Case Information

*1 ..’

E OFFICEOFTHEATTORNEY GENERALOFTEXAS

AUSTIN

.

fionorable Oeorge II. Shemard Publla AccOwit8

CmptrOlle~

AllBtln, Texas OplnLon no. O-4731

Dear Sirs

!&other 1 tmr of! Augurt 4, 1942; t the Cefanss PUnt r to the cement manw by nnd through atlng 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 bun- dred (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, sella or USest pro- and vho thereafter distrlbutea, id t on one sale, id d hovever, no tax ahall,b &a~rlbutlon or une. The pefo?lla~~~~or said tax + l l .* is hereby defined as a ldlstributor* (Zt~phaals ~OtlrS) on lta face, and In plak*tenns laya the-

The statute, tax upon the person vho manufacturers 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 aa- Ho person, c~e8 ot the time of suoh dlatrlbutlon, sale or use. as defined in the etatute, ever be- other than the “distributor,’ comes l~iable forthe payment of the tax. It 1s an occupation tax “The statute, and.there is no doubt of the Leglslative.intenta statute facturing and Import levies a te;X for eaoh100 pouikd; of cement on those manu-

Trinity Portl8nd C ement error refused). Co. vs. State, 144 S . “g.Tci) ‘gy%; In our opinion lo. O-3079 ve held the diistrlbutor llable 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 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 be oolleoted gasoline mold, could not, oonstltutlonally, from a *3 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 pur- cbasor of cement vas ea independent oontraator vhether he pur- chssed 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 state of Alabama vs. ~r%.ng 8 Boozer, 62 sup. def in1 tely ovemuled. 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 3alos vere made to salon price and collsat it fwzm the purchaser, a "cost-plus contractor' vh6 was engaged In oonatructing an snay In holding camp under contract vith the United states Government. the constltutS.onal ati ool.leotlble as agaiaat such oontraotor the court saldt

‘Congress has daollned to pass legialaticm lm- munixlng: from state taxation oontraatom under *oost- plus" oontraats SOP the oonstmotion or governmental projects l Comequently the participants in the pres- ent 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, a tax sxaated from the oonEroctor8 merely prohibita beoauso it is passed on e~onomloally, by the terms of the oontract or othervlse; 88 a pa%% of the aonatrua- tion ooot to the Gorerxment. So far as suuh a non- dlsoriminatory 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&n- l?!m aasertkd right of the one to be free of tax- ties. ation 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 ~~-- *4 flonorable George Ii. Sheppard, Page 4

view ha8 prevuile~, 880 ;eaAhundle Oil co* ve. state ex rel, KAOX, supra~ Waves vu. Texas Co., e me 3 think It Ao lcuww tenable." (pals oure "p

The aam of Curry vs. United States, eupra, involved the mme question px'eaented IA the Kl~g 8 Boozer oaee. the only dif- fore~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 OOAtPfL0t- brh.&n.g the bu?.ldIngmeterlal om, I~purchaaI~gand into the state and 5~ zrppropriatIng %t to their aoA= tract vith the ~VOPRBl~At, W0r0 AOt tP@At8 OF &8trU- of.the Ciovermmsntt ad they ace not ml&wed nentalltles of the tax. to vhloh they would othemriee be subjeot, q or tm fact they are eovezmwmt Contraotors. remon that xl- the 8 tate lau ‘lays the tax qtllem rather than the.

~lvldu.al vlth whom #my enter 0 a ooet-plus oantraot the PrSSeAt OAe, then it ef'foOt0 mS the ~(;dVrBFAtWAt, r?3re the Ltxllvidual., OAly as the ec0~0Lulo burdd3A is shift- ad 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 The Federal Fam Loaa upon gross receipts from salos of property. Act exempted,tho bank from Federal, State snd loos1 taxation, vith oertain exceptions. The Court held that the 86bS t8iViBa AOtpy- th6 bmk v&i exempt, by able c~ property sold to the Beck, becmee 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 ia, in tomis, laid on the IS~dor. Bo alone is l&able for the ymont of the tax to the State, end AO ore elae ever beoomee ll.ab 8 pqmnt r of the tex Mleee by virtue of oontreot vitb ?IkP. Our court.8 have deternine& that the legal ¶.noide~oe of the tax iacm the vendor. Port- Trinity la&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 pressnt- ly hold that th8 legal l~oi.deAce of the cemAt distributors' oocu- is UpOA the pel’8CNI VhO Sk6lWfROtU.r%~ Or ~rod~c6S cesJ%Ikt pation tax 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 ffov- WAUleAt OX' t0 89 iAStPUUbSAt.S~it~ thblY!Of iS iSlfIlRtPi~ial, aAd that- the 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 speoi- fically provides that AO sales use tax &all be Included In the and that no ruch tax will be paid by De- oement prioe quotatlans, fense Plant corporation. Thus, raeltjter by our statute ~0x9 by the oontraat, ¶.A this 3mGaAae, does the tax ever beoome the llabillty 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 cOnsid- oration in oomectlon vlth this opinian. We expresm our appreola- tioA the brief, above referred to, as well as for the dooumeA- tary evldenoe all OS vhtoh has been very bsnefiolal to us. furnished, are

Trwting that ve have Sully ansvered your inquiry, we ,Yours very truly OvEI)SD 4, 1942 ‘- __-~,~ ~.: .- AT’I’O+ -R& 0~ -, .- . id -‘-