                                 ATTORNEY GENERAL OF TEXAS
                                              GREG         ABBOTT




                                                 August 14, 2008



The Honorable Florence Shapiro                          Opinion No. GA-0653
Chair, Committee on Education
Texas State Senate                                      Re: Validity ofcollecting a Regional Transportation
Post Office Box 12068                                   Authority's sales and use tax at different levels in
Austin, Texas 78711-2068                                separate subregions (RQ-0677-GA)

Dear Senator Shapiro:

         You inquire about the imposition of a Regional Transportation Authority's ("RTA") "sales
and use tax at different levels in separate Subregions within the authority."l You specifically ask
about the satisfaction of the constitution's equal and uniform taxation requirement if the sales and
use tax "is collected at a uniform voter-approved rate within a Subregion of an RTA but at different
rates in different Subregions, all of which receive different approved levels of service that take into
account their disparate tax levels[.]" Request Letter, supra note 1, at 2; see also TEX. CaNST. art.
VIII, § 1 (equal and uniform provision). Though your question expressly inquires about subregions,
it appears to be premised on an assumption that any municipality may create its own subregion
through which to participate in an RTA. See Request Letter, supra note 1, at 2 (stating that
"[s]eemingly, ... a municipality ... could form a Subregion to participate in an RTA ... [,]" and
"within an RTA various municipalities could participate at separate levels of service at different tax
rates").

       Because ofthat assumption, it is helpful to have an understanding ofthe geography ofRTAs
before addressing your question. RTAs are governed by chapter 452, Transportation Code. See
generally TEX. TRANSP. CODE ANN. ch. 452 (Vernon 2007 & Supp. 2007) (titled "Regional
Transportation Authorities"). Chapter 452 authorizes an RTA to be initiated from "each subregion
of a metropolitan area,"2 or from only one subregion. 3 Id. § 452.701(a) (Vernon 2007); see ide



         lLetter from Honorable Florence Shapiro, Chair, Committee on Education, Texas State Senate, to Honorable
Greg Abbott, Attorney General of Texas, at 2 (Feb. 15,2008) (on file with the Opinion Committee, also available at
http://www.texasattorneygeneral.gov) [hereinafter Request Letter].

         2Chapter 452 defmes "metropolitan area" as a "federal standard metropolitan statistical area having a population
of more than 500,000, not more than 60 percent of which resides in municipalities having a population of more than
350,000." TEX. TRANSP. CODE ANN. § 452.001(7) (Vernon 2007).

          3The predecessor statute to chapter 452, Texas Revised Civil Statute article 1118y, was enacted to authorize
the creation of a regional authority consisting ofboth Dallas and Tarrant Counties, with interim boards for each county.
                                                                                                           (continued...)
The Honorable Florence Shapiro - Page 2                         (GA-0653)



§§ 452.701(c) (providing that if "one subregion establishes an authority, the remaining subregion
may establish a separate subregional authority"), 452.001 (1 )(B) (defining "authority" to include "an
authority ... consisting of one subregion"). For its purposes, chapter 452 defines "subregion" as "a
principal municipality, the county of the principal municipality, and any municipality or unit of
election included in the boundaries of a subregion by the creating entity ... and confirmed at an
election."4 Id. § 452.001(12) (emphasis added). Separately, the territory of a proposed RTA
includes all of the territory in the "county of the principal municipality" and "each unit of election
that has the majority of its population in [that] county." Id. § 452.704(a)(I)-(2). Upon the results
ofthe confirmation election, the RTA is authorized in the whole ofthe county territory and the units
of election in which voters approve the RTA. See ide § 452.717(a); see also ide § 452.716(a)
(requiring that the confirmation election be conducted "so that the votes are separately tabulated and
canvassed in each participating unit ~f election"). Thus, the territory of an RTA will necessarily
include and overlap with the territory ofa county and participating municipalities. At the same time,
the territory ofthe RTA itselfcould consist ofone or more subregions. While chapter 452 authorizes
a "contiguous municipality"S to create its own RTA, it does not authorize any municipality to create
its own subregion that may then participate in an RTA. Chapter 452 does not equate a municipality
with a subregion.

        RTAs are created to "provide public and complementary transportation services in the area."
Id. §452.701(a); see id § 452.056(a)(1) (authorizing authority to operate and maintain a public
transportation system). Toward that purpose, an RTA is authorized to collect a transit sales and use
tax. See ide § 452.401(a) (authorizing executive committee to impose a sales and use tax for the
authority at specified rates). The imposition ofthe sales and use tax must be approved at an election.


