Case Information

*1 OFFICEOFTHEATTORNEYGENERALOFTEXA!3 AUSTIN

iionomble Oeorge H. Shqpard

Comptroller of Fubl:o Aaaountr

Awtln, Texue

Dear Eiir:

ipts tax*a letvied terms of Artio1e 7000.

This is

or not a Rural

under the -'S&be

for ad raloma

bBS reaelptal tex. instanoes under ire Corporatloa Aat* baarune ptic 8S, 4Stb Legielatur*, am Artdale lS&Bb in Vernon*a The Aot authorlees the oorpmatians by three or purpoee of rwnhhhing sleatrlolty 8nd and, plumbing equipment in xuraZ areaa. whioh 'IQ deem material in this dieaus- 3.. Cooperative nOn-~r0rtt asrmberehlp

aorpcratione ma? be orgon~sed under t&i Aot far th6 purpose or engqlng in rural elootri- floation by a&y one or 1p0re of tbs iolloprlng methods:

Hon.Geo.H.M.leppard, Page 2

(1) The Purnlshing or eleotrio ener&y to perSonS In rurnl areaa who are not receiving oentrnl station service; in the wiring OS the prs- (2) Assisting

raises oi' persons In rural oreas or the aoqulsi- tlon, supply, or installation of electrlsml or plunbIng equipment therelnn)

(3) The furnlshlng of sleotric energy, wiring faoilltles, eleotrlool or plumbing equip- ment, or sarvloes to any other oorporotlons or- ganized under this Aat or to the members thoreor.

“sac. 4. E&oh oorporatlon shall hate power! (1) To cnza an4 be &al, complain and defend, In its oorporate name;

(8) TO ham perpetual sucraeesion unlese a UnIted period of duration Is stated In its arti- ales of lnoorporetlon;

(9) To a&oBt a corporate seal whloh map be altered at pleasure, and to use it, or a iaoslmfle there&, as required bylaws

(4) To generate, monuffioture, purohase, a* qulre, and aooumulate eleotrlo energy and to transmft, dlstrfbuts, sell, furnish, and dispose oi such eledrlo energy to its membors only, and to construct, ereot, purohase, lease as lessee ~aa4lnanymanneraoqulre,owa, hold,maIMaln- operate, sell, dispose of, lease as lessor, ex- ohange, and morQage plants, buildings, works, maohinery, supplles, eqtipment, apparatus, and tronsmlssion and distrlbutl~ l.ines $W systems neoem3ary, oonvenIent, 00 useful;

(Sl To asrrl8t its members only to wire their pre&see.and Install therein eleotrloal andplumbbg i~ures,,maohinery,supplfes,ap- pa+at~, C+ZMI equlpmentotanyand all ldnds and charaoter, and in oonneotloatherewIth and iOr ' suoh purposes, to purohaf~e, aoqtie, lease, sell,

distribute Install, and repair eleotrioal and- plamblng rixtures, maohinery, supplies, appara- *3 Bon. 050. B. Sheppard, Page 3

tw,, fu@ e&tlpment of any and all kinda and oharaater and to roaalva, acquire, endorse, pledge, hypothacate, and dispose of notes, bands, and other evldemoes of Indebtedness;

(6) To furnish to oth5r oorporatlons organ- ized under this Aot, or to the member8 threei, eleotrIa enargy, wIrlng feollltles, eleotrlaal and plumbing equip&, and servioes oonvenlent or ueeful;

(7) To aoqulre, own, hold, use, exera189, Bnd, to the extant,prmltted by law, to sail; mrtgag5,915dge,hy9otheoate,and in anyramner dltqxme of FranalIl5eS,~rightS, prlVllCWH3, lb oenses, rIghta or way, and eas5mnta neoessary, useful, or appraprlate;

. lease aa leases, (8) To purahaae, reoelve,

orla aayoth5rmwm5raoquir5,0wns hoXd,Plain- tala, ~e.ll, exahnage, and use any aad all real and~soaal9rop5rty or cmy S.ntmestth5r5%n;

