..’ 

E OFFICEOFTHEATTORNEY GENERALOFTEXAS 

AUSTIN 

. 

fionorable Oeorge II. Shemard 

CmptrOlle~ of Publla AccOwit8 

AllBtln, Texas 

Dear Sirs OplnLon no. O-4731 

!&other tax 1 

tmr of! Augurt 4, 1942; 

t the Cefanss PUnt 

r to the cement manw 

atlng by nnd through 

xm.mSaot.urms in thla State 

dlmct Bale to the Dnltsd 

i&d 47, seation 4la, aa tuaimlsd by &ticle 12, 

EIciuae Bill 0, 47th Lagl8lnture, reeds ln pact as follows: 

I- ,- 

.~.. 

,. . ...: 1. :. 

. 
Eonorable Oeorge H. shoppard, page 2 

“Cement Distributors. ticire Is hereby imposed 

.a tai of tvo and one-half (&) cents on the one bundred (100) pounds, or fractional part thereof, of 

cement on every p.erson in this state manufaaturln.3 or 

producing ti and/or lmportlry ceinent Into this state, 

and vho thereafter distrlbutea, sella or USest proid d hovever, no tax ahall,b 

&a~rlbutlon or une. 

id t on one sale, 

The pefo?lla~~~~or said tax 

is hereby defined as a ldlstributor* + l l .* (Zt~phaals 

~OtlrS) 

The statute, on lta face, and In plak*tenns laya thetax upon the person vho manufacturers or produces in, or imports 

cement into this atste aud thereafter diotrlbutes, sells or uses 

it. The %EJI is measured by the mount of cement distributed, sold 

or used, after euch marmfaature, production or importation and aac~e8 ot the time of suoh dlatrlbutlon, sale or use. 

other than the “distributor,’ 

Ho person, 

as defined in the etatute, ever becomes l~iable forthe payment of the tax. It 1s an occupation tax 

statute, and.there is no doubt of the Leglslative.intenta “The 

statute levies a te;X for eaoh100 pouikd; of cement on those manufacturing and Import Trinity Portl8nd C 

“g.Tci) ‘gy%; of error refused). 

ement 

Co. vs. State, 144 S . 

In our opinion lo. O-3079 ve held the diistrlbutor llable 

for the tax and held tkbt the tax acorued upon salea of cement by 

the distributor to a aost-plue aontraator who vas reimbursed for 

the aoet of materiale by a govermnent instz%mentalltg. At the 

date of that opinion, however , the 3nlted States Supreme Court had 

not overruled, though It had linlted Its dealsions in the 0888s of , 

Panhandle 011 Co. vs. Statei.277 u. s, 218 72 L. Ed. 857, 48 Sup. 

Ct. 451;.Indian Motorcycle Co. ~~a. U. S., 263 U. 9. 70, 5 L. Ed. 

1277, 51 sup. ct. 6011 and Graves vu. Texas Company, 29 ;5 U. s. 393; 

80 L. zd. 1236, 56 SUP. ct. 818, That oplnlon vae based on the 

Principle 8nnounced in Trinityfaru Co.,va. Orosjenn, 291 U. 3. 466, 

514 sup. ct. 469, 78 L. Ed. 918, that even though a stnte tax on an 

.: 

independent oontraator inareased the ultimate ooet to the govermnent, 

unless a direat burden vere placed on the goverxnwent, the tax vould 

not be unaonstltutlonal as InfrIngIng the governmental lmmunlty iron, 

taxation. Deaplte the Trlnltyfam oaee,Ihovaver, in viev of the 

holdlng in the case of Psnhandle 011 Co. VLI. State, aupra, that an 

oaoupatlon tax on gasoline distributore,,based on the amount of 

gasoline mold, could not, oonstltutlonally, be oolleoted from a 
Ronomble George H. Sheppard, page 3 

gasoline distributor vho sold direotly to the Federal Governme&, 

it beoame neaessary for us to deternine vhether or not the purcbasor of cement vas ea independent oontraator or vhether he purchssed as an &gent. of the govemment. 

Jlnoe the date of our oplnlon Ho. O-3079, however, the 

manhandle 011 Coqany cane and others of like import have been 

def in1 tely ovemuled. state of Alabama vs. ~r%.ng 8 Boozer, 62 sup. 

