                                                                                ,,.
                                                                               .,:, ,,: ,,, ..’        :       ~.
                                                :,,‘.No$ember
                                                    :                13,, $3
                                ~, ,,   .,:.
    ,,, ,,.
                                                                      “.‘bpinion,:I\lo~.IIH-     ( $f’   ~’
  The H&orib:Le’ Jack ,&is&
                                                 ,,,         ;
  Chief Clerk      in.,:~,I,,
  ,General,,L&d      Office:, .:I’,,. :l., ., ..,         ,,~~.      ,,,.,:,Re: .,,: .~$abllity .of ,St+te and
  Austin,,   Texa.s .78701,     ,~~:~..    :.:  ,,,  :.:,    ~:~..:
                                                                .,,,,
                                                                    ~  ,~.          .Its a~gencles ,for A.irway
                         ..~,,,T,       ..,..     ~.   ,,:    ,,..                    i]‘se   Tax’on       civil     aircraft
  Dear        Mr.~‘Giberson:                                             .:

          Your letter requesting.our’opinion     asks ,whether                            the General   Land
  Office,   as +,n,agency ,of the State.of Texas, #&required                               as.a matter   of law,
  to pay an Airway     Us,e..Tax on state-owned   ai&craft~a$d”:if                            it is, whether
  the agency ib.o’bligat&d    to :pay interest and pen&ties”&                              the amount not
  timely   paid.;                                              ,/                         ~,::

         As bagkgfound      to:this request .are. the factk ~that in a cause tried in
  .the United states~.DistFict.,,Court,:~or   th.:‘:~estcrn1,~i5tljct       of Tellas styled
  Stat.e of T.&xas,,v.. United State6..of .Aineii&,      ~..,thk’::State:,questianea its liabili.ty
   under $4261 of Title 26 of the United States ‘&&y               Internal    Revenue      Cod,e
   of 1954, fqr taxes. impo’se~d upon,the amount paid .by~~emp.loyees of the State
  for transportation.?n     off+al.State    ,business.:      The State k’ought a refund.
                               ,.
          Tha$.suit was,,$ermi&&d.dy          a’.jtidg&ntlof &United      States District
  Court in June,:of ..1?,72, denying the c:laim ,o! the state.       That deci,sion was
  affirmed    by the ,Uni,t,e,d,zSt+tes Cou,rt.of Appeals f.or,.t&&f’th    Circuit,  per
  curiam,    in December,.,,$9?2,      &d is’now a final judg&&nt.


   ....~  In the~meantime,.    when the p,uestion:of your+gency’s         ,Liabili.ty for the
. tax on the use of civi:l aircraft,   .imposed’by      5 4491 of Tit,ie 26,~ ,was ,brought
   to the attention, of the Att,orney ,G&eral’s     office, : y&~&$$&vis’ed          apparent:ly
   that this office ,was challlenging  the 1iabi:tity of Sta’te age&d;       &I payment of
 ..such taxes an+ that you shou:ld not pay the tax.
               ..~..~’
        In the pribr suif, which’&      &ce,‘fii&b,   ‘it ‘was
                                                           “’ ” Our c&e&ion                                         that the
 tax levied  upon transportation   of State employees      on State business                                       was




                                                       p.    697
The   Honorable    Jack Giberson,      page   2   (H-149)




unconstitutional as being violative         of an implied governmenta          immunity.
The United States District  Court,         in its conclusions  of law,      r,ejected this      .
contention     holding that the tax could be imposed          constitutionaIl:ly  upon
individual    State employees      traveling   on official   State business.      The Court
pointed to the fact that the purpose of these taxes was to provide                 additional
revenue     to finance increased      government      outlays in the expansion      and
deve.lopment      of airport   and airway systems and to impose            those additional
costs upon the users of the system.             It held that whether      the tax was con-
sidered     as an exercise     by Congress    of its power to ,re,gu.late interstate
commerce       ‘or as an exercise     of the taxing power,      it was constitutional      as
applied    to employees      of the State of Texas.

                        “The airway user charge is not a tax ins the
               traditional    sense, but instead is a charge for services
               rendered     and represents   a quid pro quo, and as such,
               is outside the scope of the doctrine      of implied inter-
               governmenta,      tax immunity.   . . . ”

                       “Nothing   in the historical     basis of dual sover-
               eignty underlying     the principle    of state immunity      from
               federal   taxation requires     that the states continue to
               receive    the benefit of airwayfaci,lities      and services
               actual:ly used by states but furnished         by the Federal
               Government      without bearing their equitable        share of
               the costs incurred     in providing     those particular    bene-
               fits.   Even employees      of the Federal     Government       must
               pay the air transportation       charge.     No :logical reason
               exists why all users of the air transportation           system
                should not pay their fair share of such costs. ”

       Since the issues are not identical,   the State of Texas is not estopped
fromquestioning&     imposition of the tax on your aircraft.   Nevertheless,    it
is our opinion that it would be unfruitful to question the tax.

        Your letter requesting   our opinion also asks whether you. will be
ob:ligated to pay interest   and penallties on the unpaid portions of the tax.




                                         p. 690
The   Honorabh    Jack Gibeison,:   ‘page :3”!.(H-149’)




       Section 660,l ,of’Title 26 of the United States Code, the 1nt:ernal j
Revenue    Code of 1954, requires     the payment &interest     at the rate of 6%
per annum in the event any tax imposed by the Code is not paid on or
before the date prescribed     for its payment.    The interest    is co:llected
as a compensation     for use of the money,    and not as.a penalty.       Vick:v.
Phinney.    414 F. 2d 444 (5th Cir. 1969);

        Penalties,, which are governed       by 5 6672 of ,Title 26 are assess’ed
in the nature of punishment      for failing to collect     and pay over a tax when
due.    By the ,terms of the section,     those, liab:k are’ “shy person’!     defined
in $6671 as including”‘an     officer  or employee      .of a corporation,    oi'a .mem-
ber or employee     of a partnership,     who as such officer,      ‘employee    or mem-
ber ,is under a duty to per:form the act in respect          of which the violation
occur.3. ” Governmental      agencies    are not included.       Cascade    County v.
Pemdl,      67 F. S~pp. 253 (D. C, Mont.,        1946).

        It is our opinion,   therefore,    ‘that your agency should pay the tax
imposed     by 5 4491, et seq.,    of Title 26 of the United States Code, imposed
for the use of c.ivil aircra.ft and owes interest      on’those taxes from the time
they were due.: It is, further our opinion that the State is not liable for
penaltic,s.

                                      SUMMARY

                     Under the decision      in State of Texas v. United States
              of America     that the governmental      immunity    of the State of
               Texas and the doctrine     of dual sovereignty      do not exempt
              the State from liability    for federal    taxes upon the use of
              civil aircraft   where the taxes are imposed        for the purpose
              of constructing    and operating    airports    and airways,   the
              Land Office shou,ld pay,similar        taxes levied   on a state-
              owned aircraft.      The State may be liable for interest         on
              the unpaid taxes but is not liable for any penalty.




                                              Attorney    General   of Texas
                                                                                                           ~~



                                       -      .-,   .,,,--.-I   ~--,..-.,,        ~-~   .,,,.-..-,,...,-        ~-   .._._,   _   ..,_,   ,.__,._,,_




The   Honorable   Jack Giberson,     page,4         (H;149)




APPRQVED:




DAVID M. KENDALL,         Chairman
Opinion Committee




                                                                             ,.




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