(9) To borrow l~ney and oth5rivi5e oontraot ' ladebtedues5, to lmie lte obligatUa5 thsmfors and to 85ettr5 th@ payment thereof by rportgage, plsdge, or 4486 of trust of all or any or lta progmrty, aB(let(l, franahlms, revenuea, or la- '. 0oloe;

,i~, (LO) Toselland oonv5~,mortg~,pl*e, leaee a6 lessor, and otberrlse dispose oi liu. or any part of ifa property and assets$

(ll) Tohavc~tmdsreroisethepaprer Of eminent donainforthe purpose andintbeaanner provided by the oondsrmanafiopr laws af,thio Stat5 for aaquirfng prlrate property tm pub&h UO, .suoh right to be paraxaxaat axoept as to property or the state, or et any polltlcal subdlvl5Ion thereofi

(12) To aoo5ptSlfts or grants of money, servloes; or property,raal or personals

Hon. Gee. H. Sheppard, Page 4

(X3) To qake any and sll eontraots neoessary or ConYanlent im the ercrrolse of the powers granted in thl8 hot;

(14) ,To fix, regulate, and oolloot rates, fees, mats, or other oharges for electric energy and any other raollltles, supplies, equipmt, or servloes furnished bytheoarporatian;

(IS) To aonduotltqt busfness, andhaveofflees within or without this Stats;

(16) To elect or appoint officers, agents, and emplogees of the obrpora%ian, and to define their duties and fix their compensation;

(17) To make and alter bplaws, not imonsis- teat with ths artioles of immrporatlon or dth the larrr or this state for the a4mlal5fxutloa and re- gulatlon of the af?alrs of tbs oorporatloa;

(lf3) Todo andpewgorqeltherfor Itself or Its memb5r5, or tar any oth5r oorporetlon org5alZail under this Aat, or for the numbers theq%of, any and all aots mid thlag5, and ta ban, and exaroise my andallporersaslmyben~es~,o~nisnt,or

approprlati to effeatuate the puzpow ror whleb the oorporatloa is orgnalzed.

"880. 6. (a) The artlales of laaorporatl0n slml.l state:

(1) f&o name of the oorporatiion, tiloh name shall lnaludo the wor4a, rXleotrlo Cooperative* and de word *Corporation, * *fnoorporatsd, * *mo.~, * Ua5oolatloa, * or Vempony~ aadthe nam6 shttll‘be suah as to distlagul~h it from any other oorporatlon orgsnizea andexIstlngundsrtholaws of this State;

(2) The purpose for wblahtlm oorporatloa Is folamd;

mn, Ceo. B. Sheppard, Page 5

'sac. 25, (a) Retch aorporatlon shnll b6 operatedwlthout profit toltsaecmbem but the rates, fees, rents, or other charges for oleotrla energy and any other faollltles, su99lles, equip- ment, or services furnished by the oorporatloa shall be suKIcl6nt at all tlms.

(1) To pay all operatlag and malntenauoe expewes neoesasry or dealrablo for the prudent conduct of its business and the prlnolpal of aad interest on the obligations issued dr asstmad by of the pur- the c~atloa la the 95rfon~no6 pose for whit* It was orgaalaed, and (2) For the creation of reservw.

(b) The r6venues of the oorpmatlm shall be devotedilrst tothepaynmntofoperatingand melntenanco expen6os 6ndth6 princlpalandinter- est on outstanding obligations, and thsreafter to 6uch reserv66 ror lmproosrrvnt, n6w oonstru6tian, .depreolatlon, and contlng6neles a8 the Board Say m.t.Gm to tlm prsacklbd.

