. . . - 

Hoa. Qeo. He Sheppard 

Comptroller of Public Amounts 

Austin, Texas 

Dear sin Opiaion Ho. 04656 

Be: Whothsr lea~or would bs subjeot 

to gram receipts tax onthe m&al 

reosivad from 1esPae using motor 

trucks for hauling betweer two,or 

more iaoorporated towna. 

Could lossor deduot driver'8 salary, 

iaeuramo, or other mainteaamoo oxparse befor. ocmlpnting the tax? 

Your letter of FeW.~arg 7, 1944, submita for our opiaioa queatioa 

thereia ooatained which we quote as follows: 

"Article 7066b(a), V.A.C.S., hpot?ea a grosr recoiph tu ad is u follows: 

wQaoh iadividnal, partnership, aompany, asroaiatioa, or oorporatioa doiag business as a %otor bus oompeay" as defined in Chapter 270, Aot8 

Ramla~ Sessioa of.the Fortieth Legislaturs, as amended byiho Aots of 1929, 

First Called Sessioa of the Forty-first Legislature, Chapter 70, or as 

"motor oarrier" or *aoatraot oarrler" as dofimsd in Chapter 277, Aots 

Regular 6espioa of the Ebrty-secomi bgislature, over and by use of the 

publio hi 

P 

ys of this ,State, shall-m&o quarterly on the first day of 

January, pril, July, amd Ootober of eeoh year, a nporb to the Comptmller, under oath, of the iadividual, partaorship, aompfmy, assooiation, or 

oorporation ly its preeideat, treasurer, or secretary, ehowiag the gross 

amount received from intrastate lmiaess doao withim this State in thm 

payment of ohargea for transporting persona for compem8atio8 and uy 

freight or conmodii;g for hire, or from other 8o~ro.a of rwemm reooivod 

from iatrastate lusi~ess within this State during the nuarter wxt pryceding. Said individual, partnership, ampsry, aelbiatioa, or aorporation at the time of making said report, shall pay to the State Treasurer 

an ocoupatioa ~SX for the quarter begimimg oa said date equal to tm aad 

two&snths (2.2) per oat of said gross reooipts, a8 shm w said report. 

Provided, however, carriers of parsoas or property who are required to 

pay aa intangible assets tax under the laws of this Stat., are hereby axempted from the provisions of this kticle of this ALat.1 
Hon. Geo. H. Sheppati, page 2 (0-6865) 

*Int%d whers truok o%aers how been making contraat with large traaafer sad 

freight oompanies by lersi8g their trucks, furni8hing driver, paying vorkmen*s 

compensation insurance on said driver, and ppyillg all ooats aad expenses of 

operations, maintelp&loe aad upkeep of said equimt, eto. See oopy of ooxtraot 

form between Lessee and Lessor. 

"The Lessee operates under a oomon carrier's petit and is subject tothe intarrgible tax. 

"Please tell me if the Lessor would be subjeot to the gross reoeipbs tax oaths 

rental reoeivved from Lessee where hauls are made betweu two or mor4 incorporated 

towns within this State. Also, would the Lessor be permitted to deduct the drivor's salary, insuraace or other maintenance expease before computing the tax?" 

You also attach copy of a lease agreement headed at the top "Exhibit 

A," to be ooasidered in connection nith your letter in answering your questioa. 

Porthe sake of brevi%y, thie leame agreement is not copied her&a, but retained 

by us, as we assume you have a oopy or oaa seoure another if you deem it necessarg. 

The taxing aot here involved rsfers to Chapter 277, Acts Regular Session, 42ad Lapslature, V.R.C.S., for a definitioa of *motor oarrier" and "contract carrier subject to the tax. 

It therefore bsoo~~s aeoessary to lay Article 7066b(a), V.R.C.S., 

aloagside the statutory defiritioar, therein referred to to see if a lessor of 

motor equipment underthe ooaditions aatiaaed ia your letter and the lease 

agreement suhuitted by you is a "motor carrier" .or "oontraotmarrier," aad thus 

subject to the tax. Chapter 277, supra, defines a Tmotor carrier" as.follows: 

*The term 'motor oerisr' means aq person, firm, oorporation, caupamy, copartnership, assooiatioa or joint stock assooiation, and their lessees, reoeivars 

or trustees appointed by any court whatsoever owaiag, ooi&r mama i 

operating or causing to be operated any motor-propells ?i--d%e*S- ve 

porting property for compensation or hire war my publio highmy iathis State, 

where in the oourse o? suoh Craasportation a highway between two or more incorporated cities, towns or villages is traversed: provided that the tow 'motor 

aarrier' as used in this Aot shall not iaolude, and this AOt shall not apply 

to motor~vehioles operated exclusively withiathe inaorporatod limits of cities 

or towas." (Emphasis ours) 

A “ooatraot carrier” is defined as follows: 

a(h) The term loontract carrier' manas any motor carrier as hereinabove defined 

bransporting properby for oompensatioa or hire over aw highmuy iathis State 

&her than as a common carrisr.x 

This lessor is uaqdti~~ebly, in the language of the above definition, a "person, firm or corporatiqnf" it ems, controle, manages, operates 
Hon. Gee. H. Sheppard, page 3 (O-6656) 

or oauses to be operated a “motor propelled vehicle used ia tratwpofiing prop 

erty for ocsnpensatioa or hire" between two or more incorporated cities, towns 

or villages, a8 distinguished from exclusive oparatioa ia cities or t-8. 

