Case Information

*1 Honerrble Gee. H. Sheppard

Comptroller of Public Accounts Opinion No. V-665

Austin, Texas

Re: Whether foreign corpora- tion is liable fer Motor Vehicle Use Tax on buses purchased out of state and to be used in Texas only in interstate commerce.

Deer Mr. Sheppard:

You request our opinion as to whether the Transconti- nental Bus System, Inc. should pay the Motor Vehicle Use Tax on ten buses to be used only in interstate commerce. You en- closed a letter to you from the corporatidn which reads, in part, as follows:

“We will have ten buses based in the State of New Mexico which will operate under interstate rights from Albuquerque, New Mexico to El Paso end return to Albuquerque. Interstate passengers enly will be handled and no local passengers will be taken on the buses or discharged from these buses at any points between the state line and El Paso.

“These buses were originally purchased the State of Kansas on which Kansas sales tax and license fees were paid. At the time they were trenderred to New Mexico, New Mexico license ices were pid. We new propose to license these buses in the State of Texas and pay the Texas mo- tor bus license fees; however, we feel that these buses should be exempted from payment of the Mo- tOr Vehicle Sales and Use Tax due ta the fact, that they ore to be ulssd exclusively for interstate pur- poses atld no intra-state passengers are to be han- dled.

“We feel that payment of the Motor Vehicle Sales Use Tax would constitute &n undue bur- *2 -z-able Gee. H. Sheppard, Page 2 (V-665)

We have been ahired by the Secretary ef Stats that Trurcentinental Bus System i* incerporated under the laws af Delaware 8ad ia operating in Texas under l permit te do hrsi- n4#8 in tbie State. This c4rpor4tien is enpled, in bddition to it4 iaterst4te business, in intrastate business in Tene end h40 l hu$~@r, &ice in J&Us, frem which meat 4 Texas busi- wsn is ceaducted.

Tti perhnt eectfonr l f Article 7047k, V.C.S. are l e feU4wo;

‘Seottm 1. (4) There io hereby levied l ~$4~ upoa every retail rale ef every meter vehicle sold in this State, euuh tax tm be equel te one (I) per cent 4f the ktdcadlere~r p4id or to k paid to *a rre4ler by the buyer, wYch ceneideratien ihll in- paid l r to be p&id for acid mater cluU4 the amount vehicle and all l c c4sr 4 ries attached ther4t4 et the tin&o d the able, what&r eutih censideretieh be in ,,,th8 nture of cae,h, credit, w exchn#e ef ether

prep4rty, Q r:r~~!rllttru4.,~‘~‘~.,rr*cnt ‘se&f&T includes aw+8a*ew8 r44*tlmep* w tea8 wd by tJa& ,Federai Government, then m& F-86 tax s+aU ba d&acted frem .4ui;h c+ ru4rdda br an pirp4sr 4f c~pt6lz# ;q4 mwDt d Car. lw48d by *i4 Artlels upen iuch rbt&tl 8414.

. .

Hamerable Geo. H. Sheppard, Page 3 (V-665)

“When a tax becomes due on a motor vehicle purchased outside of this State and brought into this State for use upon the highways, the person, firm, or corporation operating said motor vehicle upon the public highways of this State shall pay the tax imposed by Section 2 to the Tax Collector of the county in which such motor vehicle is to be registered. The tax ahall b4 paid at the time ap- plication is made for registratien ef said motor vehicle, and the Tax Collector ah11 refuse to is- me the registration licenre until the tax is paid.” (Emphasis ours)

Section 2 4f the l bev4-quoted article levies a u*4 tax every metor vehicle purchased at retail sale outside of this State and brought into this State for use upon the public hiphways ef this Stat4 by . , . corpordioas domiciled or doing business in this State. A corporation, although incorporated by one state, may have a “commercial domicile in another. See Wheeling Steel Corp. v. Fox, 298 U.S. 193, 56 S. Ct. 773. Even though under tbc facts the Transcontinental may not have a mercial domicile in Texas, it is doing an intrastate business in Texas and comes clearly within the taxing statute. It will thee- fore be required to pay the use tax, unless such tax amounts to a regulation of or a burden on interstate commerce. This tax is an excise tax; and if it effecta interstate commerce indirectly, incidentally, or remotely, it will be valid unless it actually dis- criminetrq against such cemmerce. Hump Hairpin Mfg. Go. v. Eknmerson, 250 U.S. 290, 42 S.Ct. 305. Here we have a tax not directed at or discriminating gain4t interstate commerce, It is not directly imposed upon it or those engaged in it. It only affects such commerce, as any tax will affect it, by adding to the uxpeaec af huainetir.

While a 4tat4 may n4t directly burd4n interstate com- merce bg taxatia, it may require all who 1~44 her reada to make reanonabla campeneation therefer. WcCarroll v. Dixie Grey- hound Lirue, Inc., 309 U.S. 176, 60 S.Ct. 504; Hendrick v. Mary- land, 235 U.S. 610. By the t4rms of the statute there is no use tax levied unless the rnet4r vahicle in purchaatd and brought in- ts this State for use upon the public highway6 of this State. It is also significant that th4 use tax must be paid before the Tax Col- lector is authoriced to registar the motor vehicle end issue a li- cense for itr use upon the highways. Thus it ia seen that the pay- ment of this tax is a prerequisite to the us4 of th4 motor vehicle upon the highway8 in that it is unlawful to operate such vehicles upon public highways of this Stat4 without registration. In other worde. the privilege of operating such m4tor vehicles upon our highways is conditioned upon the payment of th4 tax.

