and 

payment of the tax on 

special fuels sold and 

delivered fn bulk 

quantities to another 

supplier who has not 

secured and does not 

hold a valfd supplier’s 

permit for the current 

year and related 

questions, 

You have requested the opinion of this office as to the tax 

liability of a bonded supplier legally in possession of special 

fuels who makes bulk sales to unlicensed suppliers (who usually 

also operate as users), or who makes bulk sales to unlicensed 

dealers and user8 whose purchases are predominantly for offhighway use* or who makes bulk sales to purchasers for exclusive 

non-highway use without securing the signed statement required 

in subdivision (3) of Artfcle 10~06, Vernonss Cfvfl Statutes. 

Article 10.06 makes ft unlawful to make bulk sales to 

person who (1) la not licensed as a supplier, or (2) is not 

any 

licensed as a dealer or user of special fuels, or (3) does not 

furnish a signed statement that none of the special fuels purchased will be delivered by him or permftted by him to be 

delivered into the fuel supply tanks of motor vehicles. 

In connection wfth your Pequest, you have submitted a 

statement of the general construction and interpretation which 

you have placed upon the statutes in admlnfsterfng the Motor 

Fuel and Special Fuels Tax Acts. Since such administrative 

Interpretation is entitled to great weight, 53 Tex.Jur.2d 259- 

264, Set, 177, we quote the following statement thereof. 
Honorable Robert S. Calvert, Page 2 

“The legal Incidence 

fuel and special fuels is 

user of the fuels for the 

Opinion No. (C-401) 

of the tax on motor 

upon the ultimate 

propulsion of motor 

- vehfcles upon the highways of Texas. 

“But since there are millfons of highway 

users the Legislature, wherever it is possible, 

has imposed the, collection of the tax upon the 

vendor who fs usually cdnstftuted and licensed 

by law as a bonded fiduclar+y or agent of the 

State for collection purposes. 

“In the case of motor fuel (gasolfne) 95% 

of the fuel consumed in the State is used 

taxable on the highway so the tax collection 

is impbeed on the first sale by the wholesale 

distributor and tax refunds are authorized on 

the 52 used off the highways. 

“But in case of special fuels (diesel and 

butanes) the highway use Is Just the reverse. 

Only 5s to 10% of the total c~onsumptlon is used 

taxable on the highways while 90s to 95s is 

used off the highway for non-taxable purposes. 

Hence9 the State could not afford to adopt the 

motor fuel procedure of collecting the tax on 

the first sale of all special fuels sold fn 

the State and then paying back 90% to 95% fn 

refunds to non-highway users. . 

“Bat the Legfslature, after determfnfng 

that most of the special fuels used taxable 

on the highways was dispensed through retail 

dealer statIons and storage facflftfes 

maintained by bulk users such as bus and 

truck lines, devised a plan of collecting 

most of such tax at the wholesale level by 

suppliers who ape licensed and bonded by 

Article lO.ll(l) 60 make such coPleetfons ,fOr 

the State and vhf& would eliminate most of 

the tax ref”rPnds. 

. , 

“TRfa was accomplfehed by setting up in 

one category the dealers and users handling 

taxable fuels mostly who pay taxes to the 

supplIer, and settfng up in another category 

the dealers and users handPing non-taxable 

fuels mostly tie pay any fncfdental taxes due 

directly to the State3 &b follows: 
Honorable Robert S. Calvert, Page 3 Opinion No. (C-401) 

I'-l* Dealers and bulk users whose 

purchases of special fuels are predominantly 

t 

mostly) for delivery into motor vehicles 

for taxable use on the highways) are 

required by Article 10.11(l) to secure nonbonded dealer or non-bonded user permits and 

are required by Article 10.03(3) to pay the 

tax to the supplier upon delivery to their 

respective storages. If any of such tax 

paid fuel is thereafter used or sold for use 

off the highway tax refunds may be filed for 

such incidental diversions D 

“-2. Dealers and bulk users whose 

purchases are predominantly (mostly) for use 

or resale for use non-taxable off the highway, but with some lesser quantities to be 

delivered by the dealer or user into motor 

vehicles for taxable use, are required by 

Article lO..ll(l) to secure bonded dealer 

OF bonded user permits (to purchase tax 

free from suppliers) and are required by 

Articles 10.03(k) and (5) to report and pay 

directly to the State the tax on any 

deliveries made into motor vehicles - 

unless said taxes have been paid to the 

supplier (as authorized by Article 10.03(3)). 