Such a "lessor" as posed in your letter fails squarelydthin the putiaw of the 

statutory defiaition, ðer treated as a "motorarrier" or "oontraot carrier," 

and heaoe in our viewis subject to the tax imposed by A&iole.7066b(a), supra. 

Wesre not withoub judicial oomf%rmatior ofIfiis aonolusioa, although the cases 

we note are not tax oa8e8, but iwolvs penal violations of 

This is not important, however, 

lapter 277, supra. 

for we wed only to determi.la if such lessor 

is a "motor carrier" or "contract carrier" inthe purviewof the si,stutory dofiB 

nitica adopted ia the Aot, dich is the same for taxing purposes as for violations of the Act3 if 80, tax liabilify follows as a matter of law under the 

expfess terms of the taxing act. 

The Supreme Court, ia the mase of &w Way Lumber Co., et al, v. 

Smith, 96 S.W. (2d) 262, in an iajunotion suit by ths Lumber Ccmpaxyagainst 

the members ofthe Railroad Cormnissioa and some of its executive officers conoerned primarily with motor fratlsportation, sought to restrain interference 

with its operations upon the ground it was not a "motor carrier" or "contract 

carrier" as defined in the Motor Carrier Act (Chapter 277, supra). The Court 

said: 

". . . The term %oter oarrier' as defiaed in the act iaoludss every one oper 

sting 'any motor propelled vehiale used in transporting propertiy for ooanpensation or hire over axy publio highway inthis State,' and exoepto those 'operated 

exolusively within the incorporated limits of oities or tarns.* The term 'oasman carrier' bps long had a def'itite maaing in this state, and the Legislature 

saw no neoessity for defiaiag that term. However, the Legislature did see fit 

to define the tezms 'motor oarrier* md 'contract carrier.* Thus it clearly 

appears in subsections (g) and (h).of seotioa 1 of the ack(Veraoa’s Ann Ci V. 

St. art. 911b, 1 1) 'hat the Legislature intended to briag under the act*weq 

person who operates au(y r&or propelled vehiolr irtraasportimg property for 

compensation or hire oa the public highways, outside of oities, either as a 

o-on oarrier or as a contract oarrier." (Ekaphasis ours) 

The case of Reavlay v. State, (Couti of Criminal&paalr) 63 S-W. 

(2d) 709, involved a criminal prossoution,the defaase of the dofsnlsstbaiing 

that he did not come sithi.athe definition of the Aot. Defendant iathiscnse 

leased his truck uder a written agrament, as is the case here, some of the 

provisions being similar to the provisions of the lease submitted by you. The 

lease agreement involved in this 1oase is set out in the opinion and for oomparative purposes we quote so much as we deem pertinsntr 

"Appall-t R-M the owner of the truck aad trailer described iatb fOllOWing 

writtea agreement* 

"%%moranda of agreement made and eatered iato this Fourth day of 

April, A.D., 1932, b and between Armour & C-say, a corporation, 

first prty,and Thos. W. Reavley, Jr., of Baoogdoches, Texas, sacond party. 
. 

Hon. Gee. H. Sheppard, page 4 (O-5866) 

"Whereas second party is the owner of.a osrkaia Chevrolet truck and trailer 

of fivetoae capacity, motor number T2853666, oarryine: 1932 lioease number 

166835, suitable for the hauling amd delivering of 'mat and mt products, 

aad 

"Whereas first prty, in the operation of its Raoogdoohes, Texas, Inxnch is 

williag to hire said truck for use in the hauling "ad deli sriag of the produots sold ia said Wanoh, 

*'eon, therefore, this agreement witness&h: 

"'(1) Second party hereby give" to first party the sole and exclusive use of the 

truok above mentioned, together with a competent driver for the sane,who shall 

at all times bs subject to the ooatrol and direction of first parby in and about 

the conduct of its business, ia the hauling and delivering of its produots as 

aforesaid.* 

"'(2) Second party shall keep said truck in good working coaditioa aad shall pey 

all expc~~ser of its oporatioa, iacludtig the salary or wages ofthe driver, and 

also including any and all city, state or counwtaxes, fees and license". 