(a) Revunuesnotmqu%red rorthepumoses 65t fOrth in 8UbsOOtiOSl (b) Of this -0tion. shall ‘. ‘. bereturn6dfrmtimstot%6i6toth6m6mbersona proratabebi6 aaoordlngtothodlDOunt0ttmS~s done ulth aaah during the prlod, either la 0-b.

in abatemmt of aurr8nt OhtkrgeI! for 515ctrlc'5n5rf5YB or othsxwlao as th6 Eoard dete2mlnes~ but such r6- turamaybemsdobyxayofgsnsrali~~reduoklon to 6&mbers, it the Board so eleots.

-soo* 30. Corporations iormed.hereunder shall pay annually, on or before May tirst,to th5St3tmataryofState,alla0nse fesof Ten-l- l6r6 ($10) and suoh corporate shall be eX6A6pt fromallother excfee taxes ofwhat6o~w6rkSndor nature.

"sea. 31. wleaeYer any Q0rporatlon arganleed uDderthLs A&shall haa, borroasdmoneyfrcmany Federal agency, the oblIgatlons isswd to BacIpB th6paymentoisuchmney8hallbeex6mptfromthe p3mrlslo1~~of the Texas Seotarltl6s Aat. (CheptW 100, Acts of the Forty-fourth &g@ilature, R651h~ *6 ~0x1. 0~0. B. Sheppard, Page 5

Session), or any Aots amendatory thereof, nor .

shall the propislons of.eald Aot apply to the lfieuan~e of membership OertlflOatesk

"SBO. 36. If any proVl610~ 0i~thl6 hot, or the application of euoh provision to eny person or olroumstanoe Is held InvalId, the remainder 02 the Aot and the applloatlon 0: suoh provlslom 'to other persons or olroumstanoee shall not be af- ieoted thereby.*

We wlll $lrst dlsouss your lnqriiry ae to whether or not a oorporatlon organized under this law Is liable ior ad valoiem taxes on Its property. We 05lL your attention to the faot that We have already anenwred thle qU8lvtiOn in our Opinion Number O-587, dated.Ap~ll 19, 1939, a@lreeeedto Honorable J0hn.C. Marburger, County Attorney of %yette Ctiunty, In whloh we held~that oorporatlons of thl8 kind, organized suer thle law, are subjeot to ad valorem taxes.

In our previous opl&n, on AprU 19, 193Q, we dlsoussed'thi6 question very exhaus%ltiwly; an&we f5k.l.y be- lieve that the reason8 and 6.onoluelona given in that opl.n%on are oorreot. We will notigo into aa muoh.detail on this question in this opinion a8 we &id in our former~opXn.%on.

*The~.&er of the state to impose ~kss ii: en In- herent governmen tal pcmer' not d?pemSent on nor dezlwd fma either the +ederal or State Constitution. Thase Con0WtUtMn8~ impose restr$otlons, but ,are not the zouroe of the Statb*s, taxing power, whloh is m attribute ofmm~elgnty.~ 40 Tar. hr. go. See~a?.so 3Dt parte Townsend, 54 Tex. Crank. Rep. SM), 144 8. W. 0@., and Stratton T. Commi86fone1s~~ Court Wgimep County, (Tex. Civ. App.) 137 8. W. 1270 (v&t of error re- fused).. There are no pro~l5bms In the Texts8 Consfltutioo that oould be oonstrued as exempting, or authorizln.6 the ex- emptlod of, property ot the kind In questlon f'ron~ad ~alorem taxations but,.on the other hand the Constitution, in our ~oplnlon~prohIblta suoh e&exemption. The pro~lelons ef then Texas Constitution bearing on this partlatiar questfon are a8 follows:

