P 

November 30, 1988 

Mr. Perry L. Adkisson 

Chancellor 

The Texas A&M University System 

College Station, Texas 77843 

Honorable Bob Bullock 

Comptroller of Public Accounts 

L.B.J. State Office Building 

Austin, Texas 78774 

Gentlemen: 

OpiIliOIl No. JM-987 

Re: Applicability of 

the limited sales and 

use tax to public 

entities (RQ-1363 and 

RQ-1415) 

This office has received two requests for opinions 

which ask a series of related questions concerning the 

q&cability of certain provisions of the Texas Limited 

, Excise, and Use Tax Act to public entities which 

engage in transactions subject to the taxes levied under the 

act. See aenerally Tax Code 55 151.001-151.801. 

The Comptroller of Public Accounts requests our opinion 

on the following issues: 

(1) Whether state agencies, cities, 

counties, independent school districts, state 

colleges and universities or their auxiliary 

enterprises, and special purpose districts 

engaged in making retail sales of tangible 

personal property and services subject to 

taxation under the Texas Sales Tax Act must 

collect sales tax on those sales? 

(2) If [such entities must collect taxes 

of retail sales,] then must they be issued 

a sales tax permit [specified in section 

151.204 of the Tax Code]? 

(3) If so, are they subject to the same 

rules as other taxpayers with regard to: 

a) purchase of tax permits: 

b) filing of returns: 
Mr. Perry L. Adkisson 

Honorable Bob Bullock 

Page 2 (JM-987) . 

c) penalty and interest on late filings; 

and 

d) enforcement procedures and other 

matters. 

Additionally, Chancellor Adkisson asks whether public 

institutions of higher education are entitled to withhold a 

percentage of gross sales and use tax receipts as reimbursement for the cost of collecting the taxes. The statute 

permits those who collect the tax on behalf of the state to 

withhold one-half of one percent of the tax due. Tax Code 5 

151.423. 

I. 

It is important to note at the outset that these 

questions do not concern the taxation of any public body. 

See, e.u Attorney General Opinion WW-1502 (1962). Rather, 

the issu;; under review concern the applicability of certain 

provisions of the Tax Code to public bodies that "sell@1 or 

"retail" tangible personal property subject to the sales and 

use tax. See, e.a., Tax Code 5 151.052: Part III, below. 

Nor do the questions under examination pertain to 

exemptions from the imposition of the sales and use tax for 

governmental entities on purchases of tangible personal 

property for their use. &g Tax Code § 151.309. 

Of course, the application of the provisions of any tax 

law, including enforcement provisions~with interest charges 

and monetary penalties, to public bodies ma in fact promote 

something like what one court has identified as the 

"senseless process" of the sovereign taxing itself 

[t]he net result of which would be but to 

take its own money out of one pocket for the 

purpose of putting it into another -- less 

the cost of assessing and collecting the tax. 

. . . accomplish[ing nothing] but the idle 

expenditure of public funds. 

Lower Colorado River Authoritv v. Chemical Bank and Trust 

Co., 190 S.W.Zd 48, 51 (Tex. 1945) (citation omitted). See 

also Attorney General Opinion WW-1502 (1962). 

II. 

Section 151.051 of the Tax Code specifies that a "tax 

is imposed on each sale of a taxable item in this state." 

P. 5042 
Mr. Perry L. Adkisson 

Honorable Bob Bullock 

Page 3 (JM-987) 

The tax is collected by those making sales of things subject 

to the tax: 

(a) A seller who makes a sale subject to 

the sales tax imposed by this chapter shall 

add the amount of the tax to the sales price, 

and when the amount of the tax is added: 

(1) it becomes a part of the sales price; 

(2) it is a debt of the purchaser to the 

seller until paid: and 

(3) if unpaid, it is recoverable at law in 

the same manner as the original sales 

price. 

Tax Code 8 151.052. Additionally, the Tax Code defines a 

lVsellerll or "retailer I0 in relevant part as a 

(a) . . . person engaged in the business of 

making sales of taxable items of a kind the 

receipts from the sale of wh~ich are included 

in the measure of the sales or use tax 

imposed by this chapter. 

