Hon. Robert S. Calvert
Comptroller of Publfc Accounts
Austin, Texas
                     Opfnion No. V-1383
                      Re:   Applfcabflfty  of gross re-
                            ceipts taxes to long dis-
                            tance toll receipts   of
                            Mountain States Telephone
                            Company on calls between
                            Texas points via cables in
Dear Hr. Calvert:           New Mexfco.
          Your request for    an opfnfon   of this   offfce
reads in part as follows:
           “Article   70’70 V.C.S. reads in part
     as follows:     (1)   ‘Each indivfdual,    com-
     pany, corporation,     or association    ownfng,
     operating,    managing, OP controlling     any
     telephone lfne OP lines,      OF any telephones
     within this State and chargfng for the use
     of same, shall make quarterly,        on the first
     day of January, Ap~fl, July and Octobep of
     each year, a report to the Comptroller,         un-
     der oath oY the indfvfdual,       or of the )resf-
     dent, treasurer,     or superintendent    of such
     company, corporation,     or association     show-
     ing the gross amount received from ai1 busf-
     ness within this State during the preeedfng
     quarter fn the payment of charges for the
     use of its line or Lines, telephone and
     telephones,    and from the lease OP use of any
     wires or equipment within this State during
     said quarter.D
          “It has come to B$ attention that Moun-
     tain Mates Telephone Company, with offices
     at El Paso, Texas, routes a number of their
     long distance calls from 83 Paso, Texas to
     other pofnts fn Texas via their own cables
     In New Mexfeo.
Hon. Robert So Calvertp    page 2    (V-1383)


           “Please advfse me whether or not
     toll calls fr-om one Texas point to an-
     other Texas pofnt routed via another
     State as described above, fs titer-
     state commerce? and as such exempt
     from the Texas Gross Recefpes Taxam
           It becomes immediately apparent that the
answer to this question hinges upon the doternina-
tion of whether the receipts     are derfved from lntsr-
state coBBerco.   If so, then such recefpts     may be
wholly, orp at least,  partfally    exempt from State ‘~
taxatfon under the Commerce Clause.       UoS. Con&. Arv.
1, See. 8.
           It has not been suggested that the inter- ’
state routing through New Mexico by the Mountain
States Telephone Company of the toll calls from El
Paso to other points in Texes was intentionally       ntil-
Isad as a means of avoldfng this tax.      We ass-e    that
such routing was necessary or expedient and that the
company has acted in good faith*      If the contrary
should appear, an entirely  different    question would
bo presentedl.
          We will not attempt to review or to dfstin-
guish the many eases relating     to this interstate     eom-
merce question.    It suffices   to state that thfs is an
%re% of %fce dfsttictions.w       We enclosea cop7 of At-
torney General’s Opfnion Woo V-994 (1950) wherein we
raviewrd some of the peeent interstate      commerce cases.
It is a general rule that a State cannot levy a tax
so as to place a burden on, discriminate       against,   OP
for the privilege    of engaging in interstate    commerce.
It is also generally    sttatpd that gross reeripts     de-
rived from interstate    commerce are exempt from State
texat1on.   These rules9 however, oversinpllfy       the ques-
tion and are helpful in answering speeffie       questfoae
in that they serve only as guide posts*
           In the detrrmiziatfon    of whether a Stata tax
                                        Suprrme Court in
                                           309 U.S. 33
                                        ;: a to&s8
   1




Hon. Robert     S. Calvert,   page 3   (V-1383)


               “Section 8 of the Constitution    de-
       clares    that 8Congress shall have pewer
                to regulate commerce with foreign
       ia;i.ks,     and among the several States.
        0 0 .I In fmposfng taxes folk state pur-
       poses a state is not exerefsing       any
       power which the Constitution      has con-
       ferred upon Congress.      ;Tt Is only whw
         et een teh states or with for eianL a-
       bow
               to %n g&g@. which ieprfepes     the
               itv conferred uoo~ress.         that
       the tax can be said t       xceed   enstm-
                                get Gfbbozs
                              87; South Caroh
                           Barnwell B g
       U.S. 177, 185 ‘Forms of st~~e”~a~~?ion       ~
       whose tendenc; is to prohibit      the com-
       merce or place it at a disadvantage 8s
       compared or in competition with intra-
       state commerce 9 and ~%nystate tax which
       discriminates    against the commerce, are
       familiar   examples of the exercise    of
       state taxing power in an unconstitution-
       al m%nner9 because of its obvious regu-
       latory effect    upon commerce between the
       states.

       Brce       clause to relfeve  those ennag&
       fp interstate    commerce of theiP just




       cause 9 f~ some manner, it has an effect
       upon commerce between the states,         and
       there are many forms of tax whose burdens,
       when dfstrfbutrd     through the play of eco-
       nomfc forces,    affect    interstate   commerce,
       which nevertheless      fall short of the regu-
       lation of the commerce which the Constitu-
       tion leaves to Congress.          O O D Non-
       dfscrimfnatory    taxation of the instrument-
       alaties   of interstate      commerp(9eis not pro-
  Hon. Robert   S. Calvert,   page 4     (V-1383)




               It is clear that, in view of the recent
  decisions,    a State can tax receipts arising,   in whole
  or in part, from fnterstatr    commerce if therm are lo-
  cal activities    of incident&  upon which to base the
  tax and t e tax does not dfscrfafnate     against such
  commerce. 9
             ,., While the Commerce Clause does not expressly
.’ preqlude St~ate taxation of Interstate       commerce9 the
   power of the States to tax interstate        commerce was llm-
   ited because It was I’jeognixed as bring nthe dominant
   p*er   over commerce O      Thus interstate    commerce is ipa-
   mu&e only from -such State taxation that has the effect
   of actually    regulating  such eommerca* The Court has,
                                            ently from taxation.
                                            9 335 U.S. 80 (1948)




                                       v. stone,    335 U.S. 80
         central Greyhouhd Lines v.: ~ealeyi.~334U.S. 653
       ); Western Live S&x?k v. Bureau of Revenue, 303
  uos. 250 (1938);stond’v.    Interstato letural ea.9 Coo
  103 F,2d 544 (C&LAO ‘5th 1939 aff, 308 U.S. !%!2);~
  Southern Natural Gas CO.~v. Alabama 301 UOS. 148 (1937)?
    Aa/ Freeman v. Bewit, 329 UoSo 244 (1946).
.      .