Honorable Gee. H. Sheppard, Pale 4 (V-665)’

It is true that thu revenue derived from this tax is not allecatcd to the use or maintenance of the public highways af this State. We do nit believe that the use to which the funds are allocated i$ controlling. The United States Supreme Court kr D&O OUm ICkpress Co, v. State Revenue Cammission, 306 U.S. 72, 59 6. Ct. 435 in upholding a state tax on motor vehicleo maa~ed in interstate cemmerce, used the following language:

“The scope laagua&e of the challenged en- actment unmistakably disclose intention of the State to require payment of compensation for tha privi- lele of operating over its roads the specified ve- hicles for the transpertatfon ef property. It cen- taino no hint of hostility to interstate commerce or of purpose to imporc a charge on the privilege or basinesr af The exaction traraportation.

ie not to be deemed Jfenpive ti the commerce clause merely because the State, in the conduct of fiscal affairs, chooses to use part or all of the psocoeds for purposes other than the construction, improve- ment. or maintenance ot its

Poor, supra, pale 557 *7 S

Bingaman, supra, 412,‘56 S.‘Ct. page 758. I( (E phasis added )

The Supreme Court ef New Mexico in Gso. E. Breece Oumber Co. v. Mirabal, 287 Pac. 699, in construing a statute

all *asoline and mo- , in upholdin the tax u < * . Much effort in the argument and is made brief of c-al fox apjcllees to convince us that this ie a special privilege ax users af the pub- lic ruds of the state by means ef automobiles trawling such hithways. If we understand upar argument, it is as follows: Tke tax is a tax upen the use of the public hi@ways by gasoline prepelied vehicles; ppellees di not use tbe public, highrays in the censumption of gasoline in their qserations; therefore, they canrqt legally be charged with the tax. If both of appollees’ premises were true, their cwelusion would inevitably follow. The treuble is with the m8jir premise, In the first place, as we tba tax ia tiot laid on the have hereMore assumed, use ef the public bi#hways. The statute dees not say so, and nowhere in the statute can such a conclusion *5 Wbnorable Geo. H. Sheppard, Page 5 (V-665) oroceeds of the tax are devoted. bv statute. to the

r~----~-- ---~ ~~~-~~- ~~~--~~-. ~~, --~~--~~, -~ --~- yment ti such bon%s and debentures as may have

een msutd by the state to secure a fund with which to build and improve thehighways of the B,at e. But this has nothing to do with the matter.

This is merely a imancial arrangement of the state to make sure provision i,or the prompt payment 61 . . ” (Km v its obligations when they become due,.

*asis added)

Furthermore, this tax is levied upon the privilege of purchasing at retail a motor vehicle out of the State and bring- ing it into this State for use upon the highways of this State. The tax is not a cha<ge upon the use of the highways and is due and payable before the vehicle is used in either intra or inter- state commerce. The mere fact that the motor vehicle is used subsequent to the incidence of the tax as an instrument of inter- state commerce does not make such tax a forbidden burden on inter state commerce. The tax is on a privilege secured before commerce begins. See Nashville C. & St. L. Ry. V. 288 U.S. 249, 53 S.Ct. 345. Also see Edeiman et al v. Wallace, Boeing Air Transport, Inc., 289 U.S. 249. 53 S.Ct. 591 wherein the Court said:

“As the statute has been administratively con- strued and applied the tax is not levied consumption of gasoline in furnishing motive power for respondent’s interstate planes, The tax is ap- plied to the stored gasoline as it is withdrawn from the storage tanks at the airport and placed in the planes. No tax is collected for gasoline consumed in respondent’s planes either on coming into the &ate or on going out. It is at the time of withdraw- al atone that ‘use’ is measured for the purposes of the tax. The stored gasoline is deemed to be ‘used’ within the, State end therefore subject to the tax, from the tanks. Compare when it, is withdrawn Nashville, Chattanooga 6 St. Louis Ry. v. Wallace,

“A State may validly tax the ‘use’ to which gas- *line is put in withdrawing it from storage within the &ate, and placing it in the tanks of the planes, notwithstanding tNt ultimate function is to gen- erate motive power for carrying on interstate merce. Such a tax cannot be distinguished from that considered upheld in Nas*ville, Chattanooga 81 *6 Honorable Geo. H. Sheppard, Page 6 (V-665)

St. Louis Ry. v. Wallace, supra. There it was pointed out that ‘there can be no valid obiection io the taxation of the exercise of any right or power incident to . . . ownership of the gasoline, which falls short of a tax directly imposed an its use in interstate commerce, deemed forbid- den in Helson v. Kentucky,’ 279 U.S. 245. As the exercise of the powers taxed, the storage and withdrawal fro&r storage of the #asolin&, was complete before commerce be- gan, it was held that the bu,rden of the tax was tom indirect and remote from the function of in- terstate commerce, to transgress constitutional limitations,. , .”

It is therefere our opinion that the Tax Collector should not register the ten buses in question 6ntil tire Motor Vehicle Use Tax is paid thereon.

We affirm the holdins in Attorney General’s Opinion No. .O-6529, written during a prior administration, on the sole ground that the corporation in question in that opinion was nei- ther domiciled in Texas nor doing an intrastate business Texas. Ail language used in such opinion that is in conflict with this piaion is hereby expressly overruled.

SUMMARY A use tax is due upon ,motor vehicles, pur- chased out of Texas by a foreign corporation that is either domiciled in Texas or doinS an intrastate business in Texas, if brought into Texas for use uRen the highways of this SCte, even though such metor vehicles will be used only in interstate merce. Art. 704lk, V.C.S.; Edeltnrn v. RoeinS Air Transport, Inc., 219 U.S. 249; 53 S. Ct. 591; Dixie O&o Express Co. v. State Rev. Corn... 306 U.S. 72, 59 8, ct. 435.

Yburs very truly ATTORIVEYGENERALOFTEXAS By

W. V, Gcppert Assistant