Tax Code 9 151.008. 11Business11 is defined as "an activity 

of or caused by a person for the purpose of a direct or 

indirect gain, benefit, or advantage." Tax Code 9 151.003. 

It is important to note that the Code Construction Act 

mandates the inclusion of llgovernment,l' "governmental 

agency," and "governmental subdivision" within the general 

definition of U1personl' as that word is used in the relevant 

provisions of the Tax Code. Gov't Code 5 311.005(2).1 

When the legislature intends for governmental entities 

to be treated differently from other persons in the Tax 

Code, it specifically provides for distinctive treatment for 

1. The first act imposing the limited sales and use tax 

contained a definition of "person" which included the 

VState, or any agency hereof, or any city, county, special 

district, or other political subdivision of this State to 

the extent engaged in the selling of tangible personal 

property . . . .*I Acts 1961, 57th Leg., 1st C.S., ch. 24, 

9 1, at 71. 

p. 5043 
. 

Wr. Perry L. Adkisson 

Honorable Bob Bullock 

Page 4 (JM-987) 

public entities whose activities otherwise fit within the 

reach of the statute. See. e.a., Tax Code § 151.3101 (the 

sales of amusements "exclusively provided: by this state, 

municipality, county, school district, special district, or 

other political subdivision of this state . . .I* are 

exempted from the sales and use tax); and Tax Code 5 151.309 

(exemption from payment of the tax by governmental 

entities). 

This office has noted, for example, that the sales tax 

is applied to sales made by the Department of Highways 

operating as a retailer selling tangible personal property 

to purchasers in the general public. Attorney General 

Opinion H-303 (1974). No general principle in the 

Constitution or the Tax Code limits the application of the 

sales and use tax simply because transactions subject to the 

tax are entered into by public entities, or because the 

public body must extract the tax from those purchasers who 

owe it as a part of the purchase price of tangible personal 

property. 

Thus, when a governmental entity acts as a "retailer" 

or "seller," section 151.052 of the Tax Code makes clear 

that the l*sellerlq or "retailer*' is not initially liable for 

the tax: rather, the purchaser is liable to the seller for 

the tax as '*a part of the sales price." Accordingly, the 

key operational definitions in the sales tax law apply to 

public bodies that otherwise fit within their terms. The 

provisions of the law are clear and unambiguous, and call 

for no examination beyond the plain meaning of the words 

used in the statute. Brazos River Authoritv v. Graham, 354 

S.W.2d 99 (Tex. 1961). 

III. 

The collection of the sales and use tax and the deposit 

of the tax receipts with the state depends on the specific 

efforts of sellers and retailers mandated by the Tax Code. 

Retailers must register with the comptroller, and all 

sellers must obtain sales tax permits. Tax Code 55 151.106, 

151.201. 

Subchapter I, chapter 151 of the Tax Code specifies the 

methods which must be used by retailers and sellers to 

report the amount of the taxes they collect. The subchapter 

also specifies the deadlines for making such reports and for 

transmitting tax receipts to the comptroller. See Tax Code 

gg 151.401, 151.409. Additionally, the code permits the 

seller or retailer collecting the tax to deduct one-half of 

one percent of the amount due for the cost of collecting the 

P. 5044 
Mr. Perry L. Adkisson 

Honorable Bob Bullock 

Page 5 (JM-987) 

F . 

F-- 

tax and to qualify for certain discounts for some prepayment 

of the taxes collected. Tax Code 00 151.423, 151.424. 

Subchapters K and L, chapter 151 of the Tax Code 

specify the procedures used to collect delinquent sales 

taxes, mandate penalties to be levied for certain violations 

of the sales tax law, and prohibit certain practices with 

regard to the collection and payment of the tax. 

The provisions of the Tax Code which place the burden 

of collecting the sales tax on sellers and retailers do not 

distinguish retailers and sellers in the public sector from 

private retailers and sellers. Again, it appears that when 

the legislature meant for different rules to apply to 

governmental entities, it provided so in other definitional 

provisions of the Tax Code. Sea the discussion at page 5, 

above. 

