                                         'Acmm~    ?a. ~~MXAB
PRPCE     UDANPEE
A-mnIE1    nl.?nlCar\x.

                                          August   7, 1952


          Hon. Robert         S, Calvert
           Comptroller        of Public Accotits
          Austin.     Texas                        Opinion No. V-1496

                                                   Re:   Legality of refunding motor
                                                         fuel tax payments to persons
                                                         supplying sand, gravel, and
                                                         ready mixed concrete to
                                                         highway construction   COP?
           Dear Mr., Calvert:                            tractors.

                          Your requesr   for an opinfon of this office   reads   as
          follows:

                      “We desire your opinion regarding the legality of ~
                 paying motor fuel tax refund claims filed wder the     .
                 two conditions explained begow.

                       “Section l3 (b), Article  7065b, Vernon      Annotatec
                 ~Civil Statutes, pxx3vide.s in part as follows:

                          ‘Provided,  however,   no tax refund shail be
                          paid to any person on motor fuel used in
                          any constr,uction or maintenance work which
                          is paid for from any State funds to which
                          motor fuel tax collections   are allocated or
                          which is paid jointly from any such State
                          funds and Federal funds, etc.’

                       “Persons   engaged in the business     of processing  sand
                  and gravel, and ready mired concrete frequently sell and’
                  deliver such products to contractors     engaged in the con-
                  struction and maintenance    of State highways for which pay-
                  ment is made to such contractors      from funds to which
                  motor fuel tar collections   are allocated.    The contractor
                  in turn pays for the sand, gravel and ready ..mix concrete
                  out of the payment received by him,. While the delivery
                  of the sand, gravel and concrete constitutes      a sale of the
                  pr~oduct the sellers  are usually required to deIiver their
                  products on and over the highway project unde~r conatruci
                  tion where it is thereafter   spread, rolled or u?cd by the
                  contrac~tor.

                          l
                         Th& department has heretofore    paid tax refunds to
                  the sand, gravel and concrete diatribntors   on m&of   fuel
                  use’d in the processing of such producto On the pre’mis~e
Hon. Robert   S. Calvert.   page 2 (V-1496)




     that such persons are merely   sellers of a product used
     in the construction and maintenance    of State highways
     paid for from motor fuel tax collections    distinguishing
     them from the contractors   who actually perform the
     construction  and maintenance work.

           “In another claim filed by a person engaged in the
     business of crushing and selling crushed rock and gravel,,
     .a contractor  engaged in the construction  of s~ever.al state
     highway projects paid for from motor fuel tax collections,
     has contracted with the rock and gravel processor       to
      move his rock crushing equipment to gravel pits leased
     by the highway contractor.    In this case the rock and
      gravel processor   does not sell the crushed rockand gravel
      to the highway contractor,  he merely crushes and pre-
      pares the rock and gravel for the contractor for which
     he is paid a fixed price per square yard of ciushed rock
     or gravel prepared.

           “The only claim filed under the above circumstances
      is befng held in suspense pending your opinion.

           ‘Will you please advise this department whether
      the law precludes  payme~nt of tax ref:unds to persons
     ,who sell and deliver sand, gravel and ready mured
      concre’te under the conditions stated above tomhighway
      contractors  who pay them for such products out of funds
      received by thencontractor   from State funds to which
      motor fuel tax collections  are allocated?

           ‘Will you likewis’e advise us whether the Comptrol-
     ler is,precludedby   law from paying a tax refund to a rock
     and gravel crusher who is paid by a highway contractor
     on a yardage basis for crushing rock and gravel for him
     to be used by said contractor      in the construction of a
     highway project paid for out of a fund to which motor
     fuel tax collections   are allocated?”

              It is thus seen that the highway contractors   using the sand,
 ,gravel. concrete mix, and the processe~d or crushed stone, are
  engaged in construction      or maintenance work which is paid for
  from State funds to which motor fuel tax collections       are allocated.
.We assume for the purposes of this opinion that the use of the
   motor fuel in question fully meets the requirements       of Article
   7065bAl3, Vernon’s     Civil Statutes, for a tax refund, and that the
  ‘use~r of the motor fuel would be entitled to reimbursement        of. the
   tax paid except for the prohibition or exception provided for in
  Article 7065byU(b),      quoted above in your letter.
Hon. Robert    SC Calvert,   Rage’3   (V-1496)




           It is clear that if the highway contractor had himself
furnfshed the sand, gravel, and ready mixed conc~rete. or had
crushed.the     rock and gravel for use in construction       or main-
tenance work which was paid for out of such State funds he .would
not be entitled~to any refund of motor fuel taxes.          The fact that
the particular work was performed under a sub-contract, lease,
rental, or other arrangement         with the highwaycontractor       is imy
material in determining       the ,legalityof   the tax refund.   In this
connection,.it,   is stated inAttorney      General’s  Opinion’V-1379
(1951):

            “r;he real test is that the highway construction
      and maintenance work is performed            and paid for from
     motorfuel        taxes allocated to l&e Highway Department
     or the countie:s in connection with highway work.            The
     incidental fact that the prime contractor          engages and
      pays the subcontractor         who performs    a certain portion
     of the work is nqf ‘m$terial.         That the subcontractor
      useu the motor.fuel        in construction  and maintenance
     ~work on the highwsrys must be conceded.            We think
      that Rortion of. the exception which reads, ‘ . . . which
      is paidfor     from.aiy     State funds to which motor fuel
     .ts.x collztions      are allocated~.. . .’ does not have the
      effect of excluding from the exception the subcontract-           -
      ors simply because they are ~paid by the prime con-
      tractor.     It is sufficient to bring them within the ex-
      ception that they perform construction          and mainten-     ‘.
      ante work which is paid for from allocated funds.            The
     work is actually done as a part of the work which the
      prime contractor        under his contract with the Highway
      Department       obligates himself to perform and which k
      paid -for from allocated funds.”

           It is our opinion that under the facts submitted,  persons
using motor fuel in seIIing and delivering sand, gravel, and ready
mixed concr&e,:;or,,.crushing    and processing  rock and gravel for
a highway contractor     engaged in highway construction   or mainten-
ance work paid~ for,,from State funds to which motor fuel tax Cole
lections are allocated,    are using such motor fuels in connection
with such constructio,a~ or mainte.nance work, .and therefore are
not entitled to a refitrid of motor fuel taxes paid by them:
I-&OIL
     Robert Si Cakeit,   page 4 (V-1496) i



                            SUMMARY           .'


          Pe~rsons selIing and delivering sand, gravel,
     and concrete mix to, or processing or crnshing
     gravel or rock for, highway contractors engaged
     in construction or maintenance work paid for with
     State funds to which motor fuel collections are
     allocated are not entiled to a refund of motor fuel
     taxes upon motor fuel purch&sed and used in con:
     nection with such work. Art. 7065b-U(b), V.C.S.;
     .Att”y Gen; Op:V-l379   (19%);

                                        Yours very truly,

APPROVED:                                 PRICE DANIEL
                                        ,Attorney ~General
: W; V,~Geppert
  Taxation Division
               .
  E. Jacobson.                  ,. ~,   .$$qgd!jg&&
  R.eviewing Assist&
                                             .?bsiq.t&t ,~
 Charles D&&h&r
 Fhst Assistant, ’
