Hon. Robert S. Calvert                           Opinion     No.   V-1371
Comptroller   of Public         Accounts
Austin, Texas                                    Re:     The validity  of ad valorem
                                                         tax on intangible  assets of
                                                         an interstate  bus or truck
Dear    Mr,   Galvert:                                   company.

                Your request        for an opinion states that two out-of-
State motor carriers         have requested          an exemption          from the pay-
ment of the intangible        assets and property             tax imposed by the
provisions     of Article    7105, Vernon’s          Civil Statutes.          The partic-
ular facts with respect         to these two carriers             reflect     that each is
authorized     to use the highways          of Texas in interstate             commerce
pursuant to interstate        certificates       of convenience          and necessity
issued by the Railroad         Commission          of Texas.        The certificates
allow the carriers        to operate interstate          only in accordance           with
the authority      granted to them by the Interstate                Commerce         Com-
mission.     Neither     has offices      or shops in Texas,            nor do they have
tangible personal       property      permanently        located in this State.            On
the other hand, each has a designated                 resident      service      agent in
Texas,    and each is operating           over the highways           of Texas for com-
pensation    and hire under the certificates               issued by the Railroad
Commission        of Texas.      One of the carriers            is authorized       by the
Texas    Railroad     Commission         to operate     one hundred twelve (112)
trucks over our highways             while the other carrier             is authorized      to
operate    thirty-three     (33) tracks.        Each has purchased              from the
Commission        the identification       plates required         by Article       91 lb,
V,,C.S. Each transports           interstate     freight     into and out of Texas,
using Yn such operations           the highways       of this State.

                 Based    upon the above        facts,    you ask:

                 May the State Tax Board validly        assess    for tax-
   :: s ation a proportionate      share of the intangible      assets                      _.
-,    ‘..and property    of an out-of-State     motor carrier      under
         Article   7105, V.C.S. (such tax to be allocated         on the
         basis of the miteage     traveled    in Texas compared        to
         the total mileage    traveled   and the resulting     percent-
         ages multiplied    by the total intangible    assets of the
         company,    or some comparable         method) although the
         company has no permanent          tangible  property    in Texas
         on Jaswrp     1 of the tax year in question?
.-



     Hon. Robert S. Culvert,       Paga   2 (V-1371)




                  Article  7105, V.C.S., was amended in 1941 (Acts
     47th Leg., R.S. 1941, ch. 184, p* 269, at p. 295) so as te make
     subject to the Intangible  Tax Act
           ,s
               ~ o * each ‘motor   bus company,’ as defined in ~ . ~
            [ Art. 91 la] and each ‘common        carrier   motor carrit
            er’ operating     under certificates   of convenience     and
            necessity    issued by the Railroad      Commission     of Tex-
           ‘as, doing business     wholly or in part within this State
            * * * . The intangible     taxable values of said motor bus
            companies      and said common carrier        motor carriers
            shall be apportioned      to the counties   in or through
            which they operate      in proportion   to the distance    in
            milea of the higbwaya       traversed   by aaid carriers     in
           each rsapective        county.”

              The Supreme Court of the United States has conoirt-
 ently held that interstate commerce can be made to pay its way by
 bearing a nondiscriminatory share of the tax burden which each
 state may impose on the activities OP property within its bordess,
 Western-Life-Stock    V. Ru~eau of Reve&m;30<   U.S. 250 (1938),
 and cases therein cited. In the r&cent cape of Ott v. Mississinni
 Valley Barge Line CQ., 336 U.S. i69 (1949), its                  u-
 dana and N~ew O~lean# could levy an ad valorem tax on bargea
 used in interstate c aaunerce, busied on the number of mile6 of
 huge Rues in Louisfuuu mud New Orleans in relation to the total
 milwge”uf the lima. This purccntaSe wae then applied to the to-
 tul pnopertp of tha tir#a Rue to determine what portion of the
 property wao pcranuuutl7 ,within the State during the tauin~ 7ear
     aod aabject to taxa%&
                        The Laafeiana ltatute, like the Texas
     we,p w~k ies
                UA
                 .sser mnentslbull be mpde on the be&r of the
     coudltfou of thinga afatfng       on the 1st day of January of eachyear.”