Thus, absent specific language creating an exception 

for governmental entities, all of the provisions of the 

limited sales, use, and excise tax law apply to governmental 

entities entering into transactions subject to the provisions of the Tax Code, with the exception discussed in Part 

IV, and subject to the general qualifications set out in 

Part V. 

Specifically, public institutions of higher education 

when they act as l*sellersE' or "retailers** by conducting 

transactions subject to the sales tax, should be treated by 

the comptroller as any other "seller" or "retailer" engaged 

in the kinds of transactions subject to the tax. They are 

entitled to all of the benefits extended to "sellers" and 

"retailers" in the Tax Code, and subject to all of the 

burdens of the law. Accordingly, they are entitled to 

withhold the statutorily prescribed amount permitted to 

sellers and retailers who collect taxes, to reimburse them 

for the costs of collecting the tax on behalf of the state, 

and to qialify for any bounties provided for the prepayment 

of taxes. Tax Code 55 151.423, 151.424. 

Additionally, the comptroller asks specifically whether 

governmental entities must purchase sales tax permits. 

Section 151.202 of the Tax Code provides that a "person 

desiring to be a seller in this state shall file with the 

comptroller an application for a permit for each place of 

business." See also Tax Code 95 151.201, 151.2021 (governs 

fees to be charged for issuance and renewal of sales tax 

permits). There is no language in any of the provisions of 

the sales and use tax law concerning permits to indicate 

that the legislature intended for governmental entities 

13. 5045 
or. Perry L. Adkisson 

Honorable Bob Bullock 

Page 6 (JM-987) 

conducting business as sellers to be exempt from either the 

permit requirement or the fees to be charged for new and 

renewed permits. Attorney General Opinion JR-973 (1988). 

IV. 

Subsequent to the enactment of the Tax Code, the 

legislature adopted the State Funds Reform Act. Gov't Code 

3s 404.091 - 404.094. The State Funds Reform Act applies to 

state agencies, defined as: 

an office, institution, or other agency that 

is in the executive branch of state government, has authority that is not limited to a 

geographical portion of the state, and was 

created by the constitution or a statute of 

this state, but does not include an institution of higher education as defined by Section 

61.003, Education Code. 

Gov't Code § 404.092. The act applies to state agencies 

only "to the extent that they are not otherwise required to 

deposit funds in the treasury." The act does not apply to 

funds. specified in section 404.093 (b) of the Government 

Code, none of which are relevant to this inquiry. 

In essential part, the state Funds Reform Act requires 

that: 

(a) Fees, fines, penalties, taxes, charges, 

gifts, donations, and other funds collected or 

received by a state agency under law shall be 

deposited in the treasury . . . . A deposit 

shall be made at the earliest possible time 

that the treasury can accept those funds, && 

not later than the seventh dav after the date 

of receint. 

(b) Money that is required by this subchapter or by another law to be deposited in 

the treasury shall be deposited to the credit 

of the general revenue fund unless the money 

is expressly required to be deposited to 

another fund, trust fund, or special account 

not in the general revenue fund. This subsection does not affect the authority of the 

comptroller or the treasurer to establish and 

use accounts necessary to manage and account 

for state revenues and expenditures. (Emphasis 

added.) 

p. 5046 
P 

Mr. Perry L. Adkisson 

Honorable Bob Bullock 

Page 7 (JM-987) 

Gov't Code 5 404.094. Sales 

sellers and retailers "shall be 

tax receipts collected by 

delivered to the office of 

the comptroller.n Tax Code S 151.409. At present, the 

comptroller's rules require taxes collected by state 

agencies to be deposited in the treasury within seven days. 

Comptroller of Public Accounts, Revenue Accounting Rule 12. 

This practice of the comptroller is consistent with the 

State Funds Reform Act. Although the Tax Code specifies 

that sellers and retailers must send sales tax receipts to 

the comptroller on either a monthly or a quarterly basis, 

the comptroller may require that receipts be submitted on a 

different basis, if he deems that to be necessary "to 

facilitate the collection of taxes due." Tax Code 

55 151.401, 151.405. Thus, the present practice which 

requires taxes collected by the state and its agencies to be 

deoosited in the treasury within seven days is authorized by 

the Tax Code. This practice is also consistent with the 

provisions of the Government Code requiring that taxes 

collected or received by state agencies must be in the 

treasury within seven days of receipt. 