       3(... continued)
See HOUSE STUDY GROUP, BILL ANALYSIS, .Tex. S.B.1 079, 66th Leg., R.S. (1979) [Bill Analysis labeled "SB 1079-63,"
dated 5/23/79] (stating that "[t]his bill allows the creation ofa regional transportation authority in the Dallas-Fort Worth
area"). The Lone Star Transportation Authority, which would have included both counties, was not approved by the
voters. See Brief from Dallas Area Rapid Transit Authority, to Honorable Greg Abbott, Attorney General of Texas, at
Appendix Tab 2 (Mar. 28,2008) (on file with the Opinion Committee) [hereinafter DART Brief]. We are informed that
the Dallas Area Rapid Transit (DART) is a "regional transportation authority comprised of one subregion." Id DART
Brief, at 4. And we are aware that the Fort Worth Transportation Authority has created its own authority with boundaries
that include all of Tarrant County. See Tex. Att'y Gen. LO-90-65, at 1.

          4When initiated, the proposed territory of an RTA includes all territory in the county of the principal
municipality and all territory in each unit of election that has a majority of its population in the county of the principal
municipality. See TEX. TRANSP. CODE ANN. § 452.704(a) (Vernon 2007) (providing for boundaries ofRTA). In each
unit of election in which the voters approve the creation of the RTA, the RTA is confIrmed. See id § 452.717(a). A
"unit of election" is defined as a "principal municipality;" a "designated unincorporated area created by the
commissioners court of a county of a principal municipality;" or "any other municipality located in the territory of an
[RTA]." Id. § 452.001(14).

          5A "contiguous municipality" is a "municipality that has a boundary contiguous with a principal municipality

and having: (A) a population ofmore than 250,000 ... ; or (B) boundaries extending into two or more adjacent counties,
nvo of,\rhich counties include a principal municipality." Id. § 452.001(3). A contiguous municipality is authorized to
create a separate subregional authority. See ide § 452.701(d). A separate subregional authority created by a contiguous
municipality would not "participate in" another RTA.
The Honorable Florence Shapiro - Page 3               (GA-0653)



See ide § 452.401 (b). The rate may not exceed a rate that "when combined with the rates of all sales
and use taxes imposed by other political subdivisions ... having territory in the [RTA] exceeds two
percent in any location in the [RTA]." Id § 452.403(a); see also ide § 452.401(a) (authorizing rate
of between one-quarter of one percent to one percent); TEX. TAX CODE ANN. §§ 151.051 (Vernon
2008) (imposing state sales and use tax at six and one quarter percent), 321.101 (authorizing
municipal sales and use tax), 321.1 03 (a) (authorizing municipal sales and use tax "at the rate ofone
percent"). Chapter 452 contains specific provisions to accommodate the two percent maximum
when a municipality that itself imposes a special sales and use tax joins the RTA. TEX. TRANSP.
CODE ANN. § 452.403(b)-(c) (Vernon 2007); see ide § 452.6025(d) (Vernon Supp. 2007) (providing
that an election in municipality to confirm addition of municipality to RTA is "to be treated for all
purposes as an election to reduce the rate of the municipality's special sales and use tax ... to· the
highest rate that will not impair the imposition ofthe [RTA's] sales and use tax"). Chapter 452 also
authorizes the governing body ofthe RTA to "direct the comptroller to collect the [RTA's] sales and
use tax at different rates in different subregions of the [RTA]." Id. § 452.406(a). It is this potential
difference in tax rates that gives rise to your question under article VIII, section l(a). See Request
Letter, supra note 1, at 2 (asking whether "the constitution's 'equal and uniform' requirement [is]
satisfied if the transit sales and use tax is collected at a uniform voter-approved rate within a
Subregion of an RTA but at different rates in different Subregions").

         Article VIII, section lea) provides that "[t]axation shall be equal and uniform." TEX. CaNST.
art. VIII, § l(a). Texas courts have long recognized that absolute equality and uniformity in taxation
is an unattainable ideal and not required by the constitution. Rosenburgv. Weekes, 4 S.W. 899, 901
(Tex. 1887); Whelan V. State, 282 S.W. 2d 378,380 (Tex. 1955); Tarrant Appraisal Dist. V. Colonial
Country Club, 767 S.W.2d 230, 234 (Tex. App.-Fort Worth 1989, writ denied). The Texas
Supreme Court has stated:

                        Taxes are said, within the meaning of the constitution, to be
                'equal and uniform,' when no person nor class of persons iJ1. the
                taxing district, whether a state, county, or other municipal
                corporation, is taxed at a different rate than are other persons in the
                same district upon the same value or the same thing, and where the
                objects of taxation are the same by whomsoever owned, or whatever
                they be.

