                        April 18, 1990




Honorable Gibson D. (Gib) Lewis   Opinion No.   JM-1158
Speaker
Texas House of Representatives    Re: Whether the purchase of
P. 0. Box 2910                    fuel by a company that pro-
Austin, Texas 78769               vides transportation    ser-
                                  vices for a school district
                                  is exempt from taxation
                                  (RQ-1807)

Dear   Speaker Lewis:

     You ask about the proper construction of amended    sec-
tion 153.104 of the Tax Code, which exempts public    school
districts   from the state's motor fuels tax, effective
September 1, 1991. S.B. 417, Acts 1989, 71st Leg., ch. 813,
5 6.16, at 3720 [hereinafter Senate Bill 417l.l Specifical-
ly, YOU ask whether   the tax exemption would apply to a
purchase of motor fuel by a private transportation   company
if that fuel were used exclusively for the public     school
transportation services that that company has contracted   to
provide to a school district.  You do not specify precisely
what sort of contractual relationship is involved, nor do
you include a copy of any actual contract.

     On the basis of attorney general opinions issued pre-
viously that construe a very similar exemption      from the
gasoline tax for the federal aovernment     on aasoline  used
exclusively by it, we conclude--<hat gasoline purchased by a
school district or by the agent of a school district for the



      1. Sections 6.12 through    6.17 of Senate Bill 417
amend sections 153.104, 153.119, 153.203, 153.222,  153.3021
of the Tax Code and subsection (b) of section 21.181 of the
Education Code. Section 7.01 of Senate Bill 417 sets forth
the effective date provisions of the bill and provides    in
relevant part:   "Sections 6.12 through   6.17 take effect
September 1, 1991."




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Honorable Gibson D. (Gib) Lewis - Page 2      (JM-1158)




exclusive use of a school district will be exempt from the
reach of the tax.    Gasoline purchased by an independent
contractor that performs services   for a school district,
however, will not be exempt from the reach of the tax.

     Chapter 153 of the Tax Code imposes a motor fuels tax
on the first sale or use of motor     fuels in this state.
Subchapter B of chapter 153 governs the first sale or use of
gasoline.2  Section 153.104 sets forth exceptions    to the
reach of the tax and will provide the following,   effective
September 1, 1991:

        The tax imposed by   this subchapter does     not
        apply to gasoline:

           (1) brought into this state in the fuel
        tank of a vehicle with a capacity of less
        than 60 gallons when the tank is connected to
        the carburetor  or fuel injection system of
        the power plant providing the propulsion   of
        the vehicle:

            (2) delivered by a permitted  distributor
        to a common or contract carrier, oceangoing
        vessel (including ship, tanker, or boat),   or
        a barge for export from this state if the
        gasoline  is moved   forthwith outside    the
        state:




      2. Section 153.101     of   the   Tax   Code   imposes   the
gasoline tax and provides:

           (a) A tax--is-imposed on the first sale or
        use of gasoline in this state.

           (b) If the tax imposed by this section is
        not paid at the time of the first sale or
        use, the comptroller may assess all appli-
        cable tax, penalty, and interest against any
        person buying the fuel for further resale.

Thus, if the first sale or use of gasoline escapes taxation,
the comptroller  may impose the tax on a subsequent     pur-
chaser.




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Honorable Gibson D. (Gib) Lewis - Page 3    (JM-1158)




           (3) sold by a permitted distributor      to
        another permitted distributor;

           (4) sold to the federal     aovernment   for
        its exclusive use:
            (5) delivered by a permitted  distributor
        into a storage facility of a        permitted
        aviation fuel dealer from which gasoline will
        be delivered  solely into the fuel SUPPlY
        tanks of aircraft or aircraft       servicing
        equipment;

           (‘5) sold by one aviation fuel dealer to
        another aviation fuel dealer who will deliver
        the aviation fuel exclusively into the fuel
        supply tanks    of   aircraft   or   aircraft
        servicing equipment; or

           (7) sold to a DUbliC school district  in
        this state for its exclusive use. (Emphasis
        added.)3

     It is suggested that the exemption should be construed
to reach, not just the sale of gasoline to a school dis-
trict, but also the sale of gasoline to a transportation
company when the fuel so purchased will be used exclusively
to provide transportation services to a school district.   It
is argued that the evident intention of the legislature    in
enacting the exemption is the reduction of school districts'
transportation costs and that construing the exemption    to
reach such gasoline purchasers will effectuate that purpose.
Based upon previously issued attorney general opinions that
construe an exemption provision substantially    similar to
subsection (7), we do not agree that subsection (7) should
be so construed.




