            OFFICE   OF   THE   ATTORNEY     GENERAL   OF   TEXAS
                                    AUSTIN   ‘1

                                July 28, 1964


Honorable CWorgs ii. Sheppard
Comptroller of Public ;oaounts
Awtln 11, Tsx4s

Dear Sir:




                                              In the n4na-
                                              for the aooount




               "!rhe ooatraot 4~oiflorlly  prarldas that
         all persons uumsglryl end opsrating.the   plaat
         or enmged in the perrornmnos or thl4 oontraat
         by Blnolalr Iiubber Ino., shall be employed or
         retained by the oontraotor and rhall not be
         4mployees or Reserve for any purpo44 whatno-
        'ever.
w%orabl.e Ceorr;? 8. Sheppard, &go              2



          -The !iubbor 34serve Cow&my                  4~rets        to   fur-
    nish the     Slncl4ir     2abber IAX., hereinafter                    re-
    ferrc-d to 4% contractor. 1~1th surilolent work-
    ing cepltal to met contractor'5 coots of opera-
    tion and to psy all the aosts of opsratlon enu-                              I
    rmereted in the contraot.
                                                                                     _
          qh6      oontrect &ovr3e%         thr contreotor will
    p4rr0rikits        0bikpti0n   vlitii0ilt       p:ofit      t0    lt9m
     mu alth9ut surfcrlng or lnourr:ng ony 10%~.
     The t$tlo to any nnrl all propartiso aoqulrcd or                                    .I
     used in connectlon with the opsmtlon of the
     plant, the ao%t at which Is psld by the Subber
     Heservs, vests dlreotly ln the iiubber Resorv6
     or Dsfeooe Plant Cor?oozatlon, 4% the r6%puctive
     lntcreots of saoh,mag sppser. A%orint% covering
  ~- ro7altiee in connectSon with tho op6rotion 0r                                       :
    the ploot ie Inolu3ed in the oantreotorgs
    ‘oocrts’ not to 6xcoe3 ono-oi&th  of 4 aent
    (Q0.1251 par porlaa or butefiiorrh~
                                      pro$roe:d r0r
    an& d4iivercP to the ?Ubber Reaa~~e Company, OF
    u%3ar oezteln condltSon% thrtta-sixteenths of a
    cent pbr pound.

          RThe oontrnotor   is ~lven atithority in the
    aontract to 8411 comerolally,        for the aooount
    of Iiubber X6serve Cosrpaay, oertaln by-pro9aots
    an.1 rcoida3s which am     acqdred    iii processing
    the char,-&    atooko f.ltci butndicuc    ani it    is
    given suthorlty to sell oormrchlly           the   ri%-
    ished buta3lene not aooept.able to 5ubber Re-
    ~Ol-vO G2npany. TUG p%06eea9 00m10t69            rS3m
    such ~416% ahall bo de~uoted from contr6OtCr~%
    ooets'ot ojzzv3tion.

         ~‘k%CE th6 full  ipOrRtioE Or tht? phnt $8
    not regdfrad ior ths pro?uctlon ol" b~&zIic%a
    for Rubbe? SI%E~YC Coaqa~y, the Contractor my,
    with consent ot iIubb6r Rerjcrm Cmgahy,    operste
    th6 piB:lt rOr it&! Glm hCOoll?ktEna 6t it% OWE
    cost on3 cq~c;lsa for the yxd~zctlon OS b~~ttadl6ne
    or othcr+&e cIurl%C such pGrioS9.

           Vh6  Contraotor, Sinclair i?zbbbr, Inc., ' * "'
     through     its
                  Attornays, Qaker, Dotto, AndrewE de
     Shnrton, of Houston, ha% e~lvloc~ u% that it A%
     _- the
     of  _.~_opinion that tho azmay oonnsetio~ of'
     thaa----.---  -.---.-- Inc.,
            nclnir Xxbhr.   -     vrlth ths Raabbcr Re-
     sbrvo Caapiny and tGa D6fense Plant Corpore::on,
/a--
                                                .



                                .’




       ifonoorable   George          H. Sheppard,   page 3
                                                             .:.,
                            \