ArtiOlLe an, SeatiOXl 3;. "TaratiOn 5ball be equal and unliorm. ,AU property ia thie State, whether owned by natural permans or oomorationar, other than munlolgel, hall be taxed ln pmpor*blon to.it,s value, v&loh shall be asoerliained a8 may be *7 km. Ceo. H. Sheppard, Pa56 7

provided by law. The Lo518lature my kupose a poll tax. It may also lmpoae ocoupatlon taxes, bothuponnaturalperaons and up6n

corporations, other than nnmloipal, doing any business in this State. It may also tax &xi- comes of both natural persons and oorporatians other than mnlolpal, exoept that persons en- &a&xl lnmechaaloal andagrloultural puraulti shall never be required to pay an ocoupatlon tax;. Frovided, that two luaabed and fifty dol- lars worth of household end kltohen fumlture,.

belon&&to oaohtamilylathlsState shall be exempt fcom taxation, aad provided fmther that the occupation tax levied by any county,

city or tom r0r any year On persoas or 001~ poratlons pursulry; any.proieaelon or busl.neas, shall not exoeed one half of the tax levied by the State ror the same period on suoh profe88lon or buainess.~ VIII, Seetlexk Z, hrtlole “AU Ommpation

taxes shall be equal end uniform upon the 8anm alass of mbjsots wlthln the 13mlt.s or the auth- orlty IevllnL: the tax; but the fa#tslature IREV,.

by5emrallaw8, exempt hrom taxation public property u8Fd for public pusposes; eatual plaoetf 0r ntl.fgfatls rrorahlp; plaoes Of burial not he3.d for private or .oorgorate pmrlt; all buildZq@ wed exoluslvely a&downed by pereons orarm+ Oi~tfOliS Of PWEOIIS iOr SOhOOl pU3Xl6eS t3&d the necessary rurnlture or all sohools, aleo the en- : Ucmzmnt l'umls of suoh S.mtltul&ns of lee

aud rel.fgfon Mt u~ad with a Vi6~tO PrMlt and whentheaameare invested inbonds orippoFtga5es, or in land oi other property whloh ha8 beea and shallhereaftar beboughtlnbysooh lnstl;tutions amuer roreeloaure eales made to satirrtg' or pro- teat suoh bonds or mertgagesg that such exempt&m 0r suohland and~ropertysbau. contln~e only rer two yeare artier the g~urohase ai the same at suoh male by suoh institution8 and no lower, and lx&- stltutlons of purely publio oha!rlty~ and all lags Clmmptltl5propertysroiE?taxatloaoth~than~* property above mentfomd shall be 0013 and v$dd+*

iirtlole XX, Seotloa 9. *!Fhe property of oountiea, cities ami towns, owned and held only auoh aa aubllo bulldinas and 6-w ntrhlla nurnb8e8.

HOG Gee. H. Sheppard, Page 8

turf? thereof, md all property used, or intended for extinguiahia& fires, publio grounda tmd all other property devoted exolualvely to the UQB und benerlt OS the publio shall be exempt from forced 6Gl.e and fromtaxetion, provldod, nothing herein shall prevent the anroroezmnt or the ven- dors lien, the meohanlos or builders lien, or, other llona now exiatl.ng.W

The property la queatlon la clearly not within any of the olesaea that the legislature is permitted to exeri@ from taxation. We have found no statute that attempts to exeznpt this pro.?erty iron ad ralorem taxation; end we belleve the pas-e of such Q statute is prohibited by the last phrase in mtlcle VIII, Seotlon 2, .oi the Constitution, which aayn that “&.I. lms oxmptln(: poporty iron t&xatiOn other than the property above nentloned ahall be null and void.*

We will now diaouaa your aeoond queatlon, whloh is, whether or not a oorporatlon oqpnfzed under this law 1s llzble for the t;roaa receipts tax levlet¶ sgalnat auoh oono82as in cortafn fn6tanoes under Alrtlole 7060, R.C.5,

