. . . -

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 usingmotor trucks for hauling

betweertwo,or more iaoorporated

towna. Could lossordeduot driver'8salary, iaeuramo, or othermainteaamoooxparse befor. ocmlpnting the tax?
Your letterof FeW.~arg7, 1944, submitafor our opiaioa queatioa thereiaooatained

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 Chapter270,Aot8 Ramla~ Sessioaof.theFortieth Legislaturs,

as amended

byiho Aots of 1929, First Called Sessioa of the Forty-first

Legislature,

Chapter70, or as "motoroarrier"

or *aoatraot

oarrler"

as dofimsdin Chapter277, Aots Regular6espioaof the Ebrty-secomi bgislature, over and by use of the publiohi

P ys of this ,State, shall-m&o quarterly on the first day of January, pril, July, amd Ootoberof 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 amountreceived

from intrastate

lmiaess doao withim this State in thm paymentof ohargea for transporting persona for compem8atio8 and uy freightor conmodii;g for hire, or from other 8o~ro.aof 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 quarterbegimimg 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 parsoasor property who are required

to pay aa intangible

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

*Int%d whers truok o%aershow been making contraat with large traaafer sad freightoompanies

by lersi8gtheir 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 betweenLessee and Lessor. "The Lessee operates under a oomon carrier's petit and is subject tothe intarrgible tax. "Please

tell me if the Lessorwould be subjeot to the gross reoeipbs tax oaths rental reoeivved

from Lesseewhere hauls are made betweu two or mor4 incorporated townswithin this State. Also, would the Lessorbe permitted to deduct the drivor's salary,insuraace or other

maintenance

expease

before computing

the tax?"
You also attach copy of a lease agreement headedat 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 copiedher&a, but retained by us, as we assumeyou have a oopy or oaa seoure anotherif 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~~saeoessary

to lay Article 7066b(a), V.R.C.S., aloagside

the statutory

defiritioar,

thereinreferred

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,definesa 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 courtwhatsoever owaiag,ooi&r mama i

?i--d%e*S- operating

or causingto be operated any motor-propells ve porting

property

for compensation

or hire war my publiohighmy 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 shallnot iaolude, and this AOt shallnot 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 carrieras hereinabove defined bransporting

properbyfor oompensatioa or hire over aw highmuyiathis 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,operatesHon. Gee. H. Sheppard, page 3 (O-6656)

or oausesto be operated a “motor

propelled

vehicleused ia tratwpofiing prop erty for ocsnpensatioa or hire"betweentwo or more incorporated cities,

towns or villages,

a8 distinguished

from exclusive

oparatioa

ia citiesor t-8. Such a "lessor"

as posed in your letterfails squarelydthinthe 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. Wesrenot 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 taxingpurposes as for violations of the Act3 if 80, tax liabilify follows

as a matter of law under the expfessterms of the taxing act.

The SupremeCourt, 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

conoernedprimarily

withmotor fratlsportation, sought to restrain interference with its operations upon the ground it was not a "motor carrier" or "contract carrier"

as definedin the Motor Carrier Act (Chapter 277, supra). The Court said:

".
. . The term %oter oarrier' as defiaedin the act iaoludss every one oper sting 'any

motor propelled

vehialeused in transporting propertiy

for ooanpensation or hire over axy publiohighway inthis State,'and exoeptothose 'operated exolusively

within the incorporated limits of oitiesor 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).ofseotioa1 of the ack(Veraoa’s Ann Ci V. St. art. 911b, 1 1) 'hat the Legislature intended

to briag under the act*weq personwho operates au(y r&or propelled

vehiolr irtraasportimg propertyfor compensation

or hire oa the public highways, outsideof oities,eitheras a o-on oarrieror as a contract oarrier." (Ekaphasis ours) The case of Reavlay v. State, (Coutiof Criminal&paalr) 63 S-W. (2d) 709, involved

a criminal

prossoution,the

defaaseof the dofsnlsstbaiing that he did not come sithi.athe definition

of the Aot. Defendant iathiscnse leasedhis truck uder a writtenagrament, 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 this1oase

is set out in the opinionand 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 eaterediato this Fourthday 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 osrkaiaChevrolet truck and trailer of fivetoae capacity, motor number T2853666, oarryine:

1932 lioease

number 166835,suitable

for the haulingamd delivering of 'mat and mt products, aad "Whereas first prty, in the operation of its Raoogdoohes, Texas, Inxnchis williagto 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) Secondparty herebygive" to first party the sole and exclusive use of the truok abovementioned, together

with a competent

driver for the sane,who shall at all timesbs subject to the ooatrol

and direction

of firstparby in and about the conduct

of its business, ia the haulingand delivering of its produotsas aforesaid.* "'(2) Secondparty shallkeep said truck in good working coaditioa aad shallpey 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 driversof saidtruck under the ocmpensation

laws of the State of Texa8, ia the we& of injuryto said driver or drivers. "'(4) In the swat of said truck beoonxiag disabled

beoauseof 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 truckwill lze obliged to travelapproximately 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 shallbe 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 liableto saoond party for any greaterocmpeasation than is hereiaafber named.

“‘ (6, First pm-Q shall pay seooiud pa-by the sum of sixtydollars ($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%" driverof said truck shalltake 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 prmnptremittsnos 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 shallhave the fight to tanninate the anam oa ten (10) days' notice to seacadparts, 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.,

SecoadPC&y.' *Underthe 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 driveras subject to the oomtrol

aad dix-e&ionof the campanyinthe ooaduot of its lmsiaeas

im haulingand delivering its products.

"Appellant

takes the positiol

that the uvidsace

an the prt of %he state shows thatthe truok -+#~a

not engagedin 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 thetrial00uz-b ma arranted in oomoluding that the method employed 18s merely a duvioa whioh ema%lodappellamt 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~npamylythe driverunder the compensation 21-s of Teas in the eveat of injuryto the d&w. Ha obligated himself

to substitute

anothertruck 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 truckwould be driven a week: provided that any excess

mileage shouldnot be considered

as a beach of the oontraot, nor make Armour & Co. liable for greateramqxmsatioa 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 lessormder the oiromstanoessubitted by you is liable for the gross recoipds tax imposedby Artiale 7066b (a), supra, withoutdeducting

driver'ssalary,imuranw ard otherHon. 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