-     .




                                                  XAS




    Honorable   George H. Sheppard
    Comptroller   of Public Accounts
    Austin, Texas

    Dear   Sir:                            Opinion No. O-3625
                                           Re: Date of accrual and method of
                                                 computation under Article     V,
                                               House Bill No. 8, 47th Legisla,Lu,re,
                                                of new occupation taxes, levied
                                                upon persons or corporations        own-
                                                ing or operating certain utility
                                                plants in incorporated   towns or
                                                cities of more than one thousand
                                                inhabitants and less than two
                                                thousand, five hundred inbabitan,ts,
                                                and additional such taxes in in,-
                                                corporated   cities or towns of
                                               higher population brackets;        (b)
                                                liability for such taxes of per-
                                                sons or corporations    owning or
                                                operating utility compan,ies in
                                                incorporated    towns or cities of
                                                exactly one thousand inbabitsnts.

           Your letter of May 28, 1941, submits       for ow   opinion the following
    questions which we quote therefrom:

             “Article  No. 5 of House Bill No. 8 of the Forty-seventh        Legis-
      lature amends Article       7060 R. C. S. 1925 by providing that the par-
      ties or concerns     shall make quarterly,    on the first day of January,
      April,   July and October of each year, a report to the ComptrolLer
      of Public Accounts,      showing the gross amount received       from such
      business     done in each incorporated   city or town in this State in the
      payment of charges for such gas, electric lights, electric          power, or
      water for the quarter next preceding;        provides   for a tax of .44% on
      gross receipts     of gas, water, light and power companies        in towns of
      more than 1,000 inhabitants and less than 2500 population; another
Honorable    George   H. Sheppard,   page    2, O-3625



  bracket on receipts from towns of over 2500 and less            than 10,000
  population; and, a bracket of over 10,000 population.            This bill
  became effective as of May 1, 1941.

       “I will   appreciate   your opinion   on the following   questions:

       “1. Will the tax on receipts from the towns in the smaller
           bracket, which is new, for the months of May and June
           be computed on 2/3 of the receipts   for the quarter end-
           ing March 31, 1941, (2/3 of the first quarter is used for
           the reason that May and June would be 2/3 of the quar-
           ter beginning April   1st).

       “2.   Tax on receipts  from the towns in the two upper         bra~c-
             kets was paid for in tax payment for the quarter         begin-
             ning April 1st. Will the increased  tax rate apply        on
             such receipts to the towns in the upper brackets         for
             the months of May and June 7

       “‘3. Will the receipts from the operations in towns of an even
            1,000 and 2500 population be taxable ? (You will note the
            law reads as to tawns over 1,000 to 2500 and again over
            2500 to lO,OOO),”

        The act above cited P.evies an occupation tax, based upon gross re-
ceipts, upon the described     public utility companies    or plants located in
incorporated    towns or cities of more than one thousand inhabitants and
less than two thousand fix~e hum.dred inhabitants, at the rate of -44 of one
per cent of its gross receipts for the preceding       quarter.   This tax is a
new levy as the tax levied by Article      7060, Revised    Civil Statutes, prior
to its amen.dment by the act under consideration,        did not levy a tax in
cities or towns containing Iess than two thousand five hundred inhabitants.
Additionally,   the act of the 47th Legi.slature  now before us, increased      the
rate of taxation in incorporated     towns or cities located in the same popu-
lation brackets    as the amended act.

        Thus, while strictly speaking, the amending act levied a new tax
and increased   an existing tax, for all practical     purposes    and within the
contemplation   of the legal principles    hereinafter   discussed,   both phases
of this tax levy will be considered     together.    The only distinction which
may be pointed to is that the companies,       now for the first time made
subject to a tax, would not have filed the preceding        quarterly  report of
Honorable   George    H. Sheppard,    page 3, O-3625



  gross receipts,   upon which the tax is computed, while companies     here-
  tofore subject to a lower tax, would nevertheless   have filed such quar-
  terly report.   But the controlling issue here is whether or not in each
  instance, that is as to the new taxes as well as to the additional taxes,
  such,taa levies become due and payable upon the effective date of the
  act, i.e., May 1. 1941, or upon the first day of the first sqtire quarter
  to succeed said effective date, namely, July 1, 1941. This question be-
  ing determined,   the mere method of computing and calculating     the tax
  will easily follow therefrom.

       Upon this question it may be generally     stated that the power of im-
  posing an excise tax is not exhauSted when once exercised,        but the tax
  may be increased    during the year if exigencies    demand increased    ex-
  penditures.   The tax may be increased     at any time before-the   expiration
  of the period for the enforcement    of the tax, although the tax as first
  fixed has been paid.    37 C. J. 189 (Licenses,   Section 40), Cooley on
  “Taxation”,   Vol. 4, Section 1715 (4th Ed.);   Patton v. Brady, 184 U. S.
  608, 46 L. Ed. 713, 22 S. Ct. 493; Williams     v. City of Waynesboro~,
  111 S. E. 47; American     Tobacco Co. v. Danville,    99 S. E. 733; State
  v. Galveston,  H. & S. A. Ry. Co., 97 S. W. 71; Texas Company v.
  Stephens et al., 100 Tex. 628, 103 S. W. 481.