The part or hrtlole 7060 thet is material to thti dlaouaalon read6 es r0iiapwr

T&oh. Inbividuel, oompsny, corporation or aaao0latlon, owning, operating or alanag* or controlling any gas, eleotrlo 15.&t, eleotrlo power or water worka, or water anti U.&t put, located wlthin any lnoorporated tom or olty : in this St&a, agd utied for looti s&e and dlstri-

butlon in aald town or city, and ohargins ior auah gas, oleotrio lights, eleotrio pouez or water, shall amka quarterly, on the O.rat days of Jeumry, L\prll, July and Ootober of’ eaoh year a report to the Comptroller under oath of the iabifidupj. or of the prealdent, treaswr or auperint~ndent of suoh oompany, oorporatlon or aeamiation shawla& the gross wunt reoebred from auoh bualneaa done in eaoh such’ Inoorporoted olty OY toun within thla State in the payment of char&3a ior suoh gas, eleotrlc llghta, eleatrio power or water ror the quarter next preoeding. Sal4 indivlduel, oompeny, corporation or enaoointion, at the time ‘of making aaid report for aog such incorporated town or *9 Ron. Gee. B. Shepgtwd, Page 9

olty of twenty-five hundred (2500) inhabitants and less than ten thousand (10,000) inhabitants, aoeordfng to the last U&ted Statee Cmsus next preceding the film of sold report, shall pay to the Treasurer of this State an oooupatlon tax ior the quarter beglnnlng on said date equal to seven-tenths of one per oent (0.7 of 16) of said @otm reoolpts, ae shown by ra$d report; end ror tiny lnoorporated town or olfy OS ten thoumud (10,GOO) inhabitants or more, aooomllng to the last Enlted .Statas Consue nest prooeaing the ill& of said report, the eald lntividual ma- pany, oorporatlon or aeaoelatlon, at the t&e of inaklng eald report,~shall pay to the Treasurer of thlei State an ocoupation tax for the quarter be&nlng on said.date an amount equal t&one end three-eight6 per oent (1 3/e) of said e;roesme- oelpte, a8 shown bg said report. Rothlng herein shell apply to any such gas, eleetrie ll@t, pomrorwaterworlo3orwateren4'llghtplent nit?& t&l8 State owned end operated by any olty or town, nor to any County or water lniprovwumt or Coae8rvation Dfstriot."

Tipt art%610 was paesed in its prowat forn~ by the 44th Lt+gla- lattme et ifs 3rd oalled gee&m in 1936.

We must now eonelder Seat&a ?#) of the VUotrle Cooperation Corporation Aot” (Art. 1988b V,A.R&.S), quote& above,*ohprovl&esthatwauah oorporatlons8hallbeexemp. Srom all other exolae tax8s of whatsoever kind or'nature.w ratloa Aat? perrolta the organ- CQopBratlml co me."xleetrlo h eleetrlolty to parsons ln 18ing of oorporatloaE4 to f lxrzk Vural area~P, and Art1018 7060 mqulres the payment of grow reoelp$s taxes by oorporatlonfi end pereona operating eleetrle plant8 in ineizporated oitlea and towne. It may be thet eon- oerna organbed under the Eleotrlo Cooperatlvo CorpOratlOn hot by virtue of being llkted to Wmtl areatP eouUl not operfite lnlneorporate4touna,andthatthere eouldxiotbea oonee* 80 situated that both the Eleotrle Cooperative Corpwatlon Aef and Artlale 7060 would a ply to it; but we do not hateail to 60 into that question lnth%i opinion, beeause.we aseuma byrir- *10 Hon. ho. H. Sheppard, Fme lo

tue of you askin this partioulsr question you have In t&t mind a Rurel Eleotrlc .;ssoolatlon that comes wit&In the terms or Article 7C60. 3[f Scotion 36 of the *E.Ieotrlo Cooperative Zorporatlon ;rct" is valid it creates'an exheption to mtlole 7060, and would control in the situation you ,a8k about.

iit3 we view it, aald Sect&n 20 is a valid law, and it creates en exception to mticle 7060. under its terms all Rural Electric xesoalationa organized under the wElootrlo Co- qmrative Corporation Aot? ere exempt from excise taxes.