V. 

The comptroller also asks whether the enforcement 

provisions in subchapters K and L, chapter 151 of the Tax 

Code apply to governmental entities, including the state, 

its agencies, counties, cities, and independent school 

districts. In particular, the comptroller inquires about 

the application of provisions levying penalties and interest 

for the late filing of required reports and the late payment 

of taxes to such taxpayers. 

The enforcement provisions of the Tax Code make no 

distinction between public and private entities subject to 

the code in any of the sections touching on the enforcement 

of the sales and use tax, including the provisions 

concerning the levying of penalties and interest. 

The Constitution forbids payments to be made from the 

public treasury except pursuant to a specific appropriation. 

Tex. Const. art. VIII, 5 6. Additionally, appropriations 

may be made only under the authority of previously adopted 

legislation. Tex. Const. art. III, § 44. The state is not 

liable for interest on claims made against it, unless a 

statute authorizes the interest. See, e.a., State v. El, 

Paso Natural Gas Comoany, 300 S.W.Zd 170 (Tex. Civ. App. - 

Austin 1957, no writ). 

D. 5047 
Mr. Perry L. Adkisson 

Honorable Bob Bullock 

Page 0 (JM-987) 

The Tax Code requires all of the entities subject to 

its provisions to pay interest on certain tax returns filed 

late: the state is such an entity. The Tax Code also does 

not discriminate between public and private entities in the 

provisions governing the imposition of penalties. Therefore, the code authorizes the state to pay both the interest 

and penalties which may be levied against it under the 

enforcement provisions of the sales and use tax law. This 

means that the comptroller may impose penalties and interest 

in the appropriate circumstances specified by the Tax Code. 

Satisfaction of a levy must await action by the legislature 

to aooronriate funds to pay any levies against the state or 

one of its arms. Again, while the imposition of such a 

penalty by the state against itself may be a pointless 

process, it is not forbidden by any provision in the law. 

Lower Colorado River Authoritv v. Chemical Bank and Trust 

Co., 190 S.W.2d 48 (Tex. 1945). 

Counties must adopt annual budgets which provide 

details of planned expenditures for the county. See aeneru Local Gov't Code, ch. 111. Expenditures may be made 

only "in strict compliance with the budget." See Local 

Gov’t Code 55 111.010, 111.041, and 111.070. This means 

that all payments, including fines and interest due because 

of violations of the Tax Code, must be provided for specifically in the budget adopted by the county commissioners. 

A similar pattern applies both to municipalities and 

school districts. See Local Gov't Code § 102.009; Educ. 

Code OS 17.29, 17.56, 23.42, and 23.47. 

SUMMARY 

The Limited Sales and Use Tax Law applies 

fully to the state, including its agencies 

and political subdivisions, to municipalities, and to independent school districts 

entering into transactions which fit within 

the terms of the Tax Code. All entities 

subject to the provisions of the sales tax 

law are entitled to any benefits extended .by 

the statute, including the provision which 

allows sellers and retailers who collect the 

tax to withhold a specified percentage of the 

taxes collected as reimbursement for the 

costs of collection. The State Funds Reform 

Act, sections 404.091 through 404.094 of the 

Government Code, apply to the handling of 

sales tax receipts collected by the entities 

subject to the act. Penalties and interest 

-. 

p. 5048 
Mr. Perry L. Adkisson 

Honorable Bob Bullock 

Page 9 (JM-987) 

levied against public entities 

the Tax Code may be paid by the 

pursuant to law. 

Very 

h 

pursuant to 

entities only 

JIM MATTOX 

Attorney General of Texas 

MARY KELLER 

First Assistant Attorney General 

Lou MCCREARY 

Executive Assistant Attorney General 

JUDGE ZOLLIE STEAKLEY 

Special Assistant Attorney General 

RICK GILPIN 

Chairman, Opinion Committee 

Prepared by D. R. Bustion, II 

Assistant Attorney General 

P. 5049