“WPth this statutory arrangement the 

law then specifically provides in Article 

10,03(3) that the supplier shall collect the 

tax on each gallon delivered to non-bonded 

dealers and users - who are those persons in 

category 1, whose purchases are predominantly 

for delivery by them taxable into the fuel 

supply tanks of motor vehgcles. 

“The above is the only provfsfon in the 

law which speciffcally states that the 

supplier shall collect the tax on a delivery. 

“In the next psragraph, Article 10.03(b) 

and (5) provedes that every dealer and every 

user, respectively, shall report and pay to 

this State the tax on ,each gallon of special 

fuels delivered by them into the fuel supply 

tanks of motor vehicles - unless said tax 

has been uafd to 3 licensed euDD,lfer. 

-1893 - 
Honorable Robert S. Calvert, Page 4 Opinion No. (C-401) 

“As this Division has heretofore construed the lawp Article 10.03(3), places a 

mandatory duty upon every supplier- to 

collect the tax on each gallon of special 

fuels delivered to dealers or users whose 

purchases are predomPnantly for delivery by 

them into the fuel supply tanks of motor 

vehicles - and regardless of whether such 

dealera or users had exercised thefr duty 

of securing the non-bonded permits that the 

law required them to secure to perform such 

functions . 

“Conver8ely, if the supplier made such 

deliveries to unlicensed dealers or users 

whose purchases were predominantly for use 

or resale fOr use non-taxable off the highway tar which bonded dealer or bonded user 

permits ape required by law, the; supplier 

would not become liable for the tax on 

such deliveries (most of which would be 

presumed to be consumed off the highway) 

since Articles 10,03(h) and (5), provide 

that every dealer and every user shall 

remrt yd Da; to this State the Gn 

each gal on o special fuels delivered by 

them into the fuel supply tanks of motor 

vehicles - where such taxes have not been 

paid to a lfcexissd eupplfer, 

“CUP thought that the Legislature 

Intended to punish such unlawful sales by 

misdemeanor or &atuPtoPy civil penaltfes, 

rather than by making the selling supplier 

liable for the tax. thereon, was based on 

the fact that in Ahe usual course of 

operations by far the greater portion of 

the fUe1 purchased will move ultimately 

into non-taxable channels off the highway.” 

We are in agreement tith your conclus%on Snsofar as nontaxable us8 Is concerned for ths reason that no tax ever 

accrued absrent such taxable uBie* It is well settled that the 

tax in question is an indirect or “excise” tax snd that for 

any tax to be due the 3ta%es the special fuels must be used 
Honorable Robert S. Calvert, Page 5 Opinion No. (C- 401) 

in motor vehicles operated on the public highways of this 

‘State. State v. City of El Paso, 135 Tex. 359, 143 S.W.2d 

366 (1940). We do think* however, that the bonded supplier 

would be liable for any taxes that did actually accrue by 

virtue of any taxable use as well as subject to the mis- 

;;m;f?c)r and civil penalties imposed by Articles lo.25 and 

. . 

More specifically therefore, our conclusions are as 

follows : 

(1) Even though there Is no specific provision in the 

Special Fuels Tax Act which requires a bonded supplier to 

collect the tax on special fuels sold to an individual 

supplier, the bonded supplier has made an unlawful bulk sale 

under Article 10.06. We hold that the liability of a bonded 

supplier who has made such an unlawful sale to an unlicensed 

supplier Is limited to the amount of the tax which accrued 

on such portions of the special fuels as were actually put 

to a taxable use by the unlicensed supplier’s permitting 

the use of raid fuel8 in motor vehicles on the highway. 