The gross reoeipts tax provided fn Article 7060 is a Corm of excise tax. In the c&se of Yoster E-. Crefghton Company 7. Grnham, 154 Ten& 412, 286 S, W. 570, 47 A. 1. R. 971, the 3oux-t aaldr

*All taxes, other than polls, are either direct or Indirect. k direct tax is one thot is impo66d directly on property aOCOrd~ to

its value. It is generally spoken of as a

property tax, or~nn ad ralerem tax, .4n in-

dire& tax is a tax upon sou% right or prlvl- legs, and it ls.also called au excise or oo-

oupatlon tax."

Xt hais been suggested that acla S@lon 30 orentes In exentptlon.that is arbitrary aad uareaaonable and that it the canetltutlonnl provisloaa on untform taxation and violates squal protection of the laws; but we do not agree with that contention. The *iQeutrlo Cooperative Corporation AuV is de- 3lgmd tqareate conoerns of a dlstinet type, and that are en- paged In a business different from other aoneerns. Not only ~6 they different from concerns selJ..lng oths~~ uommotlltles, Sat they are different .fromthe usual oonoern selling eleotri- my. In the first plam thep are non-profit organlzatlons, md the others are in business for a profit; end In the ssoond ?laoe they limit their aativities to wrural areatP, and the ,tbers do business in oltles end towns; itswe understand it 'oaoupatlona say be classiiled for the purpose of taxation, ' * * provided the olaeslfloation is reasoniible.* * * 30 per- zons of the same class may be sub-blvitled apoording to certain llfferenoea, provided the sub-olassifloation la reasonable, and the tax graduated aoooxWngly, or one or &ore sub-olaaaes may ae exempted.~ 1 Cooley on Taxation, 4th Ed., 940.

Eon. %o. 13. Sheppard, Pq:e ll

In view of what~the.appellate oou&s hare said we are oonvlnoe4 thnt said Seotlon 30 in qmetlon la vel.Id. IQ the case of Citizens '3klephoue: Co. v, F~I.ler, 229 U. 5~. 322, 57 L. Ed. l.206, 33 Sup. Ct. 833, the oanatltutlomllty of the ?dichl@n lawtaxdn~ telephone oonpanlt~ was upheld, and in that awe the Supreme Court of the United States said: *The act eontalned this pro*: VroviUe4, That the property of telegraph and telephone hop- panlea whom gross reoeipts within this State for the pear ending June thirty do not exoeed five hundred dollars shall be exeapt from taxation.: '"Tha contantlon of appellant that the aot offends the equal proteotlon clause of the Constl- tutlon is baaed on that pi6vi~oi It is ,=6ed thatthe- proviso makes an unjust dioorlxl.natl.on between eompenies dolngths same buelnees by the 681~8 measm and imposes a tax * * * beoawe the bu6lness of one 16 large and the &her small.* + * The Diatrlct Court, honever, tooke broader claw and oonsidere% the laduoeuent of the leglela- tlon and lto abmfnietratltre poselbllltle6 as glv- lng aheraeter to its elaselfloatl0n~' The aourt alsoooaai4ered th.eoheraaterofthe taxedend non-texed.lines, their aurnber and gomparatlve wlu6 en% tho mount-of tares which would bs as- 8essed a&.nst them. * * * "The Lines may be divided into two oleeses, : (1) lines own&l by appellant an% oonduoted for profit, and (2) lines oonneoted with those qt fhe flrstolass and oalled sub4laen6ed oompealee, rural and roadwny. + * *

"The 9urel* usually belongs to en aseoQla- tlon of farmers who llva along the.lins~. It aom- prlaea a switch-boar4 ledsed & the main or profit- n&lng oo~~~toar~~.~er,thelPain~o~any own&g the telephones cm tha line end reee;lriPyi the entlre'aharge fos $011 messegee, less the manager's comnlfJelans fox aa.ieoti.o& %Q roadveya ooanooteQ *12 Hon. Oeo. H. Sheppard, Page l.2

with a *rural' are oonstructed and owned by the Samera in the sum way as other roadways. The larger portion of 'rurals' are oontraotfj with Individuals.' * *

.: Th? profit that is afirlved from the rural &nd roadway llnee ie in the reduced rate for the telep&m3e. The manager ~ts.the dlfferenoe between what he pays the main company snd what. he eets from tpoae to whom he re~te.