                  The method oeed by Louisiana is similar to the math-
     od popuaud fccptaxing the intan@blem of the companies in quea-
     tion. We thfnk it in propup for a proportionate ebare of the intan-
     siblou ti k allocated to Texas for tauutiou, juet as it was propep
     to allocate to Locrktisna its proponrtionate share of the tangible
       roperty of the barge iine.
                              Pn Curry v. McCanless,   307 U.S. 357
     r f939), It wae rtated, *The
                             taxpayer  who is domiciled in one state
 bet camies on buttiness in awther is subject to a tax there mea‘-
 wed by the value of the intangfblea  used in hia buaineacl.* The
 carrier8 are mimittedly doiuS iutepstate business in Texan, There-
 f&bee,Tame       may   valldky     llrr a prepw   poatiou of their intangible
 valw.

                                                                 334 U.S. 653
                                                                 tax levied by
.          .




    Hon.       Rob,ert   S. Galvert,   Page   3 (V-1371)




New York on the gross receipts       of a common carrier      from trans-
portation   between two points in New York but over routes that uti-
lized the highways   of Pennsylvania     and New Jersey.     It was con-
tended “that since the taxed transportation      was interstate    com-
merce,    New York may not constitutionally      tax the gross receipts
from such transportation.”      Although   the Court held that New
York could not tax the entire revenue       from such transportation,
it held that
                         a,
                           . . a The tax may be ‘fairly      apportioned’    to
               the ‘business       done within the state by a fair method
               of apportionment.       ’ Western    Life St&k v. Bureau of
               Revenoe,      303 U.S. 2n), 255. There       is no disoute as
               toftasibility      in apportioning   this tax. On th; record
               before     us the tax may constitutionally       be sustained    on
               the receipts      from the transportation      apportioned    as to
               the mileage      within the State-. See Rat&man          v. West-
               ern Union Telegraph          Co., 127 U.S. 411, 42 1-428.
               1334 U.S. at 663.)

In discussing  the right of New Jersey    and Pennsylvania      to tax the
proportionate  part of the transportation     over the highways      of
those states, the Court said:   ‘“If New Jersey and Pennsylvania
could claim their right to make appropriately       apportioned    claims
against that substantisl part of the business     of appe1Iant to which
they afford protection,  we do not see how on principle       and in prec-
,edeA such a claim could be denied.”      (334 U.S. at 662.)

             We think the reasoning   set forth in the above cases is
applicable  here and supports the right of the State of Texas       to
levy the intangible tax in question, since, in QW opinion, Texas is
the situs for tax purposes of a proportionate     share of the intangi-
bk assets of a company doing interstate      burintss  in this State.

              That the rule applicable    to intangibles   is not different
from that of tangible property    is demonstrated      by the following
paragraph   from Commonwealth       of Virginia   v0 Imperial    Coal Sales
Co.,
-     293 U.S.  15n934):

                       “Such taxation may embrace       intangible   as well
               as tangible    property.   Adams Express      Co. v. Ohio
               State Auditor,     166 U.S. 185, 218, 219, 17 S.Ct. 604, 41
               L.Ed. 965; Gudahy Packing        Co. v. Minnesota,     snpra;
               Wells,   Fargo    & Ce. v, Nevada,   supra.   It is not the
               character    of the property   that makes it nubject to
               such a tax, but the fact that the property       has its situs
               w,ithin the state and that the owner should give appro-
               priate support to the government       that protects    it.
               That duty is not less when the property        is intangible
                                                                     .        .




Hon.   Robert   S. Calvert,   Page   4 (V-1371)



       than when it is tangible.    Nor are we able to perceive
       any sound reason br holding that the owner must have
       real estate or tangible property     within the state in or-
       der to subject Lts fntangible   property   within the state
       to taxation.”

              In light of the above, the answer        to your question    is
that the State Tax Board may validly      assess       for taxation a prop-
er share of the intangible    assets of a foreign       corporation   doing
interstate  business   in Texas.


                                 SUMMARY

               An out-of-State      common carbier       motor carrier
        operating   over the highways      of Texas    under a certif-
        icate of convenience       and necessity   issued by the Rail-
        road Commission        of Texas i.s subject to the intangible
        tax provided    in Article    7105, V.G,S., regardless     of
        the fact that it has no permanent        tangible property     in
        Texas on January 1.

                                                        Yours     very   truly,

                                                        PRICE      DANIEL
                                                       Attorney     General


APPROVED:

Jesse P, Luton, Jr.                                               Assistant
Reviewing Assistant

Charles  D. Mathews
First Assistant




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