           OFFICEOFTHEATTORNEYGENERALOFTEXA!3
                             AUSTIN




iionombleOeorgeH. Shqpard
Comptrollerof Fubl:oAaaountr
Awtln, Texue
Dear Eiir:




                                             ipts tax*a letvied
                                             terms of Artio1e7000.
          This is
or     a Rural
     not
under the -'S&be
for ad raloma
                                             bBS reaelptal tex.
                                             instanoesunder

                                    ire CorporatloaAat* baarune
                                    ptic 8S, 4Stb Legielatur*,
                                am ArtdalelS&Bb in Vernon*a
                                       The Aot authorleesthe
                                   oorpmatians by three or
                        purpoee of rwnhhhing sleatrlolty8nd
                         and, plumbingequipment in xuraZ areaa.
                        whioh 'IQdeem materialin this dieaus-

                    3.. Cooperative   nOn-~r0rtt asrmberehlp
           aorpcrationema? be orgon~sedunder t&i Aot
           far th6 purposeor engqlng in rural elootri-
           floationby a&y one or 1p0reof tbs iolloprlng
           methods:
    Hon.Geo.H.M.leppard,Page 2


            (1) The Purnlshingor eleotrioener&yto
        perSonSIn rurnl areaawho are not receiving
        oentrnlstationservice;
             (2)  Assisting in the wiring OS the prs-
        raisesoi'personsIn rural oreas or the aoqulsi-
        tlon, supply,or installationof electrlsmlor
        plunbIngequipmenttherelnn)
             (3) The furnlshlngof sleotricenergy,
        wiringfaoilltles,eleotrloolor plumbingequip-
        ment, or sarvloesto any other oorporotlonsor-
        ganizedunder this Aat or to the membersthoreor.
            “sac.     4.   E&oh oorporatlonshall hate power!
             (1)    To cnza an4 be &al,   complainand defend,
        In its oorporatename;
             (8) TO ham perpetualsucraeesion
                                           unlese a
        UnIted periodof durationIs statedIn its arti-
        ales of lnoorporetlon;
             (9) To a&oBt a corporateseal whloh map be
        alteredat pleasure,and to use it, or a iaoslmfle
        there&, as requiredbylaws
            (4) To generate,monuffioture, purohase,a*
       qulre,and aooumulateeleotrloenergy and to
       transmft,dlstrfbuts,sell, furnish,and dispose
       oi such eledrlo energyto its memborsonly,and
       to construct,ereot, purohase,lease as lessee
       ~aa4lnanymanneraoqulre,owa, hold,maIMaln-
       operate,sell, dispose of, lease as lessor,ex-
       ohange,and morQage plants,buildings,works,
       maohinery,supplles,eqtipment,apparatus,and
       tronsmlssionand distrlbutl~ l.ines$W systems
       neoem3ary,oonvenIent,00 useful;
             (Sl To asrrl8t its members only to wire
        their pre&see.and Installthereineleotrloal
        andplumbbg i~ures,,maohinery,supplfes,ap-
        pa+at~, C+ZMI
                    equlpmentotanyand all ldnds and
        charaoter,and in oonneotloatherewIthand iOr
'       suoh purposes,to purohaf~e, aoqtie, lease,sell,
        distribute Install,and repair eleotrioaland-
        plamblngrixtures,maohinery,supplies,appara-
Bon. 050. B. Sheppard,Page 3


    tw,,   fu@ e&tlpment   of any and all andkinda
    oharaaterand to roaalva,acquire,endorse,
    pledge,hypothacate, and disposeof notes, bands,
    and other evldemoesof Indebtedness;
         (6) To furnishto oth5r oorporatlons  organ-
    ized under this Aot, or to the member8threei,
    eleotrIaenargy,wIrlng feollltles,eleotrlaal
    and plumbingequip&,     and servioes oonvenlent
    or ueeful;