        But while the general principle        of taxation announced by the author-
  ities cited cannot be controverted        it may be speciously     argued that such
  recognized    principle   has no applicatian      to the instant act because     same
  specifically   provides   that the person or corporation        subject thereto
  “shall make quarterly,      on the first day of January, April,        July, and
  October of each year, a report to the Comptroller”,             showing the gross
  amount received       from such business for the quarter next preceding            and
  “at the time of making said report . . . shall pay to the Treasurer              of
  this State an occupation tax for the quarter beginning on said dates.”
  . . . ; hence, the act not becoming effective on the first day of the cur-
  rent quarter,    i.e., April 1. 1941, it was intended by the Legislature          that
  no report and tax payments would be required             until the first day of the
  quarter next succeeding       the effective date of the act, which would be
  July 1, 1941.

       Although this distinction of the instant act from the tax measures
  involved in the cases supporting the above rule, may, at first view, ap-
  pear valid, we submit that the decision of the Supreme Court      of Texas in
  the case of Texas Company v. Stephens, et al, supra, will upon close
  analysis and comparison     of the tax measure  under consideration   therein
                                                                                  -        .




Honorable   George   H. Sheppard,   page 4, O-3625




  with the Instant act, convincingly  refute and negate this distinction and
  argument.    Insofar as pertinent here, this decision involved the effec-
  tive date of Chapter 148, page 358, Acts, Regular     Session, 29th, Legis-
  lature, generally   called the “Kennedy Bill”, especially   Se,ctions 9, 11,
  12 and 13 thereof; levying certain occupational    excises.

        Section 9 of the cited Act, levying a tax on an annual basis of two
  per cent of gross receipts,       upon the busines,s of selling at,wholes,ale,
  oil and other allied produ’cts, provided that said tax “shall be paid to
  the State Treasurer      quarterly,   and every such person, agent, associa-
  tion of persons or corporation       so owning, controlling     or managing such
  business    shall, on or before the 1st day of April, and quarterly        there-
  after, report to the Comptroller        under oath of the ,president, treasurer,
  superintendent     or some other officer of said corporation        or association
  or some duly authorized       agent thereof, the amount received by them from
  such business     in this State.”
                                                                I
        Section 11 of the Act levied an occupational      excise upon.the business
of leasing, renting, operating,    hiring or charging mileage for the use of vari-
ous classes    of cars, including tank cars , and provided-that     the person or co’r-
poration so engaged ‘“shall on or before the 1st day of April and quarterly
thereafter,   through its superintendent     or other chief officer, or authorized
agent, file with the Comptroller      of Public Accounts,   a report, under oath,
showing the amount of gross receipts from such rentals or mileage or other
sources    of revenue, for the preceding three months, Andyshall pay a tax of
two per cent on their gross receipts       from all rentals or mileage or other
sources    of revenue received   from any railway companies        or other persons
or from all other sources within this State.”

       Sections 12 and 13 of the Act, levying, respectively,          occupation taxes
upon the businesses     of operating pipelines and produc,ing oil, are even more
comparable,    as regards   the accrual,    by quarter,   of the taxes levied, to the
instant act than are the preceding       sections.    Both Section 12 and 13 ‘were
s,ubstantialLy identical in this regard,      providing that each person or c,orpora-
tion engaged in such business       “shall on or before the 1st day of April of each
and every year, and quarterly       thereafter,    through its superintendent,   presi-
dent, secretary   or other authorized      agent, fiLe with the Comptroller     a report
under oath, showing the amount of’gross          receipts  . . . during the three months
next preceding;   said . . . companies,     at the time of filing the required    report
shall pay to the Treasurer      of the State of Texas” the stated tax.
Honorable   George   H. Sheppard,   page   5, O-3625




        This Act became effective April 17, 1905, on a date too late for the
companies    effected thereby to report and pay the taxes levied, on the first
day of the quarter April 1, 1905, just as in the instant question, the effec-
tive date of the Act was May 1, 1941, which was a date subsequent to the
first day of the quarter beginning April 1, 1941, on which date a report was
required to be made and a tax paid.     Under each of the acts now under com-
parison another report and tax payment was expressly       required  upon the
first day of July of the respective  years.  But with reference   to the conten-
tion of the taxpayer that no tax was due and owing until said first day of
July, 1905, under these four sections of the “Kennedy Bill”, the Supreme
Court of Texas, in the cited case, ruled adversely    as follows:

             ‘The contention that the Kennedy bill did not take effect
       before July 1, 1905, so as to impose liability for the taxes
       for such part of the preceding      quarter as elapsed after
       April 17th of that year cannot be sustained.       The bill was
       passed with the emergency       clause and by the requisite   vote
       to put in force upon its passage and, having been approved
       o,n April 17th. it went into effect at once as a law,     Of course,
       it is true, as contended, that the time when taxes became due
       under it is to be ascertained     from the intention manifested    by
       its provision.   It fixes the first quarter as beginning April lst,
       but, its passage through the legislature     having been delayed
       until that time had passed, it could not operate during the in-
       terval from April 1st to April 17th. The intention was clearly
       manifested,    however,   by its history and by the emergency
       clause, that it should become effective as a revenue producing
       measure as soon as it could be enacted, and there is nothing in
       the facts stated to prevent that intention from controlling.“.     ‘,

            The instant measure,     like the “Kennedy Bill,” was passed with the
emergency    clause and by the requisite     vote to make it effective immediately
upon its passage and approval;     and, similarly,   we think the intention was mani-
fest from the legislative  history of this Act, and the social security program
which it was designed to relieve,     instanter, and the contemporaneous      temper
of the times, that the Legislature     intended that the revenues    expected to be de-
rived from this measure     levying new and additional taxes, should begin to flow
into the State Treasury   immediately      upon the effective date of the act, towit,
May 1, 1941.

           It is a corollary   from this conclusion that the occupation taxes     due
and owing from the subject     companies  on May 1, 1941, would be computed       on
Honorable   George   H. Sheppard,   page 6, O-3625




the basis of two-thirds    of the gross receipts     for the preceding   quarter  (the
quarter ending March 31, 1941), at the rate of taxation fixed in the Act, be-
cause only two-thirds     of the current quarter remained after the Act became
effective  (May and June).     The utility companies     located in incorporated
cities or towns of more than one thous.and inhabitants and less than two thou-
sand, five hundred inhabitants will be, it is true, for the first time required
to file a report of their gross receipts      for the preceding   quarter ending
March 31, 1941. But if our~conclusion         is tenable that such companies     may
be lawfully required    to pay a new tax as of May 1, 1941, we can find no legal
obstacle to requiring    that such report of gross receipts      for the preceding
quarter be filed now, in order that the tax may be properly          computed.   We
think such result would necessarily       follow from the principles     and authori-
ties above discussed.

            As   regards the owners or operators    of those utility plants in in-
corporated   cities or towns of the higher population brackets,     against whom
a higher tax has been levied, such tax will, of course,    be computed on the
basis of the report of gross receipts   for the preceding   quarter   (ending
March 31, 1941). which such persons or corporations        have, presumpt.i.vely,
already filed.

            Answering  your third question, we are reluctantly   but inescapably
constrained  to advise you that incorporated  cities or towns, containing ex-
actly one thousand inhabitants, no more and no less, do not fall within the
taxable population brackets fixed by ArticIe V, House Bill No. 8, 47th Legis-
lature, and consequently   an individual, company, corporation   or association
owning, operating,   managing or controlIing  any gas, electric light, e1ectri.c
power or water works, or wster and light plants, located within such incor-
porated town or city, would not be subject to the occupation, tax levi.ed there-
by.

             TheAct provides      that the described    individual, company, corpora-
tion or association    ‘“at the time of making said report for any such incorpor-
ated town or city of more than one thousand inhabitants and less than two
thousand, five hundred inhabitants, .according to the last Federal         Census next
preceding   the filing of said report, shall paydai the Treasurer      of this State an
occupation tax,” etc.                              .r--   _

           It will be noted that this first popu.lation bracket does not begin
with an incorporated   city or town of one thousand inhabitants or more, but,
Honorable   George     H. Sheppard,     page   7, O-3625




on the contrary,  expressly    refers to an incorporated city or town of more
than one thousand inhabitants.      Therefore, from the plain English of the
matter.  an incorporated    city or town of one thousand inhabitants or less
would not be covered by the A,ct.

            With reference  to cities and towns of exactly two thousand,
five hundred inhabitants,  embraced    in your third question, we are advised
that although certain towns and cities exist having exactly two thousand,
five hundred inhabitants, none of such towns or cities are incorporated,
and hence do not fall within the purview of the statute here involved.    Hence,
we would not at this time attempt to answer this phase of your inquiry.

            Trusting    the foregoing     fully answers     your   inquiries,   we are

                                                                Yours   very truly

                                                       ATTORNEY          GENERALOF       TEXAS



                                                           BY
                                                                Pat M. Neff,    Jr.
                                                                  Assistant




FIRST ASSISTANT
ATTORNEY    GENERAL

                                                                    APPROVED
                                                                     OPINION

                                                                   t?!$za.
                                                                       Chairman
