. ..   -




 Hoa. Qeo. He Sheppard
 Comptrollerof PublicAmounts
 Austin, Texas

  Dear sin                         OpiaionHo. 04656
                                   Be: Whothsr lea~orwould bs subjeot
                                   to gram receiptstax onthe m&al
                                   reosivadfrom 1esPae using motor
                                   trucksfor haulingbetweertwo,or
                                   more iaoorporatedtowna.

                                   Could lossordeduot driver'8salary,
                                   iaeuramo, or other mainteaamooox-
                                   parse befor. ocmlpnting
                                                         the tax?

        Your letterof FeW.~arg7, 1944, submitafor our opiaioaqueatioa
  thereiaooatainedwhich we quote as follows:

  "Article7066b(a),V.A.C.S.,hpot?eaa grosr recoiph tu ad is u     fol-
  lows:

  wQaoh iadividnal,partnership,aompany,asroaiatioa,or oorporatioado-
  iag businessas a %otor bus oompeay"as definedin Chapter270, Aot8
  Ramla~ Sessioaof.theFortiethLegislaturs,as amendedbyiho Aots of 1929,
  First Called Sessioaof the Forty-firstLegislature,Chapter70, or as
  "motoroarrier"or *aoatraotoarrler"as dofimsdin Chapter277, Aots
  Regular6espioaof the Ebrty-secomibgislature, over and by use of the
  publiohi     ys of this,State,shall-m&o quarterlyon the first day of
  January,P pril, July, amd Ootoberof eeoh year, a nporb to the Comptml-
  ler, under oath, of the iadividual,partaorship,aompfmy,assooiation,or
  oorporationly its preeideat,treasurer,or secretary,ehowiagthe gross
  amountreceivedfrom intrastatelmiaess doao withim this State in thm
  paymentof ohargeafor transportingpersona for compem8atio8and uy
  freightor conmodii;g for hire, or from other 8o~ro.aof rwemm reooivod
  from iatrastatelusi~esswithin this State during the nuarter wxt pry-
  ceding. Said individual,partnership,ampsry, aelbiatioa, or aorpora-
  tion at the time of making said report, shall pay to the State Treasurer
  an ocoupatioa~SX for the quarterbegimimg oa said date equal to tm aad
  two&snths (2.2) per oat of said gross reooipts,a8 shm w said report.
  Provided,however,carriersof parsoasor propertywho are requiredto
  pay aa intangibleassetstax under the laws of this Stat., are hereby ax-
  emptedfrom the provisionsof this kticle of this ALat.1
Hon. Geo. H. Sheppati,page 2 (0-6865)



*Int%d whers truok o%aers how been making contraat with large traaafersad
freightoompaniesby lersi8gtheir trucks,furni8hingdriver,payingvorkmen*s
compensationinsuranceon said driver, and ppyillgall ooats aad expensesof
operations,maintelp&loeaad upkeep of said equimt,   eto. See oopy of ooxtraot
form betweenLessee and Lessor.

"The Lessee operatesunder a oomon carrier'spetit and is subjecttothe intarr-
gible tax.

"Pleasetell me if the Lessorwould be subjeotto the gross reoeipbstax oaths
rental reoeivvedfrom Lessee where hauls are made betweu two or mor4 incorporated
towns within this State. Also, would the Lessorbe permittedto deduct the driv-
or's salary,insuraaceor othermaintenanceexpeasebefore computingthe tax?"

             You also attach copy of a lease agreementheaded at the top "Exhibit
A," to be ooasideredin connectionnith your letter in answeringyour questioa.
Porthe sake of brevi%y,thie leame agreementis not copiedher&a, but retained
by us, as we assumeyou have a oopy or oaa seoure anotherif you deem it necessa-
rg.
             The taxing aot here involvedrsfers to Chapter277, Acts RegularSes-
sion, 42ad Lapslature, V.R.C.S.,for a definitioaof *motor oarrier"and "con-
tract carrier subjectto the tax.

            It thereforebsoo~~saeoessaryto lay Article 7066b(a),V.R.C.S.,
aloagsidethe statutorydefiritioar,thereinreferredto to see if a lessor of
motor equipmentunderthe ooaditionsaatiaaedia your letter and the lease
agreementsuhuittedby you is a "motorcarrier".or"oontraotmarrier,"aad thus
subjectto the tax. Chapter 277, supra,definesa Tmotorcarrier"as.follows:

*The term 'motoroerisr' means aq person,firm, oorporation,caupamy,copart-
nership,assooiatioaor joint stock assooiation,and their lessees,reoeivars
or trusteesappointedby any courtwhatsoeverowaiag,ooi&r           mama i
operatingor causingto be operatedany motor-propells  ?i--d%e*S-
                                                        ve
portingpropertyfor compensationor hire war my publio highmy iathis State,
where in the oourse o? suoh Craasportationa highwaybetween two or more incor-
porated cities,towns or villagesis traversed:providedthat the tow 'motor
aarrier' as used in this Aot shall not iaolude,and this AOt shallnot apply
to motor~vehiolesoperatedexclusivelywithiathe inaorporatodlimits of cities
or towas."(Emphasisours)