         (7) To aoqulre,own, hold, use, exera189,
    Bnd, to the extant,prmltted by law, to sail;
    mrtgag5,915dge,hy9otheoate,and in anyramner
    dltqxmeof FranalIl5eS,~rightS,prlVllCWH3,lb
    oenses,rIghtaor way, and eas5mnta neoessary,
    useful,or appraprlate;
.          (8)   To purahaae,   reoelve,   lease   aa leases,
    orla aayoth5rmwm5raoquir5,0wns hoXd,Plain-
    tala,~e.ll,exahnage,and use any aad all real
    and~soaal9rop5rty or cmy S.ntmestth5r5%n;
         (9)  To borrowl~ney and oth5rivi5eoontraot             '
    ladebtedues5, to lmie lte obligatUa5  thsmfors
    and to 85ettr5th@ paymentthereofby rportgage,
    plsdge,or 4486 of trust of all or any or lta
    progmrty,aB(let(l,franahlms, revenuea, or la-               '.
    0oloe;
                                         ,i~,
         (LO) Toselland oonv5~,mortg~,pl*e,
    leaee a6 lessor,and otberrlsedisposeoi liu.or
    any part of ifa propertyand assets$
         (ll) Tohavc~tmdsreroisethepaprerOf
    eminentdonainforthe purposeandintbeaanner
    providedby the oondsrmanafiopr
                                 laws af,thioStat5
    for aaquirfngprlratepropertytm pub&h UO,
    .suohright to be paraxaxaataxoept as to property
    or the state, or et any polltlcalsubdlvl5Ion
    thereofi
        (12) To aoo5ptSlfts or grants of money,
    servloes;or property,raalor personals
Hon. Gee. H. Sheppard,Page 4


          (X3) To qake any and sll eontraotsneoessary
    or ConYanlent im the ercrrolse of the powersgranted
    in thl8 hot;
         (14) ,To fix, regulate, and oollootrates,fees,
    mats, or other ohargesfor electricenergyand any
    other raollltles,supplies,equipmt, or servloes
    furnishedbytheoarporatian;
         (IS)  To aonduotltqtbusfness, andhaveofflees
    within or withoutthis Stats;
         (16) To elect or appointofficers,agents,and
    emplogeesof the obrpora%ian, and to define their
    duties and fix their compensation;
         (17) To make and alter bplaws, not imonsis-
    teat with ths artiolesof immrporatlon or dth the
    larrror this state for the a4mlal5fxutloa
                                            and re-
    gulatlonof the af?alrsof tbs oorporatloa;
           (lf3) Todo andpewgorqeltherfor     Itself  or
    Its   memb5r5, or tar any oth5r oorporetlonorg5alZail
    under this Aat, or for the numberstheq%of,any and
    all aots mid thlag5,and ta ban, and exaroisemy
    andallporersaslmyben~es~,o~nisnt,or
    approprlatito effeatuatethe puzpow ror whleb the
    oorporatloais orgnalzed.
        "880. 6. (a) The artlales
                                of laaorporatl0n
    slml.lstate:
          (1) f&o name of the oorporatiion, tiloh name
    shall lnaludothe wor4a, rXleotrloCooperative* and
    de word *Corporation, * *fnoorporatsd, * *mo.~, *
    Ua5oolatloa,* or Vempony~ aadthe nam6 shttll‘be
    suah as to distlagul~hit from any other oorporatlon
    orgsnizeaandexIstlngundsrtholaws of this State;
          (2)   The purposefor wblahtlm oorporatloaIs
    folamd;
mn, Ceo. B. Sheppard,Page 5


