                ..’




E           OFFICEOFTHEATTORNEY
                                      AUSTIN
                                               GENERALOFTEXAS


                                                                  .

    fionorable
             Oeorge II.Shemard
    CmptrOlle~ of     Publla AccOwit8
    AllBtln,Texas
    Dear Sirs                          OplnLon no. O-4731
                                            !&other tax 1




                                                       tmr of!Augurt   4, 1942;
                                                       t the Cefanss PUnt
                                                       r to the cement manw
                                                       atlng by nnd through

                                       xm.mSaot.urms in thla State
                                       dlmct  Bale to the Dnltsd



    EIciuae
                i&d Lagl8lnture,
                    47, seation 4la, aa tuaimlsdby &ticle
         Bill 0, 47th           reeds ln pact as follows:
                                                                              12,



                                 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,
     and vho thereafter     distrlbutea,     sella or USest pro-
        id d hovever, no tax ahall,b          id       t on one sale,
     &a~rlbutlon     or une.    The  pefo?lla~~~~or        said tax
      is hereby defined as a ldlstributor*         + l l.*    (Zt~phaals
     ~OtlrS)
           The statute,  on lta face, and In plak*tenns         laya the-
tax upon the person vho manufacturers or produces in, or imports
cement into this atste aud thereafter      diotrlbutes,    sells or uses
it.   The %EJIis measured by the mount of cement distributed,           sold
or used, after euch marmfaature, production        or importation and aa-
c~e8 ot the time of suoh dlatrlbutlon,        sale or use.     Ho person,
other than the “distributor,’     as defined in the etatute,       ever be-
comes l~iableforthe payment of the tax.         It 1s an occupation tax
statute,  and.there is no doubt of the Leglslative.intenta           “The
statute levies a te;X for eaoh100 pouikd; of cement on those manu-
facturing and Import                            Trinity Portl8nd Cement
Co. vs. State, 144 S“.g.Tci)    ‘gy%;         of error refused).
            In our opinion lo. O-3079 ve held the diistrlbutor     llable
for 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;5U. 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 tax 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
gasoline mold, could not, oonstltutlonally,       be oolleoted  from a
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  or 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
defin1 tely ovemuled.        state of Alabama vs. ~r%.ng8 Boozer, 62 sup.
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
salon price and collsat       it fwzm the purchaser,     3alos vere made to
a "cost-plus     contractor'    vh6 was engaged In oonatructing    an snay
camp under contract vith the United states Government.           In holding
the tax 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,
     prohibita    a tax sxaated from the oonEroctor8 merely
     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-
     ties.    l?!maasertkd right of the one to be free of tax-
     ation      the  other doer not spell lmaunlt           fron pa
     %he adzd coets, attrlbutaixleto 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
                                                  ~~--
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-
      om,   I~purchaaI~gand            brh.&n.g the bu?.ldIngmeterlal
      into  the state and 5~ zrppropriatIng%t to their aoA=
     tract vith     the ~VOPRBl~At,      W0r0 AOt tP@At8     OF &8trU-
     nentalltles     of.the   Ciovermmsntt    ad they ace not ml&wed
     of the tax. to vhloh they would othemriee be subjeot,                q
     remon     or tm    fact that     they are eovezmwmt Contraotors.
     xl- the 8 tate   lau ‘lays the tax qtllem            rather than the.
     ~lvldu.al vlth whom #my enter                0 a ooet-plus oantraot
     mS     the  PrSSeAt    OAe,  then it ef'foOt0 the ~(;dVrBFAtWAt,
     r?3rethe 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
upon gross receipts      from salos of property.     The Federal Fam Loaa
Act exempted,tho bank from Federal, State snd loos1 taxation, vith
oertain exceptions.        The Court held that the 86bS     t8iViBa     AOtpy-
able c~ property sold to the Beck, becmee th6 bmk v&i exempt, by
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 tax 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 r 8 for pqmnt           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.     Trinity     Port-
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-
pation  tax   is  UpOA the pel’8CNIVhO Sk6lWfROtU.r%~ Or ~rod~c6S    cesJ%Ikt
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~ b8001810a 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 or use tax &all be Included In the
oement prioe quotatlans,     and that no ruch tax will be paid by De-
fense Plant corporation.      Thus, raeltjter by our statute ~0x9 by the
oontraat,   ¶.A this 3mGaAae, does the tax ever beoome the llabillty
of 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 for the brief,   above referred    to, as well as for the dooumeA-
tary evldenoe furnished,     all OS vhtoh has been very bsnefiolal   to us.

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