                               December     19, 1951


Hon. Robert S. Calver,t      ’            Opinion   No.   V - 13 79
Compt,roller   of, Public Accounts
Austin,  Texas                            Re:   Legality  of motor fuel tax
                                                refunds to subcontractors
                                                on highway projects   and to
                                                counties  on lateral road
Dea,r Mr.    Calvert:                           projects.

                 You request    the opinion of this office    ~Ipon t& guee-
tiotis   pre,sented in your    letter as follows:

                 “We desire   the opinion of your office on several
         questions  which have been presented       in connection  with
         the new motor fuel tax refund law as amended by the
         recent Session    of the 52nd Legislature,    Article  7065b,
         Vernon’s   Annotated    Civil Statutes.




                 “Contracts  for the construction   and maintenance
         of State highways    are Awarded by projects     described
         in the contracts   on bids submitted    by general  or prime
         contractors.

                 “The general   or prime contractor,    who is award-
         ed the contract:   usually engages  one or more subcon-
         tractors   to do a part of the work such as grubbing and
         clearing   right of ways, laying the concrete,    etc.

                 “When the project js completed      the general   or
         prime contractor      is paid for the entire project   by a
         warrant   drawn on the State Highway       Fund to which mo-
         tor fuel tax collections,    or a part thereof,  are allocated
         by Section 25 of the Act.

                  “The general    contractor    in turn pays the subcon-
         tractors    for the part of the work performed         and any
         materials     furnished   by such subcontractors.        Some of
         the subcontractors      involved    have adopted the view that
         since they are paid by the general          contractor   and not
         directly    by warrant   dr~awn on State funds to which mo-
         tor fuel tax collections     are allocated,     that they are en*
         titled to a refund of tax paid on motor fuel used by them
Hon.   Robert   S. aalvert,    Page   2 (V-1379)



       on such projects       and have   filed   claims   for   such tax re-
       funds,

               “Will    you please advise whether     the Comptroller
       can legally     issue warrants    to pay refund claims    to sub-
       contractors       under the conditions  described   above?

               “The next questions    concern    tax refund claims
       filed in behalf of counties which use a part of the mo-
       tor fuel tax collections   allocated    to them for the con-
       struction   or improvement     of lateral   county roads and
       related   purposes a

               “Section    25 of the Act, above cited, provides         that
       one-fourth     (l/4) of the taxes collected       after deductions
       for the enforcement         of the Act and the payment of re-
       funds, shall be allocated         and deposited    to the credit of
       the County and Road District           Highway    Fund a part of
       which fund is allocated         to each county in the State to
       be used by said counties          under the provisions     of Sec-
       tion 6(b), Chapter 324, Regular           Session of the 48th Leg-
       islature,   as amended by Section 1, Chapter 319, Regu-
       lar Session of the 50th Legislature.            The latter Acts
       provide    that the counties may use a part of the fund al-
       located to them for (a) the acquisition           of right of ways
       for county lateral       roads and for the payment of legal
       obligations     incurred    therefor    prior to January 2, 1939;
       (b) for the construction         or improvement      of county lat-
       eral roads; (c) for the purpose of supplementing               funds
       appropriated      by the United States Government           for Works
       Progress      Administration       highway construction,      Public
       Works Administration           highway construction,      and such
       other grants of Federal          funds as may be made available
       to the counties      of this State for county lateral      road con-
       struction;    and (d) for the purpose of cooperating           with
       the State Highway        Department      and the Federal     Govern-
       ment in the construction          of farm-to-market      roads.

               “Several   of the counties which have used a part
       of the funds allocated    to them by Section 25, in the con-
       struction‘and    improvement     of county lateral  roads have
       filed claim for refund of the tax paid on motor fuel used
       off the highway in such work.       The District   Attorney in
       one county has raised a question       as to whether the word
       ‘person’ used in Section 13 (b), above quoted, would in-
       clude a county, as the term ‘person’ is defined in Sec-
       tion 1 (j) of the Act.
-    .




    Hon. Robert        S. C&=ert,      Page   3 (V-1379)




                     “Will you please advise whether     the, Comptroller
             can legally   approve   the payment of tax refund claims
             filled by counties   on motor fuel which has been used, in
             the construction    or maintenance  of lateral   or county
             roads and highways?

                    “If you answer  the above question     affirmatively,
             will the work performed    in the acquisition     of a right
             of way be construed   as a part of the construction        or
             maintenance    work on such roads or highways?         ”

                 You state that the work involved      is construction    and
    mainknance    of highways   in this State and that the same ie paid for
    from &o&r    fuel taxes allocated    to th,e State Highway Department
    and counties by the provisions     of House Bill 285, Acts 52nd Leg.,
    R.S. 1951, ch. 402, p,, 695. Section 4(b) of SECTLON        XXII   of House
    Bill 285 reads in part as follows:

                    “(b) Any person,        (except as hereinafter         provld-
             ed) who shall use motor fuel for the purpose of oper-
             ating or propelling      any stationary      gasoline   engine, *Q-
             tor boat, aircraft,     or tractor     used for agricultural        pur-
             poses, or for any other purpose except in a motor vehi-
             cle oparated    or intended to be operated          upon the public
             hi,ghway of this State, and who shall have paid the tax
             imposed    upon said motor fuel by this Ar,ticle,            either di-
             rectly  or indirectly,     shall, when such person has fully
             complied    with all provisions       of this Article    and the rules
             and regulations     promulgated       by the Comptroller,        be en-
             titled to reimbursement         of the tax paid by him less one
             per cent (1%) allowed        distributors     for collecting     and re-
             mitting the tax and complying          with other provisions         of
             the laws Provided,       however,     no tax refund shall be paid
             to any person on motor fuel used in any constructton                   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,
             “.”     (Emphasis      added.)