"S(3) Second party shall also iademaify aad hold first party hadless from spy 

claims whioh may be made again& it by the diiver or drivers of saidtruck under 

the ocmpensation laws of the State of Texa8, ia the we& of injury to said driver or drivers. 

"'(4) In the swat of said truck beoonxiag disabled beoause of aooident or breakdown, or for a9y other masoa, second pax-by shall substitute another trmok of 

equal oapaoitg sad servioeability during.such time as the truck oovered @J this 

contract nuy be unavailable. 

"'(5) It is estimated that said truck will lze obliged to travel approximately 

Thirteen htmdrud (1,300) miles per nsek over all kinds of roads, but it is exprassly understood and agreed that ThSrkeen hundred (1,300) miles shall be 

regarded only as an average week's travel and that any exoess in any nsek shall 

not be regarded 8s a breach of this contraot on the part of the first parby, nor 

make it liable to saoond party for any greater ocmpeasation than is hereiaafber 

named. 

“‘(6, First pm-Q shall pay seooiud pa-by the sum of sixty dollars ($60.00) per 

week as full oompsnsation for the use of mzoh tick, the servioss oftie driver, 

aad all expenses of operating the truok as above set forth. 

"t(7) 5%" driver of said truck shall take receipts fran customers of first party, 

a8 may ts directed, and shall, in the case of C.O.D. orders, oolbct fkom such 

oustaners before delivery of the goods, and secoad party shall be responsible to 

first party for the prmnpt remittsnos to first party of all moseys colboted 

from its custuaers oa C.O.D. orders or otherwIse. 
Hon. Gee. H. Sheppard, 5 (0-56SS) 

*'The terms of this contract shall k rix months frumthe date hereof, Lut 

first parby shall have the fight to tanninate the anam oa ten (10) days' 

notice to seacad parts, iathe ewmt of dissahisfaation withthearrangeiaent. 

l Vzeouted in dupliaate the day aai year first above mittin. 

"'Anwurpnd CQE~ 

"'(Signed) J. B. Scott, First Party 

(Signed) Thea. Y. Raavley, Jr., 

Secoad PC&y.' 

*Under the foregoing agreemeat, appellant's truck ~8 operated over a pu%lio 

highway from Fort Rixth to Naoogdoohes in-carrgiag the produtia of Amour & Co. 

The driver of the trucknns employed by appellamb Armour dc Co. haddhe sole 

and e~~lusiva use of the truck.~ The driver as subject to the oomtrol aad dix-e&ion of the campany inthe ooaduot of its lmsiaeas im hauling and delivering its products. 

"Appellant takes the positiol that the uvidsace an the prt of %he state shows 

thatthe truok -+#~a not engaged in the transportatioa of property for oowpas~- 

tioa or hire, but was beiag operated exclusively by Armour & Co. in the hauling 

of its own products. Wa are unable to %rirrg onralavms to appsllut's via. 

We are amstrained to hold that thetrial 00uz-b ma arranted in oomoluding that 

the method employed 18s merely a duvioa whioh ema%lod appellamt to um the 

truck in trmsporting property for oomspmation or hire without first having 

complied with the statutes to whioh reference has bsea made. Under the nwrmandum of agreansrt, appellant paid all of the expenses of operatin, inoluding 

the wages of *he dpiwr. He kept the truok ia good mnuiag oondition. Ho 

agreed to hold Armur & Co. hamless fran any olaimrhioh might be made against 

said o~npamy lythe driver under the compensation 21-s of Teas in the eveat 

of injury to the d&w. Ha obligated himself to substitute another truck ia 

l$he event of a beakdown, or if for alrg other raasoa the tmok in question 

could not be used. The mntraot stipulated the appreximate number of miles 

the truck would be driven a week: provided that any excess mileage should not 

be considered as a beach of the oontraot, nor make Armour & Co. liable for 

greater amqxmsatioa than $60 per week. AppellPrtras msponsi%le to the oanpany for the ~mnpt ranittanoe of all oolleotiona made *the dripar." 

It follows from the foregoing that the lessor mder the oiromstanoes subitted by you is liable for the gross recoipds tax imposed by Artiale 7066b (a), supra, without deducting driver's salary, imuranw ard other 
Hon. Geo. H. Sheppard, page 6 (06856) 

maimteuaos expense, and you am aooordiagly so advised. 

Yourn vary truly 

A!lTORBFXGENER4LOF 'IXXAS 

By /s/L. Pe Lollar 

L. P. LolIar 

Assishat 

APPROVED E&R 14, 1944 

/s/Gee. P. Blaokburn 

ii ting) 

AOFcNEYGEI?EBbcOFl%fb.S 4 

8y B.W.B. 

Chairmaa