        'sac. 25, (a) Retchaorporatlonshnll b6
    operatedwlthoutprofit toltsaecmbem but the
    rates, fees, rents, or other chargesfor oleotrla
    energy and any other faollltles,su99lles,equip-
    ment, or servicesfurnishedby the oorporatloa
    shall be suKIcl6nt at all tlms.
         (1) To pay all operatlag and malntenauoe
    expewes neoesasryor dealrablo for the prudent
    conductof its businessand the prlnolpalof aad
    intereston the obligationsissueddr asstmadby
    the c~atloa     la the 95rfon~no6 of the pur-
    pose for whit* It was orgaalaed,and
           (2)     For    the creationof reservw.
          (b) The r6venuesof the oorpmatlm shall
    be devotedilrst tothepaynmntofoperatingand
    melntenancoexpen6os6ndth6 princlpalandinter-
    est on outstandingobligations,and thsreafter
     to 6uch reserv66ror lmproosrrvnt,n6w oonstru6tian,
    .depreolatlon, and contlng6nelesa8 the Board Say
    m.t.Gm     to tlm prsacklbd.
           (a) Revunuesnotmqu%red rorthepumoses
    65t   fOrth    in 8UbsOOtiOSl    (b)   Of this   -0tion.   shall   ‘. ‘.
    bereturn6dfrmtimstot%6i6toth6m6mbersona
    proratabebi6 aaoordlngtothodlDOunt0ttmS~s
    done ulth aaah during the prlod, either la 0-b.
    in abatemmt of aurr8ntOhtkrgeI!for 515ctrlc'5n5rf5YB
    or othsxwlaoas th6 Eoard dete2mlnes~but such r6-
    turamaybemsdobyxayofgsnsrali~~reduoklon
    to 6&mbers,it the Board so eleots.
         -soo* 30. Corporationsiormed.hereunder
    shall pay annually,on or before May tirst,to
    th5St3tmataryofState,alla0nse fesof Ten-l-
    l6r6 ($10) and suoh corporate shall be eX6A6pt
    fromallother excfee taxes ofwhat6o~w6rkSndor
    nature.
           "sea.    31.     wleaeYer any Q0rporatlon       arganleed
    uDderthLs A&shall haa, borroasdmoneyfrcmany
    Federalagency,the oblIgatlonsisswd to BacIpB
    th6paymentoisuchmney8hallbeex6mptfromthe
    p3mrlslo1~~of the Texas Seotarltl6s Aat. (CheptW
    100, Acts of the Forty-fourth&g@ilature, R651h~
~0x1.0~0. B. Sheppard,Page 5


    Session),or any Aots amendatorythereof,nor .
    shallthe propislonsof.ealdAot apply to the
    lfieuan~e of membershipOertlflOatesk

         "SBO. 36. If any proVl610~0i~thl6hot, or
    the applicationof euoh provisionto eny person
    or olroumstanoeIs held InvalId,the remainder02
    the Aot and the applloatlon0: suoh provlslom 'to
    other personsor olroumstanoee shall not be af-
    ieoted thereby.*
          We wlll $lrstdlsoussyour lnqriiry ae to whether
or not a oorporatlonorganizedunder this law Is liable ior
ad valoiemtaxes on Its property. We 05lL your attentionto
the faot that We have already anenwredthle qU8lvtiOn in our
OpinionNumber O-587,dated.Ap~ll19, 1939, a@lreeeedto
HonorableJ0hn.C.Marburger,CountyAttorneyof %yette
Ctiunty,In whloh we held~thatoorporatlonsof thl8 kind,
organizedsuer thle law, are subjeotto ad valoremtaxes.
          In our previousopl&n, on AprU 19, 193Q,we
dlsoussed'thi6 questionvery exhaus%ltiwly;
                                         an&we f5k.l.y  be-
lieve that the reason8and 6.onoluelonagiven in that opl.n%on
are oorreot. We will notigo into aa muoh.detailon this
questionin this opiniona8 we &id in our former~opXn.%on.
          *The~.&er of the state to impose~kss ii:en In-
herentgovernmen tal pcmer' not d?pemSenton nor dezlwd fma
eitherthe +ederalor State Constitution.Thase Con0WtUtMn8~
imposerestr$otlons,  but ,arenot the zouroeof the Statb*s,
taxing power,whloh is m attributeofmm~elgnty.~ 40 Tar.
hr. go. See~a?.so  3Dtparte Townsend,54 Tex. Crank. Rep. SM),
144 8. W. 0@., and StrattonT. Commi86fone1s~~Court Wgimep
County,(Tex. Civ. App.) 137 8. W. 1270 (v&t of error re-
fused)..There are no pro~l5bms In the Texts8Consfltutioo
that oould be oonstruedas exempting,or authorizln.6  the ex-
emptlodof, property ot the kind In questlonf'ron~ad  ~alorem
taxationsbut,.onthe other hand the Constitution,   in our
~oplnlon~prohIbltasuoh e&exemption. The pro~lelonsef then
Texas Constitution bearingon this partlatiarquestfonare
a8 follows:
          ArtiOlLean, SeatiOXl  3;. "TaratiOn5ball
     be equal and unliorm. ,AU propertyia thie State,
     whetherowned by naturalpermansor oomorationar,
     other than munlolgel,hall   be taxed ln pmpor*blon
     to.it,svalue, v&loh shall be asoerliaineda8 may be
km. Ceo. H. Sheppard,Pa56 7