                A “ooatraot   carrier”is definedas follows:

a(h) The term loontractcarrier'manas any motor carrieras hereinabovedefined
bransportingproperbyfor oompensatioaor hire over aw highmuyiathis State
&her than as a common carrisr.x

                 This lessoris uaqdti~~ebly, in the languageof the above defi-
nition,   a   "person,firm or corporatiqnf"
                                          it ems,  controle,manages,operates
Hon. Gee. H. Sheppard,page 3   (O-6656)



or oausesto be operateda “motorpropelledvehicleused ia tratwpofiing    prop
erty for ocsnpensatioaor hire" betweentwo or more incorporatedcities,towns
or villages,a8 distinguishedfrom exclusiveoparatioaia citiesor t-8.
Such a "lessor"as posed in your letterfails squarelydthinthe putiaw of the
statutorydefiaition,&ether treated as a "motorarrier"or "oontraotcarrier,"
and heaoe in our viewis subjectto the tax imposedby A&iole.7066b(a),supra.
Wesre not withoub judicialoomf%rmatiorofIfiis aonolusioa,althoughthe cases
we note are not tax oa8e8, but iwolvs penal violationsof lapter277, supra.
This is not important,however,for we wed only to determi.la if such lessor
is a "motorcarrier"or "contractcarrier"inthe purviewofthe si,stutory    dofiB
nitica adoptedia the Aot, dich is the same for taxingpurposesas for viola-
tions of the Act3 if 80, tax liabilifyfollowsas a matter of law under the
expfessterms of the taxing act.

              The SupremeCourt, ia the mase of &w Way Lumber Co., et al, v.
Smith, 96 S.W. (2d) 262, in an iajunotionsuit by ths Lumber Ccmpaxyagainst
the members ofthe RailroadCormnissioa  and some of its executiveofficerscon-
oernedprimarilywith motor fratlsportation,  sought to restraininterference
with its operationsupon the ground it was not a "motorcarrier"or "contract
carrier"as definedin the Motor Carrier Act (Chapter277, supra). The Court
said:

". . . The term %oter oarrier'as defiaedin the act iaoludssevery one oper
sting 'anymotor propelledvehialeused in transportingpropertiy   for ooanpensa-
tion or hire over axy publio highwayinthis State,'and exoeptothose 'operated
exolusivelywithin the incorporatedlimits of oitiesor tarns.* The term 'oas-
man carrier'bps long had a def'ititemaaing in this state, and the Legislature
saw no neoessityfor defiaiagthat term.   However,the Legislaturedid see fit
to define the tezms 'motoroarrier*md 'contractcarrier.* Thus it clearly
appearsin subsections(g) and (h).ofseotioa1 of the ack(Veraoa’s     Ann CiV.
St. art. 911b, 1 1) 'hat the Legislatureintendedto briag under the act*weq
person who operatesau(yr&or propelledvehiolr irtraasportimgpropertyfor
compensationor hire oa the public highways,outsideof oities,eitheras a
o-on oarrieror as a contractoarrier."(Ekaphasis   ours)

             The case of Reavlayv. State, (Coutiof Criminal&paalr) 63 S-W.
(2d) 709, involveda criminalprossoution,thedefaaseof the dofsnlsstbaiing
that he did not come sithi.athe
                              definitionof the Aot.  Defendantiathiscnse
leasedhis truck uder a writtenagrament,as is the case here, some of the
provisionsbeing similarto the provisionsof the lease submittedby you. The
lease agreementinvolvedin this1oaseis set out in the opinionand for oompar-
ative purposeswe quote so much as we deem pertinsntr
"Appall-t R-M the owner of the truck aad trailerdescribediatb   fOllOWing
writtea agreement*
     "%%moranda of agreementmade and eaterediato this Fourthday of
      April, A.D., 1932, b and betweenArmour & C-say, a corporation,
      first prty,and Thos.W. Reavley,Jr., of Baoogdoches,Texas, sac-
      ond party.
                                                                       .




Hon. Gee. H. Sheppard,page 4 (O-5866)



"Whereas secondparty is the owner of.a osrkaiaChevrolettruck and trailer
of fivetoae capacity,motor number T2853666,oarryine:
                                                   1932 lioeasenumber
166835,suitablefor the haulingamd deliveringof 'mat and mt    products,
aad

"Whereas first prty, in the operationof its Raoogdoohes,Texas, Inxnchis
williagto hire said truck for use in the hauling"ad deli sriag of the prod-
uots sold ia said Wanoh,

*'eon, therefore,
                this   agreementwitness&h:

"'(1) Second party hereby give" to first party the sole and exclusiveuse of the
truok above mentioned,togetherwith a competentdriverfor the sane,who shall
at all times bs subjectto the ooatroland directionof first parby in and about
the conductof its business,ia the haulingand deliveringof its produotsas
aforesaid.*

"'(2) Secondparty shallkeep said truck in good working coaditioaaad shall pey
            of its oporatioa,
all expc~~ser                 iacludtigthe salary or wages ofthe driver, and
also includingany and all city, state or counwtaxes, fees and license".