The %lfTorinOe, therefore, belzeen the tax- paying and non-tax-paying o&qenles, or lndlvi- duale is thz& the foruer, aa said by the Di~striot Court, belong to ommerolal oorporatlons or en- terpzlses, 0rg;onizea and oonduoted for the pur- pose of earnIrg and paying profit8 as or in the nature of dividends; the latter, the uutexed, are oooperatlve or fantars* mutual es8oclatlons, usually unimorporated, oonduated at estimated coata and ortgmized prlmrlly$o get farthi, assooiatlon cheap telephone se$vloe.

*Iti lo mauISeat, therefore, that there em8 uarked dlffere~e8 betwen thetwed endnon- fsrsa eotqxuths, and the dlfferenoes uight be pronounoed arbitrary if the rule urged by appel- lant should be appUs4, that 18, that In the taxation of property no cirownstancte should be aonsldemd but its value, or, to u@o appellant*8 woras , 'es~ch~dollar's sarth should be treated alike.' But such ric;I% equellty has not been eafrnued. IQ bf~oh.@m the le&slaturo has the power of prescrlbIrg the subjeats of taxation end exemption, notwithsten4lng the oonstitutlon of the State requIrea the leglslatuze to provide a unl.fornruleoftaxatlon, * * *' *Wa think the statute &i4er r8vleii iswithin the rule. It Is not arbitrary. It ha6 a reason- able baaie .restIng on a red. dlstlnetflon. .It is not 6 d&notion bueed on Wire size only, as ooxl- tended by appellant, nor upon'the "re anottnt of *13 Hon. 030. H. Sheppard,. Page 15

business done. There I8 a difference In the doing of the buslnescr and Ite results; o dif- femme In the relation to the publlo." The 0onstItutIonallty 0r Article 7060 as orI&- ally passed, prior to Its amendmnt In 1956, was attaoked on the &munC of dIsorlznInatIon In the oase of Dallas Gas Co. T. State, (Ct. CiY. App.) 261 5. Vi. 1089 (Writ Of error rerused), a& vm think the language or JustIcre.Baugh In upholdIng the statute In that oam Is appllaable to the question in this opinion, that lengus being ae iollow6:

"Appellant Insists that beoause the act in question levlea-an oooupatlon tar at one rate on those pursuing an occupntlon In ofties of over 25,000 lnhabltants, ~0. ocoupatlon-tax et a lesser rate upon those pursuing the same oaoupatlon In oltlee of 10,000 inhabitanta and lees than 25,000 Inhabitants, and no ooal?petioti tm at all on those puMluIng that 8ame oooupa- tlon In plaaes other than these two olassss of alties, It Is void, and ln violation of section 5 of artiole 1 and seotlona 1 and 2 of art&la 0 of the Constitution of Texas sad of the Four- teenth htnendment to the ConetltutIon of the United States.* l +

"In small towns suoh cost 3;s 60 out ot proportion to the returnn troa mmh oOOupation a&to make It irspraotieable, if not eaonmnIoally InpossIble, to pursue It there. The very ex%6t- ace of swh ocoupatlon muat needs depend upon volume of business, whloh, generally, IS In pro- . portion to the number 61 InhabItants served.