    providedby law. The Lo518laturemy kupose
    a poll tax. It may also lmpoaeocoupatlon
    taxes,bothuponnaturalperaons and up6n
    corporations, other than nnmloipal,doing any
    businessin this State. It may also tax &xi-
    comes of both naturalpersonsand oorporatians
    other than mnlolpal, exoept that personsen-
    &a&xl lnmechaaloalandagrloulturalpuraulti
    shall never be requiredto pay an ocoupatlon
    tax;. Frovided,that two luaabed and fifty dol-
    lars worth of household end kltohenfumlture,.
    belon&&to oaohtamilylathlsState shall
    be exemptfcom taxation,aad providedfmther
    that the occupationtax leviedby any county,
    city    or tom     r0r any year On persoas        or 001~
    poratlonspursulry; any.proieaelonor busl.neas,
    shall not exoeedone half of the tax leviedby
    the State ror the same periodon suoh profe88lon
    or buainess.~
            hrtlole    VIII, SeetlexkZ,   “AU Ommpation
    taxes    shall    be equal end uniform upon the 8anm
    alass of mbjsots wlthln the 13mlt.sor the auth-
    orlty IevllnL:the tax; but the fa#tslatureIREV,.
    by5emrallaw8, exempthrom taxationpublic
    propertyu8Fd for publicpusposes;eatual plaoetf
    0r ntl.fgfatls
                 rrorahlp;plaoesOf burial not he3.d
    for privateor .oorgorate pmrlt; all buildZq@
    wed exoluslvelya&downed by pereonsorarm+
            Of
    Oi~tfOliS         PWEOIIS   iOr   SOhOOl   pU3Xl6eS   t3&d the
    necessaryrurnltureor all sohools,aleo the en-
  : Ucmzmntl'umls of suoh S.mtltul&ns of lee
    aud rel.fgfonMt u~ad with a Vi6~tO PrMlt and
    whentheaameare investedinbonds orippoFtga5es,
    or in land oi other propertywhloh ha8 beea and
    shallhereaftarbeboughtlnbysooh lnstl;tutions
    amuer roreeloaureealesmade to satirrtg'or pro-
    teat suoh bonds or mertgagesgthat such exempt&m
    0r suohland and~ropertysbau. contln~eonly rer
    two yeare artierthe g~urohase
                                ai the same at suoh
    male by suoh institution8and no lower, and lx&-
    stltutlonsof purely publio oha!rlty~and all lags
    Clmmptltl5propertysroiE?taxatloaoth~than~*
    property      above mentfomd       shall   be 0013 and v$dd+*

          iirtlole XX, Seotloa 9. *!Fheproperty of
    oountiea,cities ami towns, owned and held only
    6-w ntrhlla nurnb8e8.   auoh aa aubllobulldinasand
HOG Gee. H. Sheppard,Page 8



    turf? thereof,md all propertyused, or intended
    for extinguiahia& fires,publiogroundatmd all
    other propertydevotedexolualvelyto the UQB
    und benerltOS the publio shall be exempt from
    forced 6Gl.eand fromtaxetion,provldod,nothing
    herein shall preventthe anroroezmntor the ven-
    dors lien, the meohanlosor builderslien, or,
    other llona now exiatl.ng.W
The propertyla queatlonla clearlynot within any of the
olesaeathat the legislatureis permittedto exeri@ from
taxation. We have found no statutethat attemptsto exeznpt
             iron ad ralorem taxation;end we bellevethe
this pro.?erty
pas-e of such Q statuteis prohibitedby the last phrase
in mtlcle VIII, Seotlon2, .oithe Constitution, which aayn
that “&.I.
         lms oxmptln(: poporty iron t&xatiOn other than
the propertyabove nentlonedahall be null and void.*
         We will now diaouaayour aeoond queatlon,whloh
is, whetheror not a oorporatlonoqpnfzed underthis law
1s llzblefor the t;roaareceiptstax levlet¶sgalnatauoh
oono82asin cortafnfn6tanoesunder Alrtlole 7060, R.C.5,
         The part or hrtlole7060 thet is materialto thti
dlaouaalonread6 es r0iiapwr
          T&oh. Inbividuel, oompsny,corporationor
     aaao0latlon,owning,operatingor alanag* or
     controllingany gas, eleotrlo15.&t, eleotrlo
     power or water worka, or water antiU.&t put,
     locatedwlthin any lnoorporatedtom or olty
   : in this St&a, agd utied for lootis&e and dlstri-
     butlon in aald town or city, and oharginsior auah
    gas, oleotriolights,eleotriopouez or water,
     shallamka quarterly,on the O.rat days of Jeumry,
    L\prll, July and Ootoberof’eaoh year a reportto
     the Comptrollerunder oath of the iabifidupj.or
    of the prealdent,treaswr or auperint~ndent    of
     suoh oompany,oorporatlonor aeamiationshawla&
     the gross wunt reoebredfrom auoh bualneaadone
    in eaoh such’Inoorporotedolty OY toun within thla
    State in the paymentof char&3aior suoh gas,
    eleotrlcllghta,eleatriopower or water ror the
    quarternext preoeding. Sal4 indivlduel,oompeny,
    corporationor enaoointion,at the time ‘ofmaking
    aaid report for aog such incorporated town or
Ron. Gee. B. Shepgtwd,Page 9