Norris V. City of Waco, 57 Tex. 635,641, 1882 WL 9558, at *5 (1882). The equal and uniform
requirement "does not prevent the reasonable classification of persons and property for taxation."
Tarrant Appraisal Dist., 767 S.W.2d at 234. The equal and uniform mandate requires only that all
persons falling within the same class be taxed alike. Smith v. Davis, 426 S.W.2d 827,833-34 (Tex.
1968); Rylanderv. B &A Mktg. Co., 997 S.W.2d 326,333 (Tex. App.-Austin 1999, nopet.); Sharp
v. Caterpillar, Inc., 932 S.W.2d 230,240 (Tex. App.-Austin 1996, writ denied) (citing Hl!rt v.
Cooper, 110 S.W.2d 896,901 (Tex. 1937)). Thus, article VIII, section 1(a) is satisfied when the tax
classification is not unreasonable, arbitrary, or capricious and when it operates equally on persons
                                                                       T
or property within the class. See Tarrant Appraisal Dist., 767 S.\V .2d at 234.
The Honorable Florence Shapiro - Page 4                        (GA-0653)



        Moreover, a court in considering whether a particular tax classification conforms to article
VIII, section 1(a) would begin with a presumption ofvalidity. See Smith, 426 S.W.2d at 831. Under
such a presumption, a party mounting a challenge under article VIII, section lea) would bear the
burden of demonstrating there was no reasonable basis. for the classification. See Rylander, 997
S.W.2d at 333. A "mere difference of opinion, where reasonable minds could differ, is not a
sufficient basis for striking .down legislation as arbitrary or unreasonable." Smith, 426 S.W.2d
at 831. Courts entertain the "'strong presumption that a Legislature understands and correctly
appreciates the needs of its own people, that its laws are directed to problems made manifest by
experience, and that its discriminations are based upon adequate grounds.'" Id. (quoting Tex. Nat 'I
Guard Armory Ed. v. McCraw, 126 S.W.2d 627, 634 (Tex. 1939) (citations omitted).

        Under article VIII, section l(a), a tax imposed by a taxing entity within its territory that
equally and uniformly operates on all property or persons in the taxing entity is not constitutionally
infirm. See Norris, 1882 WL9558, at *5. ("Taxes are said ... to be 'equal and uniform,' when no
person nor class of persons in the taxing district ... is taxed at a different rate ...."); Smith, 426
S.W.2d at 834 (agreeing with trial court's finding and stating that assessment of property "was
uniform and equal with respect to other property in Bexar County and in proportion to the value of
the property assessed. Thus the assessments are equal and uniform within the meaning of the
constitution."). Situations involving two taxing entities that have overlapping territory and that each
impose a tax within its respective territory so that persons and property within both taxing entities
pay taxes to each entity similarly do not violate article VIII, section 1(a) so long as each entity's tax
is equal and.unifonn within the entity. See City ofPelly v. Harris County Water Control & Imp.
Dist. No.7, 198 S.W.2d 450, 454 (Tex. 1946) (upholding under article VIII, section 1(a) taxation
of property by city and special district); Kuhlmann v. Drainage Dist No. 12 ofHarris County, 51
S.W.2d 784, 788 (Tex. Civ. App.-Galveston 1932, writ refd) (upholding taxation of property by
city and by drainage district under article VIII, section l(a)). Applying these legal principles, then,
an RTA consisting of only one subregion that imposes a sales and use tax equally and uniformly
within that subregion does not present an article VIII, section l(a) problem. And a situation
involving different municipalities within an RTA in which each municipality imposes its own sales
and use tax at a different rate from other municipalities in the RTA, but equally and uniformly within
its municipal territory, is also not prohibited by article VIII, section 1(a). Thus, to the extent you are
concerned about different municipalities within an RTA having different municipal sales and use
tax rates, or about the overlap between the RTA's sales and use tax rate with a municipality's sales
and use tax rate, these differences are not prohibited by article VIII, section 1(a).6



          6Because you ask about different tax rates in different subregions, it does not appear that you inquire about an
RTA that consists of only one subregion that imposes, within the RTA, an RTA sales and use tax at different rates on
different municipalities. See Request Letter, supra note 1, at 2 (asking whether a tax "collected at a uniform voter-
approved rate within a Subregion of an RTA but at different rates in different Subregions, all of which receive different
approved levels of service that take into account their disparate tax levels"). As we do not understand this to be your
concern, we do not offer an official opinion on the question. But to the extent you may be concerned about such a
scenario, it may be constitutionally suspect under article VIII, section 1(a) because the RTA's sales and use tax '''ouid
not fall equally upon all persons within the RTA. See Norris, 1882 WL 9558, at *5. ("Taxes are said           to be 'equal
and uniform,' when no person nor class of persons in the taxing district ... is taxed at a different rate      ").
The Honorable Florence Shapiro - Page 5                (GA-0653)