likwally the larger the volunw of business done the more economiemlly suoh ooaupatlon aan be 'purmed end the mre profitable it.thu6 beoome60 Jill these considerations neoetwiarlly 6ntez into the matter of olasalflaatlon and oould have been, and doubtles?.were, considered by the Leglelature ~:arrIviug at the olassii;i~t%on of whl&appel- l&t aontplains. 9!h8,%gi8~iRZL3XOItyhW6iWlI- dladed, and pePha B did, that due to ifs very - I nature the operat on of agas plant in any plaoe P

Hon. Geo. IL Sheppard, Page 14 of loss than 10,000 inhebltants ras SO UCI-

profitable as to be eoona&a~lly Impraati- oablo, or so nearly so that an oooupation tax upon it wuld render It 80. And as stated In LIndsley v. Natural Carbonic Gas Co., 820 IT. 8. 61, 31 sup. ct. 537, 55 I.. E4j. 359, Ann. cas. lOl.SC, 160:

r*'When the clas6IfleatIon In such a law Is a&led In queetlon, If any state of facts xea- sonably aan be COnWlYt3d that would sustain It, the exlstenoe of thst state of faots at the time the law WAS enaoted must be assuced. * *la view of the peoullar nature of the oo- oupatlon Iuvolved and our duty to uphold the aots of the Legislature unless 8-e are olearly In yiolatlon of the state or uatImaal Coastitu- tlon, we aw not preparedtomy that the c&881- floation of appellant~e ooeupatlcm Is so arbIt- rary, dIsor5mIwtory, gremmnable, or unroal,a6 to WArrEnt us In holding lt wl~nstItutlonal fo?y that rewon.w

Thelfi~toaoewwlf~hto quoterroar i6 theoaseof Texas Conqxmy~d Step~M,l00~~.638,103S.F,4231,~ah upheld the confMttiIonalIty of a gxo1~8 reoeipts tax law that plaoed a different rate of taxes on different types of busl- nws, and in #at oaeie the Supreme Court of Texas st#lr

The very 1-e of the Coustltutloa of theState I@.Ies poW3rinthe Legislature to olassIfythe subj‘eots of~oaoupetlontaxes and only requires that the tax shall be ecual and unifom upoqthe sarae class. Person6:who, Iu themostgeneral sense,mayberegarded as pur- suing the imae ooaupatlon, as'ror Iustame am- ehents,.may thus be dI?Ided Iuto classes and the classes zany be,taxed In different amounts and aceordingto dirierent st~alArd8. Merchants may be divided into WhOleSAlera and retallerrr, and, If there be reasonable grounds, these may be surther divided aooorditq to. the p6WtIOular alassw o$ business in wh.Ioh they,msy engage. The consi- derations upon whlah such olAsESfioAtfons 13hal.l be *15 Hon. Ceo. l?. Sheppard, Pnple l!3

based are primarily within the discretion of the Legislature. lihe courts, undertheprovlslons relied on, ofin only interfere when It Is made clearly to appear that an attempted olaseIfloatlon has no reasonable basis Iu the nature of. the buel- Il0ELleE ClaEEiiied, and that the w OpOZ’ateE UII- equally upon subjects between whiah there I.6 no real differewe to justlfytheseparate treatment OS thsmundertakenbythe b&iEhltUre. =6 is the rule In applying both the State and Federal COnEtitUtiOnE, And it has been SO Oft&It stated E@ to reuder uuneoessary furtbsr disausslon 0s It."

our answerto yourrIrstqus6tlonirtbatRural Eleo- trio Associations oreanlsed under $he ~ZZeotrIo Cooperatiw Corporation not* (Art. l528bl are liable for ad valoremtaxw on their property.

Our anmm.to your 88002ld quWtlOtl16tbat by rirt\u 0s Seation SO or the Wleotrk Cooperative Corporation betw (;,rt. lciesb) oonoern.8 organbed under said aot am not l%able for the gross reoelpta tax levied,agaInst 6uoh ocwerns uX&Ur Article 7060. CeOil CL ROtEOh

APPROVXII JTL 17, 19.39 AEEiatfSlt

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