     olty of twenty-fivehundred (2500)inhabitants
     and less than ten thousand(10,000)inhabitants,
     aoeordfngto the last U&ted Statee Cmsus next
     precedingthe film of sold report,shall pay
     to the Treasurerof this State an oooupatlontax
     ior the quarterbeglnnlngon said date equal to
     seven-tenths of one per oent (0.7 of 16) of said
     @otm reoolpts,ae shown by ra$d report;end ror
     tinylnoorporated  town or olfy OS ten thoumud
     (10,GOO)inhabitantsor more, aooomllng to the
     last Enlted.StatasConsuenest prooeaingthe
     ill& of said report,the eald lntividualma-
     pany, oorporatlonor aeaoelatlon,at the t&e of
     inaklngeald report,~shall  pay to the Treasurer
     of thlei State an ocoupationtax for the quarter
     be&nlng on said.datean amount equal t&one end
     three-eight6per oent (1 3/e) of said e;roesme-
     oelpte,a8 shown bg said report. Rothlngherein
     shell applyto any such gas, eleetriell@t,
     pomrorwaterworlo3orwateren4'llghtplent
     nit?& t&l8 State owned end operatedby any olty
     or town, nor to any Countyor waterlniprovwumt
     or Coae8rvation  Dfstriot."
Tipt art%610was paesed in its prowat forn~by the 44th Lt+gla-
lattme et ifs 3rd oalledgee&m in 1936.
           We must now eonelderSeat&a ?#)of the VUotrle
CooperationCorporation     Aot”   (Art.1988b V,A.R&.S), quote&
above,*ohprovl&esthatwauah oorporatlons8hallbeexemp.
Srom all other exolaetax8s of whatsoeverkind or'nature.w
me."xleetrlo     CQopBratlmlco      ratloa Aat? perrolta
                                                       the organ-
18ing of oorporatloaE4   to f lxrzk h eleetrloltyto parsonsln
Vural area~P,and Art10187060 mqulres the payment of grow
reoelp$staxes      by oorporatlonfi end pereonaoperatingeleetrle
plant8 in ineizporatedoitleaand towne. It may be thet eon-
oerna organbed under the Eleotrlo Cooperatlvo
                                           CorpOratlOnhot
by virtue of being llkted to Wmtl areatPeouUl not operfite
lnlneorporate4touna,andthatthere eouldxiotbea oonee*
80 situatedthat both the EleotrleCooperativeCorpwatlon Aef
and Artlale7060 would a ply to it; but we do not hateail to 60
into that questionlnth%i opinion,beeause.weaseumabyrir-
Hon. ho. H. Sheppard,Fme lo