       3. Senate Bill 417 contains two versions of section
153.104, one that is in effect from the effective date of
the bill until September 1, 1991, and another that goes into
effect on September 1, 1991. The two versions are identical
except that the version that goes into effect on September
1, 1991, contains subsection (7), the subsection you inquire
about.




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Honorable Gibson D. (Gib) Lewis - Page 4    (JM-1158)




     The state tax on the first sale or use of motor       fuels
was enacted originally    in 1941 and contained an exemption
from the tax for gasoline sold to the federal government for
its exclusive use. Acts 1941, 47th Leg., ch. 184, art.
XVII, 5 2, at 304. The exemption was retained in subsequent
codifications of the statute. w       V.T.C.S. Tax.-Gen.   arts.
9.01-9.27,   10.01-10.25   (1960).    Every attorney     general
opinion that has considered the question has construed      this
exemption to reach the federal government       and its agents,
but not to reach independent contractors       who had entered
into contracts to perform    services for the federal govern-
ment. See, e.a+. Attorney General Opinions C-694         (1966);
WW-1502 (1962); h-172    (1957) i V-583 (1948).

      For example, in Attorney General Opinion V-1492 (1952),
this office concluded that the motor       fuels tax may be
imposed upon a purchaser     of gasoline that was deemed      an
independent   contractor    of the    Reconstruction    Finance
Corporation,   an administrative     agency of the      federal
government.    The independent contractor,     United     States
Rubber Company,     entered    into a    contract    with    the
Reconstruction   Finance Corporation     for the lease       and
operation of a synthetic rubber plant owned by the company.
The opinion discussed and reaffirmed earlier opinions       that
concluded that agents of the federal government shared        in
the federal government's    immunity from taxation, but that
independent contractors who entered into contracts with the
federal government for the performance of services are not
so immune. Quoting    from cCa uth v.
mCo.,       221 S.W.Zd 584, 592 (Tex. Civ. App. - Eastland
1949, writ ref'd), the opinion declared:

           An independent contractor and an agent are
        not always easy to distinguish, and there is
        no uniform criterion by which they may be
        differentiated.   Generally,   however,   the
        relations are distinguished by the extent of
        the control which the employer exercises over
        the employee in the manner in which he per-
        forms his work.

Attorney General Opinion V-1492, m,       at g-10; see also
Attorney General Opinions O-6964    (1946); O-5569  (1943);
O-5309A (1944) (overruling Attorney General Opinion o-5309
and reaffirming  Attorney  General Opinion O-4389):  O-5214
(1943); O-4731, O-4689, O-4389 (1942).




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Honorable Gibson D. (Gib) Lewis - Page 5      (JM-1158)




     The language of subsection (7) of section       153.104,
which exempts from the motor fuels tax gasoline sold to a
school district   for its exclusive use, is substantially
identical to that of subsection (5), which exempts gasoline
sold to the federal government for its exclusive use.
conclude that a court construing subsection     (7) probaby;
would construe the exemption   in the same fashion as the
previously-cited attorney general opinions have construed
subsection (5) and hold that gasoline purchased by a public
school district or its agent for the exclusive use of the
district will be exempt from the state's motor fuels tax on
gasoline.  Gasoline purchased by an independent    contractor
that has entered    into a contract with a public      school
district to perform services, however, is not so exempt,
even in an instance in which the gasoline so purchased   will
be used exclusively to perform the contracted services.

                       SUMMARY

           Gasoline purchased by a public school dis-
        trict or its agent for the exclusive use of
        the district will be exempt from the state's
        first sale or use tax on motor fuels that is
        imposed by chapter 153 of the Tax Code.
        Gasoline purchased by an independent     con-
        tractor that has entered into a contract with
        a public school district to perform services,
        however, will not be exempt, even in an
        instance in which the gasoline so purchased
        will be used exclusively     to perform the
        contracted services.            .




                                      JIM     MATTOX
                                      Attorney General of Texas

MARY KELLER
First Assistant Attorney General

JUDGE ZOLLIE STEAKLEY
Special Assistant Attorney General

RENEA HICKS
Special Assistant Attorney General




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