"S(3) Secondparty shall also iademaifyaad hold first party hadless from spy
claimswhioh may be made again& it by the diiver or driversof saidtruck under
the ocmpensationlaws of the State of Texa8,ia the we& of injuryto said driv-
er or drivers.

"'(4) In the swat of said truck beoonxiagdisabledbeoauseof aooidentor break-
down, or for a9y other masoa, second pax-byshall substituteanothertrmok of
equal oapaoitgsad servioeability during.suchtime as the truck oovered@J this
contractnuy be unavailable.

"'(5) It is estimatedthat said truckwill lzeobligedto travelapproximately
Thirteenhtmdrud (1,300)miles per nsek over all kinds of roads, but it is ex-
prasslyunderstoodand agreed that ThSrkeenhundred(1,300)miles shallbe
regardedonly as an averageweek's travel and that any exoessin any nsek shall
not be regarded8s a breach of this contraoton the part of the first parby, nor
make it liableto saoondparty for any greaterocmpeasation  than is hereiaafber
named.

“‘(6, First pm-Q shall pay seooiud pa-by the sum of sixty dollars ($60.00)per
week as full oompsnsationfor the use of mzoh tick, the serviossoftie driver,
aad all expensesof operatingthe truok as above set forth.

"t(7) 5%" driverof said truck shalltake receiptsfran customersof first party,
a8 may ts directed,and shall,in the case of C.O.D.orders,oolbct fkom such
oustanersbefore deliveryof the goods, and secoad party shall be responsibleto
first party for the prmnptremittsnosto first party of all moseyscolboted
from its custuaersoa C.O.D.orders or otherwIse.
Hon. Gee. H. Sheppard,5 (0-56SS)



*'The terms of this contractshall k rix months frumthe date hereof,Lut
first parby shall have the fight to tanninatethe anam oa ten (10) days'
notice to seacad parts, iathe ewmt of dissahisfaation  withthearrangeiaent.

lVzeouted in dupliaatethe day aai year first above mittin.

                                              "'Anwurpnd CQE~
                              "'(Signed)J. B. Scott, First Party
                                 (Signed)Thea.Y. Raavley,Jr.,
                                                  SecoadPC&y.'

*Underthe foregoingagreemeat,appellant'struck ~8 operatedover a pu%lio
highway from Fort Rixth to Naoogdoohes
                                     in-carrgiagthe produtiaof Amour & Co.
The driver of the trucknns employedby appellamb Armour dcCo. haddhe sole
and e~~lusivause of the truck.~The driveras subjectto the oomtrolaad di-
x-e&ionof the campanyinthe ooaduotof its lmsiaeasim haulingand deliver-
ing its products.



"Appellanttakesthe positiolthat the uvidsacean the prt of %he state shows
thatthe truok -+#~a not engagedin the transportatioaof propertyfor oowpas~-
tioa or hire, but was beiag operatedexclusivelyby Armour & Co. in the hauling
of its own products. Wa are unable to %rirrgonralavmsto appsllut's via.
We are amstrained to hold that thetrial00uz-b  ma arranted in oomoludingthat
the method employed18s merely a duvioawhioh ema%lodappellamtto um the
truck in trmsporting propertyfor oomspmation or hire without first having
compliedwith the statutesto whioh referencehas bsea made. Under the nwrman-
dum of agreansrt,appellantpaid all of the expensesof operatin, inoluding
the wages of *he dpiwr. He kept the truok ia good mnuiag oondition. Ho
agreed to hold Armur   & Co. hamless fran any olaimrhioh might be made against
said o~npamylythe driver under the compensation21-s of Teas in the eveat
of injuryto the d&w.       Ha obligatedhimselfto substituteanothertruck ia
l$heevent of a beakdown, or if for alrgother raasoa the tmok in question
could not be used. The mntraot stipulatedthe appreximatenumber of miles
the truck would be driven a week: providedthat any excessmileage shouldnot
be consideredas a beach of the oontraot,nor make Armour & Co. liablefor
greateramqxmsatioa than $60 per week. AppellPrtras msponsi%le to the oan-
pany for the ~mnpt ranittanoeof all oolleotionamade *the dripar."

             It follows from the foregoingthat the lessormder the oirom-
stanoessubitted by you is liablefor the gross recoipdstax imposedby Arti-
ale 7066b (a), supra,without deductingdriver'ssalary,imuranw ard other
Hon. Geo. H. Sheppard,page 6 (06856)



maimteuaos expense,and you am aooordiaglyso advised.
                                            Yourn vary truly

                                       A!lTORBFXGENER4LOF'IXXAS

                                        By /s/L. Pe Lollar

                                              L. P. LolIar
                                                 Assishat



APPROVEDE&R 14, 1944
/s/Gee. P. Blaokburn
ii   ting)                                        8y B.W.B.
AOFcNEYGEI?EBbcOFl%fb.S
 4                                                Chairmaa