tue of you askin this partioulsrquestion t&t you have In
mind a Rurel Eleotrlc.;ssoolatlonthat comes wit&Inthe terms
or Article 7C60. 3[f Scotion36 of the *E.Ieotrlo Cooperative
Zorporatlon;rct"is valid it creates'anexheptionto mtlole
7060,and would controlin the situationyou ,a8k about.
         iit3
            we view it, aald Sect&n 20 is a valid law, and
it createsen exceptionto mticle 7060. under its terms all
RuralElectricxesoalationa  organizedunder the wElootrloCo-
qmrative Corporation Aot? ere exempt from excisetaxes.
          The gross reoeiptstax providedfn Article7060 is a
Corm of excisetax. In the c&se of Yoster E-.
                                           CrefghtonCompany
7. Grnham,154 Ten& 412, 286 S, W. 570, 47 A. 1. R. 971, the
3oux-taaldr
           *All taxes,otherthan polls, are either
      direct or Indirect. k direct tax is one thot
      is impo66d directlyon propertyaOCOrd~ to
      its value. It is generallyspoken of as a
      propertytax, or~nn ad raleremtax, .4nin-
      dire& tax is a tax upon sou% right or prlvl-
      legs, and it ls.alsocalled au exciseor oo-
      oupatlontax."
           Xt hais been suggestedthat acla S@lon   30 orentes
In exentptlon.that
                is arbitraryaad uareaaonableand that it
violates the canetltutlonnlprovisloaaon untformtaxationand
squalprotectionof the laws; but we do not agree with that
contention.The *iQeutrlo  CooperativeCorporationAuV is de-
3lgmd tqareate conoernsof a dlstinettype, and that are en-
pagedIn a businessdifferentfrom other aoneerns. Not only
~6 they differentfrom concernsselJ..lng oths~~uommotlltles,
Sat they are different.fromthe usual oonoern selling eleotri-
my.    In the first plam thep are non-profitorganlzatlons,
md the othersare in businessfor a profit;end In the ssoond
?laoethey limit their aativitiesto wrural areatP,and the
,tbersdo businessin oltlesend towns; itswe understandit
'oaoupatlona say be classiiledfor the purposeof taxation,
' * * providedthe olaeslfloation is reasoniible.** * 30 per-
zonsof the same classmay be sub-blvitled apoordingto certain
llfferenoea, providedthe sub-olassifloation la reasonable,and
the tax graduatedaoooxWngly, or one or &ore sub-olaaaesmay
ae exempted.~ 1 Cooleyon Taxation,4th Ed., 940.
Eon. %o.   13. Sheppard, Pq:e ll


          In view of what~the.appellate oou&s hare said
we are oonvlnoe4thnt said Seotlon 30 in qmetlon la vel.Id.
IQ the case of Citizens'3klephoue: Co. v, F~I.ler,
                                                 229 U. 5~.
322, 57 L. Ed. l.206,33 Sup. Ct. 833, the oanatltutlomllty
of the ?dichl@nlawtaxdn~    telephoneoonpanlt~was upheld,
and in that awe the SupremeCourt of the UnitedStatessaid:
         *The act eontalnedthis pro*:     VroviUe4,
    That the propertyof telegraphand telephonehop-
    panleawhom gross reoeiptswithin this State for
    the pear ending June thirty do not exoeedfive
    hundreddollarsshall be exeaptfrom taxation.:
        '"Thacontantlonof appellantthat the aot
    offendsthe equal proteotlonclauseof the Constl-
    tutlon is baaed on that pi6vi~oi It is ,=6ed
    thatthe-provisomakes an unjustdioorlxl.natl.on
    betweeneompeniesdolngths same buelneesby the
    681~8measm and imposesa tax * * * beoawe the
    bu6lnessof one 16 large and the &her small.*+ *
         The DiatrlctCourt,honever,tooke broader
    claw and oonsidere%the laduoeuentof the leglela-
    tlon and lto abmfnietratltre poselbllltle6 as glv-
    lng aheraeterto its elaselfloatl0n~'   The aourt
    alsoooaai4eredth.eoheraaterofthe taxedend
    non-texed.lines,their aurnber   and gomparatlve
    wlu6 en% tho mount-of tares which would bs as-
    8essed a&.nst them. * * *
         "The Lines may be divided into two oleeses,
  : (1) lines own&l by appellantan% oonduoted for
    profit,and (2) lines oonneotedwith those qt
    fhe flrstolass and oalled sub4laen6ed oompealee,
    rural and roadwny.+ * *
         "The 9urel* usuallybelongsto en aseoQla-
    tlon of farmerswho llva along the.lins~.It aom-
    prlaea a switch-boar4ledsed & the main or profit-
    n&lng oo~~~toar~~.~er,thelPain~o~any
    own&g the telephonescm tha line end reee;lriPyi
                                                  the
    entlre'ahargefos $011 messegee,less the manager's
    comnlfJelans
             fox aa.ieoti.o&%Q      roadveya   ooanooteQ
Hon. Oeo. H. Sheppard,Page l.2