We reiterate that the bonded supplier In such instances is 

subject to misdemeanor and civil penalties as imposed by 

Articles 10.25 and 10.1%. 

(2) Where a bonded supplier makea bulk sales and 

deliveries of special fuels to unlicensed dealers or users 

whose purchases are predominantly for off-highway use, 

the bonded supplier has made unlawful bulk sales under 

Article 10.06. The bonded supplier is liable by reason 

of said unlawful eales for the amount of any taxes nhich 

did accrue by virtue of taxable use and..fs further subgect 

to the misdemeanor and civil penalties Imposed by Articles 

10.25 and 10.18. 

.?‘. 

(3) In those instances in which a bonded supplier makes 

bulk sales to purchasers for exclusive non-highway consumption 

without securing the signed statement required by subdivision (3) of Article 10.06 that none of the special fuels 

purchased will be delivered by him or permitted by him to be 

delivered into the fuel supply tanks of motor vehicles, 

such sales are unlawful. By virtue of this fact, the bonded 

supplier is liable for such taxes as accrued by virtue of 

taxable use of sny portion of aaid fuels on the public highways 

of this State, Again the bonded supplier is subgect to the 

;ns~$meanor and civil penalties imposed by Articles 10.25 and 

0 0 

-P895- 
Honorable Robert S. Calvert, Page 6 Opinion No. (C-401) 

Yo have asked that we advise you as to the method of 

determf 2 ing the amount of the bonded supplier’s tax liability 

in cases of the type heretofore cp$@dereda Article 10~16 

provides that when any supplier, dealer or user falls to keep 

the records, iseue the invoices or file the reports required 

by Chapter 10, there is a prima facie presumption that the 

special fuels shown by duly verified audit by the Comptroller, 

+r his authorized representative, to have been delivered to 

such supplier, dealer or user and unaccounted for at each 

place of business or of storage from which special fuels were 

sold, delivered or used for any taxable purposes. The 

Comptroller Is authorized to,,fix the amount of the taxes, 

penalties and interest due the State from such records of 

delivery or from any information available to him. If the 

tax claim so established is not paid, the claim and any audit 

~made by the Comptroller or any report filed by the supplier, 

.Xealer or user is admissible in evidence in any judicial 

‘:, proceedings filed by the Attorney General as prima facie 

evidence of correctness of s&id claim or audit. However, 

Article 10.16 further expressly provides “that the prima facie 

presumption of the correctness of the olaim.may be overcome, 

upon the trial, by evidence adduced by said supplier, dealer or 

user o ’ 

Since under Article 10.21 the Comptroller is expreesly 

siyen the power and authority to promulgate rules and regulation8 

not inconsistent with this law”, we thfnk that ff the bonded 

eupplier in the above fnstances fUrnished the Comptroller with 

acceptable evidence or proof as to that part of the fuel unlawrully sold and put to non-highway use, you could allow a credit 

against the tax liability charged to him, and thus avoid the 

court proceeding contemplated by Article 1~9.16. 

You have directed our atten$ion to Opfnion No. WI-845 

:(l%O) fn connection with the special fuels,tax law as ft 

pertains to “user permits” 0 The Opinfon states that “No 

Provision of the law requires or authorfzes the supplier to 

onerating 

upplfed) 

.fnsofar as 

Opinion No. C-328 held that the tax &u&be collected by, the 

‘~supplier even fn cases where the dealers and users were.acting 

in the capacity of bonded dealers ,wd bonded ~86~8 but had not 

been properly licensed, 
I , 

Honorable Robert S. Calvert, Page 7 Opinion No, (C-401) 

Opinion No. W-845 made the following ruling: 

“A special fuels ‘user’ who is 

laalntaining storage tanks In Texas 

and purchasing epeclal fuels from 

supplLers in bulk quantities predominantly 

for delivery into fuel supply tanks of his 

motor vehicles, and is also operating a 

number of the motor vehicles, in interstate 

commerce, necessitating Importation of 

special tie18 In the fuel supply tanks of 

such vehicles, is required to obtain both 

a non-bonded user permit and bonded user 

Import permit. ” 

We quote the following paragraph from pages 2 and 3 of 

'Opinion WW-845: 

“A wholesale supplier may sell only 

to those holding permits as bonded or 

non-bonded uaera or dealers. He is 

required by Article 10.03(3,) to collect 

the tax on each gallon of special fuels 

delivered to non-bonded users. No provision of the law requires or authorizes 

the supplier to collect the tax from any 

bonded user, or any person operating 

only in the capacity of a bonded user.” 