    Hon. Robert S. Calvert, page 5       (V-1383)      ,.’

           When state taxation of activities     or
           property within a state is involved,
           differentconsiderations      control.  It
           is no longer a question of actual fn-
           terruptfon    of the operation of con-




                While the Court formerly indulged In legal
     fictions  in certain cfr&mstances     by datrrafnfng
     that Interstate   conueorco was local in nature In OP-
     der to uphold the State taxation or regulation,         the
     Court has indicated   that it will recognize     interstate
     commerce as such and then determine vhether the State
    .tax burdens the commerce in the constituttional        sense.
     The toll calls which are routed through I&w Mexico
     rast be treated as transac~ons      constituting    inter-
     state commerce.    In entra    GreLgypdJljpes     P 0 Mea- ,
     334 U-S. 653 (19tiI,Cthe    Court said:
                 "It is too late in the day to deny
           that transportation  which leaves a State
           and enters another State Is ‘Commerce
           * * * among the several states’ simply
           because the points from and to are in
           the same State.”    (334 UoSa at 655)
               The same general rules are applied fn drter-
    mining the validity  of taxes levied upon interstate
    communication as uDon interstate




                             ;e :dePfred from interstate   zc6mmu-
    nication will. be sustained, If such receipts     are ‘attrl-
    butable to latrastate   business bs a fair and reasonabla
    means or method of appo
                     so?“1
Hon. Robert S. Calvert,     page 6    (V-1383)


             Article   7070, however, does not provide a
method or means of apportioning      the recefpts    from
interstate     commerce.   Article 7070 was passed in Its
original    form in 1907 and there is no indication
that the statute has ever been construed so as to pro-
vidd for the apportionment of the rscrfpts        from titer-
state commerce and there has been a long perfod of
legislative     acQuiescence in this construction      of the
statute 0 In construing the phrase nbusfness done in
Texas s I’ as it appears in Artfclc   7084, V.COS.p the
Court in                                     e9 134 S.Wo2d
322 (Tex.                                    aid (at pO
328):
            u . 0 0 We hold that the language,
      ‘business done in Texas,’ as employed in
     this statute war intended to mean busi-
     ness begun and completed in Texas, and
     not business begun in Texas and completed
     in some other state or foreign          nation,   or
     vice versa0       In other words, that it means
     intrastate      business.
            ” 0 j 0 ~0 Cohcedfng, arguendo        that
     the language of the act is suscepkble             of
     the construction       that it .embraces Inter as-
     well as Intrastate        business,   it manfirstly
     fs not so clearly        so as not to render ft
     open to constructfon,          Departmental con-
     struction     may ,thereforr become. a determfn-
     fng factor,       Especfally    fs this true re-
     garding revenue measuresp the admfnfstra-
     tfon of which is under constant observation
     of the legislature.         See 39 Tax, Jurep pp*
     234-238, gg 125 and 1260n
This office    has prerfously”held that receipts       from in-
terstate   toll calls were not subject to this        tax,
Att’y Gen. Op. C-1878 (19401,
            Although the.gross      receipts   derived from the     -
fnterstate   business are not subject to this tax, that
portion of the receipts       representfng   wholly intrastate
business which can be separated or segre&aEd f$;m the+
 ross receipts    Is subject to the tax.
!79 ,804 Taxation        Sets- 8728 874 9C7? 9081 Thks-         ’
for:,   thi receipts’from     8Qoop serv i ces” and from charges
recefved under contracts       or agreements for the use of
.      .




    Eon. Robert   S. Calvert,   page   7 (V-1383)


    lines, equipment or facilitfes  in Texas are subject
    to the tax even though such services may be lnei-
    dental to an interstate   communication. Letter ad-
    dressed to Hon. George H. Sheppard Comptrollrr    of
    Public Accounts   dated May~jO, 1934,Letter Opinion
    Book 372, page 31,
                In conclusion,  It ins our opinion that ihe
    gross receipts   of the Mountain States Telephone ,dord-
    pany arising from interstate    cdsimunlcations are not
    subject to the tax levied by Article     7070,V.C.S.,
    because such unapportioned taxation would place ~819
    undue burden upon Interstate    commerce In vlolat$iia
    of Section 8 of Article    I of the,United States Con-
    gtitutioil.


                  R~ecelpts from toll charges lnvolv-          ,i:
            ing idterstate   telephone’ eommunicatioq~
            are not subjectto the occupation tax
            levied dpon telephone companies by Arti-
            cle 7070,V&S.,       meqiured by the gross
            m&pt    s from, wsine8s   done within %$e
                     uoSO Const. Art. Jll Sec. 8; Attqy
           ‘fjen. 6~. QbP87@.C1946).
    APPROVED
           II                               Yours very truly,
    W. V. Geppert                             PRICE,,Dm&!
    Taxation Division                       Atitoriiey Gehe’r’al
    Everett Hutchinson
    Executive Assistant
    Charles D. Mathews
    First Assistant
    F’Lrmwb:wb*