Ct. 43; Curry vs. United States, 62 sup. Ct. 4% We think thtaae 

cases are directly in Folnt. In the King & Soozsr case the oourt 

had before It an Alabaam statute which levied a a&lea tax OS 2 p&r 

cent of the gross retail sales prlae of tangible personal property 

on the retailer, and made Zt his duty to add ouoh sales tax to the 

salon price and collsat it fwzm the purchaser, 3alos vere made to 

a "cost-plus contractor' vh6 was engaged In oonatructing an snay 

camp under contract vith the United states Government. In holding 

the tax constltutS.onal ati ool.leotlble as agaiaat such oontraotor 

the court saldt 

‘Congress has daollned to pass legialaticm lmmunixlng: from state taxation oontraatom under *oostplus" oontraats SOP the oonstmotion or governmental 

projects l Comequently the participants in the present transaction enjoy< only such tax bmrunlty as Is 

afforded by the Conetitutlon itself, and we are not 

now concerned \iLth ~the extent and the epproprlate 

exerolao of the power of' Congnsa to.free suoh tram-\/ 

sotlona fron state taxation of i.ndlvlduala La euoh 

aimxtnstanaos that the soonomla bunlen of the tax la 

paassed on to the nat.fonal goverment. The government, 

rightly, ~8 think, disolalrms any oontentlon that the 

Gonatltutlon, unaided by aongresslonal legislation, 

prohibita a tax sxaated from the oonEroctor8 merely 

beoauso it is passed on e~onomloally, by the terms of 

the oontract or othervlse; 88 a pa%% of the aonatruation ooot to the Gorerxment. So far as suuh a nondlsoriminatory state tax upon the aontraotor enters 

into the oost of the materials to the Government, that 

is but a nomal tic&lent ot the organlsatlon within 

the #ame territory of tvo lndeptmdent taxing sovere&nties. l?!m aasertkd right of the one to be free of taxation the other doer not spell lmaunlt fron pa 

%he adzd coets, attrlbutaixle to the texa~ion of t%i% 

vbo furnlsn suppllea to the Qovernment and who Bnve 

been granted EO tax Umnunity . So far as a different 

~~,,,_~.,- -~~.~~.i ~~-- 
flonorable George Ii. Sheppard, Page 4 

view ha8 prevuile~, 880 ;eaAhundle Oil co* ve. state 

ex rel, KAOX, supra~ Waves vu. Texas Co., e 

"p 

me 3 

think It Ao lcuww tenable." (pals oure 

The aam of Curry vs. United States, eupra, involved the 

mme question px'eaented IA the Kl~g 8 Boozer oaee. the only diffore~ce be- thet the tax involved in the Cumy OmeWe a use tax 

rather then a nales tax. The conrt made the follow pertinent 

etStesleAt$ 

"For the reaeane stated at lmgth in out= oplnlon 

in the siys h BoOZeI O&30 Y% thbk t&t the OOAtPfL0tom, I~purchaaI~gand brh.&n.g the bu?.ldIngmeterlal 

into the state and 5~ zrppropriatIng %t to their aoA= 

tract vith the ~VOPRBl~At, W0r0 AOt tP@At8 OF &8trUnentalltles of.the Ciovermmsntt ad they ace not ml&wed 

of the tax. to vhloh they would othemriee be subjeot, q 

remon or tm fact that they are eovezmwmt Contraotors. 

xl- the 8 tate lau ‘lays the tax qtllem rather than the. 

~lvldu.al vlth whom #my enter 0 a ooet-plus oantraot 

mS the PrSSeAt OAe, then it ef'foOt0 the ~(;dVrBFAtWAt, 

r?3re the Ltxllvidual., OAly as the ec0~0Lulo burdd3A is shiftad to it through qml=atloA of the COAt,-nOt,” (Bq~lX~lfi 

ours 1~ 

Our attentlon~~hss been celled to the.caee of Pederal Lend 

Bank 06. Blsmarclc Lumber CO,., 62 Sup. Ct.~l, where the ocurt had 

under consldemtion a florth Dakotil statute levying 6 2 per cent tax 

upon gross receipts from salos of property. The Federal Fam Loaa 

Act exempted,tho bank from Federal, State snd loos1 taxation, vith 

oertain exceptions. The Court held that the 86bS t8iViBa AOtpyable c~ property sold to the Beck, becmee th6 bmk v&i exempt, by 