             lrederai lnatruzentalitlsa, olearly exempts said
             eoatraotor rroa the Tsxaa notor fuel use tax.
                     ‘eti
                        oplnlon fron you or aciplitioatlon     or
             your Oplnlons O-4389     and O-5309-A has been re-
             quested.    I a,u snoloalng togcthor with oopy or
            -the oontraat,    thfj oorreapmdenoe    with Baker,
             Botts, Andrcwa and Wharton and rssRectfullp        re-
             quest. yo.ur opinion as to.whet&er or not the                   .i
             Slnolalr Rabber, Ino., Is subject to the use
             tax upon motor fuel used by lt upon the public
            .hlghSayo la tho.perfomaaoo       of its ooatraot
             with Rubber Reserve Company.m
                     In our Oplnlons O-4389 and 0-5309A,       this department
       ruled that oertain oost-plus oontreotors          ensaged ln the per-
       ror.manoeOP vurlo;ra funotloaa for the federal goverment are
       liable for the tax upon motor fuele used In connectlax with
       rush work. With but one eioaption,         the terma OP the oon-
       tracts involved la thsse opinions are virtually            identloal
       with the term       oi the oontreot between Slnolalr       Rubber, Ino,,
       and the Rubber Reaerva Company. Thus, in al.1 of these ooa-
       traots,    the title   to aiIppllea purchassd by the oontraotore
       Tests in an agmoy of the federal Goverment,             but, szbbjoot
       to an optional right on the part of such agenoy, the pur-
       ohases are made in the names of the contractors            end the oon-
       trectora obligate only themselves in mkinf: such purchases;
       koreover, in all of these contracts,        the persons employed by
       the oontraatora are employee5 of the oontrootors rather than
       of en agenoy or the federal govcrllment; and the work which
       ia p6rformed by the oontreotors an;l the cianner of its per-
       roorcenoe are singularly rrtie from any control sxsroised by
       the federal govermient.        Tho one nignlfloent     dlffcrenoe    be-
       tween the Instant oontract and those previously ooncidered
       1s that in the present oltuatlon the oontmctor perform the
       work at ho profit to himself,       whllc in the prior oontraota
       the contractors rect;ived profits or various kin3e.              It re-
       meins
       -.      to
               .    bF; aeon whether  tbia dlrrorsnce
                                                    - .. aufrma      to-exempt
       elnclalr Rubber, Inc., Iron paymnt or the motor rue18 tax.
                   In our grlor oplalons,  the licbllity of the oon-
       tSaot,ore hes besn preliostcd   upon the OCSOSOf Alabuza V.
       King & Roozcr, 62 Sup. Ct. f+3, 06 Li Ed; 1, carry V. 3nlted               i
       States, 62 sup. ct. 48, 86 L. Ed. 9, and Jamea v, 3revo
       COntractlng Co., 583up. ct. 208, 82 L. Ed. 155. In none
       Of thCfJ6 ca*es h&y the Suprerae court mentloncd the existcnoe
       Qf a profit   es a rWJG3flfor l~~ponln~ liublllty upon a person
                                                    ,’
                                                   ,, ‘
                                                    .,,
                                                   ..
                                                                : _
                                          .
                 .’ -_
    mnoreble     isOr&s'H.    Sh&panl,        page b      s



    *o  1s psriordng   a contqt2ct nlth the r0deral gov6znEiSnt.
    Bathor, the d6t6rXfIlStfV@ factor hes baen whether the COW
     tmctor      aats as an agent or tho United Stat69 or es an ln-
     &p65?l65t      CODtr6CtOr', t!5flthe d6ClSiO5S in these CBS68 are
    .to     thQ 6rf6Ct that COntIWtOrS Or the type her6 u5d6r OOn-
      al&r6tlon      sre 1536ps5d65t contraotors rather than mere
       agent8 or sorvsnts.       It is trU6 that in all. Of these Ca56s
       the contraotors have recelvod a profit for tholr labor;
      bowever, ~8 rt3dthat this rOOtor in no way oontrlbutru to
       their status a8 independent contractors,         3s teei thet it
       is a strange doctrlce which would say that a person who
       pertom. certain work ln a certain afmn~r r0r pmrit is an
       lndspsndeat    contrnctcr while mother person who perrorfs
       ld6ntlcal work in aa ldtntlottl     Lttinner but without profit
.      iS all t3gGllt Or S6lTtl5t.   COUsSq465tly, it is our opinion
       tbst   the d6clslo5s in the sbovs-cited      08868 control the
       instant sltuatloa an3 that Slnololr i'iubbar, Ino.,~ is lia-
      bit for the ttix     upon rotor fu6l.s used by it   in the per-
       forennoe of Its ~oontraot with Rubber Heeervtl Cqupany.
                 Gounsel for th6 taxpayer have sUggeSted thet
     thCs6 cases have been overruled by the recent declalon of
    'the Supreole Court in Unite& States a51 Zrestn ~eohlne Cou-
     pany v. County or Allsgheny, ?ennsylvanla, 88 L. Ed. 845.
     The entlrely dffr6r6Ut tact sltuetlon in this caa8, c0upi6a
     with the faot that the Suprem Court sxpressly Ustlngiiahe%
      the Bsta case fron the cases above alteb, persuades Us thet
      the bfeota case in no way touches or 15ilU65CCs the qu6stion
      pDd6r conslduratlon.                  .
                 T&tins    that the toreSOl5g fully answers your i,
      15QUil7, WYeire             .
                         .,    ..    ..           ,- Yours wiry truly,
                                              .
                                                    'ATWJRN~+GEZERAL   OF TZXW



                                                              R. Dean Koorheab
                                                                      Assistant