        The express question you present involves an RTA that consists ofmore than one subregion
and that imposes a sales and use tax at different rates in the different subregions. See Request Letter,
supra note 1, at 2. However, you do not provide information about a particular RTA nor are we
aware of any existing RTA that consists of more than one subregion. See supra pp.3-4 (describing
origin of chapter 452 to accommodate the Dallas/Fort Worth metropolitan area); see also DART
Brief, supra note 3, at 4 (stating that DART is a "regional transportation authority comprised of one
subregion"). Thus, we can advise you only generally about such a hypothetical RTA.

         As noted above, under article VIII, section lea), courts allow tax classifications that are
reasonable and impose obligations that fall equally upon members of a class. See supra pp. 3-4.
If, as you suggest, the tax rate within each subregion operates equally within the subregion, we
believe a court could find the tax for each subregion falls equally upon the persons and property of
that subregion. See Request Letter, supra note 1, at 2 (inquiring about a sales and use tax "collected
at a uniform voter-approved rate within a Subregion"). Such a finding would leave a reviewing court
with the remaining determination about the reasonableness of the classification-here the different
tax treatment based on different subregions.

         The difference need not be significant. See Fairmont Dallas Rests., Inc. v. McBeath, 618
 S.W.2d 931,933 (Tex. Civ. App.-Waco 1981, no writ) ("The difference between the subjects taxed
.need not be great, and if any reasonable distinction can be found, the duty of the court is to sustain
the classification embodied in the law.") (citing Hurt v. Cooper, 110 S.W.2d 896, 904 (Tex. 1937)
 (stating: "It would not be argued that the Legislature is without power to levy a tax upon dry goods
merchants without at the same time levying a like tax upon grocery merchants. The fact that the
 merchants not taxed, or those exempted from the tax, sell a different kind ofgoods from those which
 are taxed, is an all-sufficient justification of the classification or exemption.")); Bullock v. ABC
Interstate Theaters, Inc., 557 S.W.2d 337,341 (Tex. Civ. App.-Austin 1977, writ refd n.r.e.)
 ("The courts will not strike down the tax statute where there is a real difference to justify the separate
 treatment adopted by the Legislature."). For instance, a court might consider whether geographic
 and demographic differences between subregions provide reasonable justification for different tax
 rates. A court might also consider whether differences in transportation services provided to the
 different subregions suffice as reasoned justification to authorize different tax rates. See Dancetown,
 U.S.A., Inc. v. State, 439 S.W.2d 333, 336-37 (Tex. 1969) (determining that differences in
 commodities sold or services rendered were proper basis for classification). See generally Norris,
 1882 WL 9558, at *5 (stating that "equal and uniform" language does not mean that the "pecuniary
 benefit to be derived by every person who pays taxes shall be equal"); Wheeler v. City of
 Brownsville, 220 S.W.2d 457,461 (Tex. 1949) (recognizing that "some persons will derive greater
 pecuniary benefit from the expenditure of money for ... public purposes than will others").

       Thus, under article XIII, section 1(a), upon a determination that the tax is uniform within
each subregion and that the different tax rates in the subregions are based on reasonable and
nonarbitrary distinctions, a court could well uphold a difference in tax rates between the subregions.
The Honorable Florence Shapiro - Page 6             (GA-0653)



                                      SUMMARY

                      Texas Constitution, Article VIII, section 1(a) requires that all
              taxation be equal and uniform. Article VIII, section 1(a) authorizes
              the classification of persons and property for taxation when the tax
              classification is not unreasonable, arbitrary, or capricious and when
              the tax operates equally on all persons or property within the class.

                      Chapter 452 ofthe Transportation Code authorizes. a Regional
              Transportation Authority ("RTA") consisting of more than one
              subregion to collect a sales and use tax at different rates in the
              different subregions. For any RTA organized under chapter 452 that
              has more than one subregion and that collects the sales and use tax at
              different rates from the different subregions, the difference in tax
              rates could be upheld under article VIII, section lea) if the tax falls
              equally on people and property within each subregion and the
              different tax treatment by each subregion is reasonable.

                                              Very truly yours,




KENT C. SULLIVAN
First Assistant Attorney General

ANDREW WEBER
Deputy Attorney General for Legal Counsel

NANCY S. FULLER
Chair, Opinion Committee

Charlotte M. Harper
Assistant Attorney General, Opinion Committee