It is evident that the last sentenoe above quoted was unnecessary to the holding of the Opinion, Further, it is in 

conflict uith the first sentence of the above quoted paragraph 

and with Article 10.09. Under the provisions of Article 10.09, 

only a person who has acquired a permft can legally act in the 

capacity of. a bonded user. Article 10.09 reads as follows: 

‘Every person defined herein as a 

supplier, dealer or user shall secure 

from the Comptroller the kind and class 

of permit required herein to act in such 

capacities or to perform such f7anctions.” 

We therefore affirm that Rortion of Opinion No. ~~-845 

insofar as It pertains to the user permits involved. We are 

specifically not in accord tith its statement as to persons 

operating only "In the capacity of" bonded twers. Opinion No. 

C-328 is predicated upon the proposition that a taxable use 

was made of the special fuels Involved. Its statement to the 

effect that the tax must be collected by the supplier even when 

-1897- 
,. . 

Honorable Robert S. Calve&, Page 8 Opinion No. (C-401) 

the dealers and users were acting in the capacity of bonded 

dealers and bonded users but had not been properly licensed, 

“I.. is consistent with the result reached. It is therefore 

reaffirmed. 

~,;-’ 

JMXJEARY --- 

A bonded supplier who has made an unlawful bulk sale to an unlicensed supplier 

fa liable for the amount of tax which 

accrued on such portions of the special 

fuels as were put to a taxable use by 

the unlicensed supplier and is subject 

to misdemeanor and civil penalties. A 

bonded supplier who has made unlawful 

bulk sales and deliveries of special 

.fuels to unlicensed dealers or users 

whose purchases were predominantly for 

off-highway use is liable for the amount 

of tax which accrued by virtue of taxable 

use and Is subgect to misdemeanor and 

civil penalties. A bonded supplier who 

made bulk sales to purchasers for 

exclusive non-highway consumption without securing the signed statement 

required by Article 10.06(3) that none 

of the special fuels purchased will be 

delivered by him or permitted by him 

to be delivered into the fuel supply 

tanks of motor vehicles is liable fop 

such taxes as accrued by virtue of 

taxable use and is subQeet to mfsdemeanor and civil penalties. When 

any supplier, dealer OP user fails to 

keep the records, invoices or reports 

required by the Special Fuels Tax Acts 

there is a pplma facie presumption that 

the special fuels shown by the Comptroller”s 

audit to have been delivered to such 

supplier, dealer OP user and unaccounted for 

at each place of business or storage have 

been used for taxable purposes. If the 

claim so established is not paid, the prima 

facie presumption of its correctness may be 

overcome in any suit fop the collection 

thereof by evidence adduced by the supplier, 

dealer or user. The Comptroller has 

authority to promulgate rules and regulations 

=na,%s- 
. .i. 

Honorable Robert 9. Culvert, Page 9 Opinion No. (C-401) 

for the enforcement of the Special Fuels 

Tax Law. If the Comptroller is furnished 

with proof as to that part of the fuel 

unlawfully sold and put to non-highway use, 

the Comptroller may allow a credit 

the tax cl im. 

and C-328 't 

Opinions No. 

1964) are reaffirmed. 

Yours very truly, 

WAQQONEZ? CARR 

Attorney General of Texas 

MMcQP:dl 

APPROVED BY OPIHION COMMITTEE 

W. V. Geppert, Chairman 

John Banks 

Jsmes Broadhurst 

SsmKelley 

Grady Chandler 

APPROVED FORTHEATTORNETGE%ERAL 

Bg: Stanton Stone 

-1899,