                      Section   l(j)   of SECTION    XXII   of Hol~se Bill    285 provides
    as   fbllows:

                    “(j)  ‘Person’   shall mean and include every indi-
             vidual, firm, association,     joint stock company,        syndi-
             cate, co-partnership,     corporation    (public,   priva,te or
             municipal),    trustee, agency,    or receiver.   n

                      For the purpose of this opinion we assume    that the pur-
    chase,    sale,    and use of the motor fuel meets the requirements     of
I-Ion. Robert   S, Calvert,    Page   4 (V-1379)




the statute    for a refund, unless it falls under the exception       provided
in the part of the statute last quoted above which we have under-
scored,     This part of the statute constitutes      an exception   which for-
bids a refund of motors fuel tax to the purchasers          of motor fuel com-
ing within its terms.        That subcontractors    employed    by prime con-
tractors    to perform     all or part of the work of construction     and
maintenance       on the highways    of this State are paid by the prime
contractors      is not, in our view, the crucial    test in determining    the
eligibility   of subcontractors     for, a refund of motor fuel tax in con-
nection with the motor fuel purchased           and used in such construction.

              The real test is that the highway construction            and main-
tenance work is performed        and paid for from motor fuel taxes allo-
cated to the Highway     Department      or the counties in connection        with
highway work.      The incidental    fact that the prime contractor         engag-
es and pays the subcontractor        who performs       a certain   portion of
the work is not material.       That the subcontractor        uses the motor
fuel in construction    and maintenance       work on the highways        must be
conceded,    We think that portion of the exception          which reads,     -. . .
which is paid for from any State funds to which motor fuel tax col-
lections  are axcated     .   -” does not have the effect of excluding
from the exception     the subcontractors       simply because they are paid
by the prime contractor.       It is sufficient    to bring them within the
exception   that they perform     construction     and maintenance       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 Mighway Department         obligates    himself   to perform     and
which is paid -for from allocated       funds,,

                Turning   next to the question       of whether     or not the tax
paid by counties may be refunded under the facts disclosed                   by your
request,    we should first determine         whether     or not a county is a
“person”     under the statutory     definitions     We think clearly      it is, for
Section    1 of Ar~ticle XI of the Constitution        of this State says:      “The
several    counties of this State are hereby recognized              as legal sub-
divisions    of the State.”    And Section 3 of the same Article            reads in
part:    “No county, city, or other municipal            corporation    shall here-
after become      a subscriber    to the capital stock of any private           cor-
poration      . j I” It is therefore    quite appar’ent that the Constitution
recognizes      counties as municipal       corporations,      and, as we have
observed,     municipal   corporations      are included in the statutory         def-
inition of “person.”      City of Abilene      v State, 113 S.W.2d 631 (Tex.
Civ. App. 1937, error       ref,)

              You point out in your request     that the construction,   and
maintenance     work performed    by the counties   in building farm-to-
market and lateral     roads is paid for from a portion of the motor
fuel tax allocated    under House Bill 285, supra-     Under these cir-
cumstances     counties performing    such construction    and maintenance
Hon.   Robert   S. Calvert,   Page   5 (V-1379)




work upon highways,     which work is paid for       from     allocated       funds,
fall within the exception   t,o the statute.

              We think it was the intention   of the Legislature     to for-
bid the refund of any motor fuel tax in connection       with highway
construction   which is paid for ,from allocated    motor fuel taxes.
You are therefore    respectfully  advised  that neither    subcontractors
nor counties,   under the facts submitted    by you, are entitled    to any
refund of motor fuel taxes paid by them. :

            In view of our negative        answer   to your    question       in re-
gard to counties,  it is unnecessary       to answer your      question       as to
work performed    in the acquisition      of right of way.


                                SUMMARY

              Subcontractors    perf,orming  work in the conatr.w~-
       tion and maintenance     of state h@hwesa riuy not be ra-
       f-dad    the tax upon motor fue.1 purchased    and used in
       connection   wi.th such construct,ion  work for the reason
       that the statute forbids a refund of motor fuel taxes for
       such work when paid for from motor fuel taxes allocated
       to the Highway    Depar,tment,   under the te,rms of House
       Bill 285, Acts 52nd Leg., R.S. 1951, ch. 402,, p. 695.

              The tax on motor fuel purchased    and used by coun-
       ties in construction  and maintenance   work on highways
       paid for from allocated   motor fuel taxes under House
       Bill 285, supra, may not be refunded.

                                                            Yours      very   truly,

                                                             PRICE       DANIEL
                                                            Attorney      General


APPROVED:

W. V. Geppert
                                                            Bys@L2k-    Assistant
Taxation Division

E. Jacobson
Reviewing   Assistant

Charles  D. Mathews
First Assistant

LPL/mwb