statute, fran the paymoAt of the tax. 32~1 tex there acmsldered wae 

not upon the aoller, but upcm the pwohaaer. Though the stetuta, IA 

tom, deolamd the vendor, to be the taxpayer, It a?equlred h3m to 

add to the sale prlae the amount of the tpx and to oolleot the tex 

frca the purcrhnwr. It fuothe~ made tho auwunt of the tu a debt of 

the purohaser to the vendor amtl.1 paid, thereby plaoing the legal 

inoidenoe Of the tax direatly OA tha p~~?~haaelr. OIW Statute, OA the 

contP0ry, maIkes no euoh CsqWwient. The tax ia, in tomis, laid on 

the IS~dor. Bo alone is l&able for the 

State, end AO ore elae ever beoomee ll.ab r 8 for pqmnt of the tex 

ymont of the tax to the 

Mleee by virtue of oontreot vitb ?IkP. Our court.8 have deternine& 

that the legal ¶.noide~oe of the tax iacm the vendor. Trinity Portla&d Ceglent co. vs. at&e, 1% 9. V. (2d) 329 (vrlt of error refuaed~,. 

:~. 

., 
gonorable Qeorge H. Sheppard, Pwze 5 

This department so hsld in our opinion Eo. O-3079, and VO pressntly hold that th8 legal l~oi.deAce of the cemAt distributors' oocupation tax is UpOA the pel’8CNI VhO Sk6lWfROtU.r%~ Or ~rod~c6S cesJ%Ikt 

ln this state or vho ImpoFt it into this sltate an8 thereafter 

sells, distributes or uses it; that the tax is measured by the 

amount of oemept so sold, distributed or used, and that the tax 

aCcrue5 at the time of suoh sale, distribution or use. Uhder the 

Cuthority of the oases of Uabsma vs. ping & Boozer, 62 SUP. ct. 

43 and q vs. msited States, 62 Sup. Ct. 48, ve hold that the 

fast that the sele,may be made directly to the Uhlted States ffovWAUleAt OX' t0 89 iAStPUUbSAt.S~it~ thblY!Of iS iSlfIlRtPi~ial, aAd thatthe PAX sooruea and the vendor boouses liable therefor upon the sale 

of tile cemeAt. 

SA thus holdlAg ve are not vm&ndSul of the faot that 

S0CtiOA 610, Title 15, U.S&.A . , spealfloally exempts the Defense 

31ant CorporatlLaa frOm the paymeAt OS sales or use taxes, We are 

aonv%need, hovwer, that swh statute does not, and dws not under 

take to emmpt free. taxation all pornoAs vho deal vlth DeSeAsa 

?+a Corporutlon. The mlyw3yD~eaae PlaAt Corporatioaoould 

ever become liable for the cement dlstrlbutors* 'tax levied by our 

statute ~vould be through aantraot with the distributor. &ad vhlle 

our holding here vouXd be the sameI IA any event, it 1s latereatIng 

to note that the evtientie ruraished us Soreoloees Amy aontention 

that in this pRrtfCU&W instZ+Aee the tRX vould 6~8~ b8001810 a 8Wdexk 

Oil the Federal C?OVe~~t OF any Of It8 inBtl’USWXlt8litieS beCraUse 

as pointed out in the excelleat brief subs&ted by Kefmni. A~dmvs, 

Kelly, Z%rth & Cmapbedl, the aontmot vlth the distributor speoifically provides that AO sales or use tax &all be Included In the 

oement prioe quotatlans, and that no ruch tax will be paid by Defense Plant corporation. Thus, raeltjter by our statute ~0x9 by the 

oontraat, ¶.A this 3mGaAae, does the tax ever beoome the llabillty 

of nor payable by say person other~than the oament distributor, 

Clearly he is not a~ %Astmssemtallty of the Federal Govemment aAd 

clearly he is liable Sop the tax. 

We return herewith the dOOI%aOAtU bended to us for cOnsidoration in oomectlon vlth this opinian. We expresm our appreolatioA for the brief, above referred to, as well as for the dooumeAtary evldenoe furnished, all OS vhtoh has been very bsnefiolal to us. 

Trwting that ve have Sully ansvered your inquiry, we 

,Yours very truly 

OvEI)SD 4, 1942 ‘- 

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__-~,~ ~.: .- AT’I’O+ -R& 0~ -, 

are