    with a *rural'are oonstructedand owned by
    the Samera in the sum way as other roadways.
    The largerportionof 'rurals'are oontraotfj
    with Individuals.' * *
                  .:
         Th? profitthat is afirlved  from the rural
    &nd roadwayllnee ie in the reducedrate for
    the telep&m3e. The manager~ts.the dlfferenoe
    betweenwhat he pays the main companysnd what.
    he eets from tpoae to whom he re~te.
         The %lfTorinOe,therefore, belzeenthe tax-
    payingand non-tax-paying  o&qenles, or lndlvi-
    duale is thz& the foruer, aa said by the Di~striot
    Court,belongto ommerolal oorporatlons    or en-
    terpzlses,0rg;onizea and oonduotedfor the pur-
    pose of earnIrgand payingprofit8as or in the
    nature of dividends;the latter,the uutexed,are
    oooperatlveor fantars*mutuales8oclatlons,
    usuallyunimorporated,oonduatedat estimated
    coata and ortgmizedprlmrlly$o get farthi,
    assooiatloncheap telephonese$vloe.
         *Itilo mauISeat,therefore,that there em8
    uarked dlffere~e8 betwen thetwed endnon-
    fsrsa eotqxuths,and the dlfferenoesuight be
    pronounoedarbitraryif the rule urged by appel-
    lant shouldbe appUs4, that 18, that In the
    taxationof propertyno cirownstancte should be
    aonsldemd but its value, or, to u@o appellant*8
    woras, 'es~ch~dollar's
                         sarth should be treated
    alike.' But such ric;I%equelltyhas not been
    eafrnued. IQ bf~oh.@mthe le&slaturo has the
    power of prescrlbIrgthe subjeatsof taxation
    end exemption,notwithsten4lng the oonstitutlon
    of the State requIreathe leglslatuzeto provide
    a unl.fornruleoftaxatlon,* * *'
         *Wa think the statute&i4er r8vleiiiswithin
    the rule. It Is not arbitrary. It ha6 a reason-
    able baaie .restIngon a red. dlstlnetflon..Itis
    not 6 d&notion bueed on Wire size only, as ooxl-
    tendedby appellant,nor upon'the"re anottnt  of
Hon. 030. H. Sheppard,.
                      Page 15


    businessdone. There I8 a differenceIn the
    doing of the buslnescr
                         and Ite results;o dif-
    femme In the relationto the publlo."
          The 0onstItutIonallty 0r Article7060 as orI&-
ally passed,prior to Its amendmnt In 1956, was attaoked
on the &munC of dIsorlznInatIon In the oase of DallasGas
Co. T. State, (Ct. CiY. App.) 261 5. Vi.1089 (WritOf error
rerused),a& vm think the languageor JustIcre.Baugh  In
upholdIngthe statuteIn that oam Is appllaableto the
questionin this opinion,that lengus being ae iollow6:
         "AppellantInsiststhat beoause the act
    in questionlevlea-anoooupatlontar at one
    rate on those pursuingan occupntlonIn ofties
    of over 25,000lnhabltants,~0.ocoupatlon-tax
    et a lesserrate upon those pursuingthe same
    oaoupatlonIn oltleeof 10,000 inhabitantaand
    lees than 25,000 Inhabitants,and no ooal?petioti
    tm at all on those puMluIngthat 8ame oooupa-
    tlon In plaaesotherthan these two olassssof
    alties,It Is void, and ln violationof section
    5 of artiole1 and seotlona1 and 2 of art&la
    0 of the Constitutionof Texas sad of the Four-
    teenthhtnendmentto the ConetltutIonof the
    UnitedStates.*l +
          "In small towns suoh cost 3;s60 out ot
     proportionto the returnn troa mmh oOOupation
     a&to make It irspraotieable, if not eaonmnIoally
     InpossIble,to pursue It there. The very ex%6t-
     ace of swh ocoupatlonmuat needs depend upon
     volume of business,whloh, generally,IS In pro-
  . portionto the number 61 InhabItantsserved.
     likwallythe largerthe volunw of businessdone
     the more economiemlly suoh ooaupatlonaan be
    'purmed end the mre profitableit.thu6beoome60
     Jillthese considerations neoetwiarlly6ntez into
     the matter of olasalflaatlon and oould have been,
     and doubtles?.were, consideredby the Leglelature
     ~:arrIviug at the olassii;i~t%on  of whl&appel-
     l&t aontplains.9!h8,%gi8~iRZL3XOItyhW6iWlI-
     dladed,and pePha B did, that due to ifs very    -
   I nature the operatPon of agas plant in any plaoe
Hon. Geo. IL Sheppard,Page 14


    of loss than 10,000 inhebltants ras SO UCI-
    profitableas to be eoona&a~lly    Impraati-
    oablo,or so nearlyso that an oooupationtax
    upon it wuld render It 80. And as stated In
    LIndsleyv. NaturalCarbonicGas Co., 820 IT.8.
    61, 31 sup. ct. 537, 55 I..E4j.359, Ann. cas.
    lOl.SC,160:
         r*'When
               the clas6IfleatIon In such a law Is
    a&led In queetlon,If any state of facts xea-
    sonablyaan be COnWlYt3d that would sustainIt,
    the exlstenoeof thst state of faots at the time
    the law WAS enaotedmust be assuced. *
         *la view of the peoullarnature of the oo-
    oupatlonIuvolvedand our duty to uphold the
    aots of the Legislatureunless 8-e are olearly
    In yiolatlonof the state or uatImaalCoastitu-
    tlon, we aw not preparedtomy that the c&881-
    floationof appellant~eooeupatlcmIs so arbIt-
    rary, dIsor5mIwtory,  gremmnable, or unroal,a6
    to WArrEntus In holdinglt wl~nstItutlonalfo?y
    that rewon.w
         Thelfi~toaoewwlf~hto quoterroari6 theoaseof
Texas Conqxmy~d Step~M,l00~~.638,103S.F,4231,~ah
upheldthe confMttiIonalItyof a gxo1~8 reoeiptstax law that
plaoeda differentrate of taxes on differenttypes of busl-
nws, and in #at oaeie the SupremeCourt of Texas st#lr
         The very 1-e       of the Coustltutloaof
    theState I@.Ies poW3rinthe Legislatureto
    olassIfythe subj‘eotsof~oaoupetlontaxesand
    only requiresthat the tax shall be ecual and
    unifom upoqthe saraeclass. Person6:who,Iu
    themostgeneral sense,mayberegarded as pur-
    suing the imae ooaupatlon,as'ror Iustame am-
    ehents,.maythus be dI?IdedIuto classesand the
    classeszanybe,taxedIn differentamountsand
    aceordingto dirierentst~alArd8.     Merchants may
    be dividedinto WhOleSAlera and retallerrr,   and,
    If there be reasonablegrounds,these may be
    surtherdividedaooorditq to. the p6WtIOular alassw
    o$ businessin wh.Iohthey,msyengage. The consi-
    derationsupon whlah such olAsESfioAtfons    13hal.l be
Hon. Ceo. l?.Sheppard,Pnplel!3


     based are primarilywithin the discretionof
     the Legislature. lihecourts,undertheprovlslons
     relied on, ofinonly interferewhen It Is made
     clearlyto appear that an attempted olaseIfloatlon
     has no reasonable basis Iu the nature of.the buel-
     Il0ELleE  ClaEEiiied,and that the w OpOZ’ateE UII-
     equallyupon subjectsbetweenwhiah there I.6no
     real differewe    to justlfytheseparatetreatment
     OS thsmundertakenbythe b&iEhltUre.        =6   is
     the rule In applyingboth the State and Federal
     COnEtitUtiOnE,   Andit has been SO Oft&It stated E@
     to reuder uuneoessaryfurtbsrdisausslon0s It."
             our answerto yourrIrstqus6tlonirtbatRural Eleo-
trioAssociationsoreanlsedunder $he ~ZZeotrIo
                                           Cooperatiw
Corporationnot* (Art.l528blare liablefor ad valoremtaxw
on their property.
             Our   anmm.toyour   88002ld   quWtlOtl16tbat by rirt\u
0s Seation
         SO or the Wleotrk CooperativeCorporationbetw
(;,rt.
     lciesb)
           oonoern.8organbed under said aot am not l%able
for the grossreoelpta
                    tax levied,agaInst
                                     6uoh ocwerns uX&Ur
Article7060.




                                                    CeOil   CL ROtEOh
    APPROVXII
            JTL 17, 19.39                                   AEEiatfSlt




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