Untitled Texas Attorney General Opinion ( 1959 )

. .
THEA~TORNEYGENEECAL
OF TEXAS
Ausn~~~.'X%x~s
W'ILI. WILSON
ATFORNEY GENERAL
October 8, 1959
Honorable Robert S. Calvert Opinion No. WW-714
Comptroller of Public Accounts
Capitol Station Re: Whether credits provided
Austin, Texas for in H.B. 120. 55th
Leg. R.S. 1937,'reiating
to recovery of Gas Gather-
ing Taxes, may be claimed
against the additional
Franchise Tax and Severance
Beneficiary Tax provided
for by H.B. 11, 3rd C'.S.
Dear Mr. Calvert: of 56th Leg.
You have requested an opinion on several questions
relating to Section 3 of House Bill No. 320 of the 55th
Legislature, (1957), which reads as follows:
"Sec. 3. Final and valid judgments having
been obtained against the State of Texas by
the following named corporations in the follow-
ing causes for the recovery of Gas Gathering
Taxes paid,%0 the State of Texas under the
provisions of Section XXIII of House Bill No.
285, Chapter 402, Acts of the Fifty-second
Legislature:
"El Paso Natural Gas Company, Judgment No.
101,822, 53rd Judicial District Court of Travis
County, Texas. $2,658,935.51
"Tennessee Gas Transmission Company No. 100,870,
126th Judicial District Court of Travis County,
Texas $1,140,906.00
"United Gas Pipe Line Company No. 104,489,
126th Judicial District Court of Travis County,
Texas $1,101,000.34 in lieu of an appropriation
to pay said judgments, there is granted to each
of said corporations a credit in the full amount
of said judgments, according to their tenor,
effect and reading, exclusive of any interest
on the principal sum of such judgments either
prior or subsequent to the respective dates of
such judgments to be applied against any and all
.
Honorable Robertl,S.Calvert, Page 2 (Opinion No. Wii-714)
franchise, gross receipts aniloccupation taxes
which may become due and payable tp the State
of Texas on and after September 1,'1959, by each
said corporation, its successors or assigns,
provided, h,owever,that no credit shall be
applied against that portion of any tax the
revenues from which are dedicated by the Con-
stitution of the State or Texas to a specific
fund. Such credit may be freely assigned, in
whole or in part, by each said corporation, I
its successors or assigns, and any such
successor or assignee may apply such credit
against any such taxes which may be due and
payable by such successor or assignee to the
State of Texas. No such assignment of credit
shall be effective until the State Comptroller
shall have been furnished a true copy of such
assignment certified to be correct by the assignor
or the assignor's duly authorized officer, agent
or attorney in fact. The credit granted to each
corporation may be applied against the taxes
specified above over a period not to exceed ten
(10) years from and after September 1, 1959,
and no more than twenty-five per cent (25s) of
the tax credit provided herein owned by any
single person, firm or corporation shall,be , '
applied against taxes by such person,firm or
corporation in any one (1) calendar year. In '
order to apply against taxes the credit granted
hereunder, the owner thereof, contemporaneously
with each tax payment, shall submit to the State
Comptroller a statement sworn to by such owner
or his or its duly authorized officer, agent or
attorney in fact, stating the amount of credit
being applied, the tax against which it is
applied, and that not more than twenty-five per
cent (25%) of the total credit originally owned or
acquired by such owner has been applied against
taxes for the applicable calendar year. The appli-.
cation of a credit against the taxes hereunder
shall constitute a full accord and satisfaction,
to the extent of the sum.of the credit, of the
judgment for which the credit is granted, and
the,application of such credit agaqnst taxes
shall constitute a full accord and'satisfaction
of such taxes to the extent of the sum of the
credit applied. However, in the event that the
manner of accreditation as provided herein is
declared unconstitutional, such companies shall
not be assessed any penalty or interest for taxes
on which credit has been applied, if paid with
Honorable Robert S. Calvert, Page 3 (Opinion No. WW-714)
a
reasonable promptness after any such declaration
of unconstitutlonal1t.y."
Your first question concerns whether or not the
credit specified above may properly be claimed against the
additional Franchise Tax and Severance Beneficiary Tax1 enacted
by House Bill 11, 3rdCalled Session of the 56th Legislature.
The portion of the above quoted act relevant to this question
states:
. .there is granted. .a credit. .
: ' to be applied against w and all franchise, '
mross receiots and occuoation %es which
Had the Legislature intended to limit the credit to
taxes in existence at the time of passage of House Bill 320,
it would have used language appropriate to such purpose; since
it used language clearly to the contrary, your first question
must be answered in the affirmative.
Your next question is worded as follows: '.
"Where the Constitution provides that one-
fourth (1/4th) of the tax collected be deposited '
to the Available School Fund, please advise
whether the total tax due for a particular
period can be claimed as a credit or can only
seventy-five (75s) per cent of the tax due be
claimed as a credit."
8
The portion of Section 3 of House Bill No. 320, 55th
Leg., relevant to this query, provides:
.no credit shall be applied against
that portion of w tax the revenues from which
are dedicated by the Constitution of the State .
of Texas to's specific fund." (Emphasis added.)
The.f'oregoingproviso In no way limits the amount of
the credit that may be taken in any one year. It merely pro-
vides that no credit may be taken against that portion of any
tax specifically dedicated by the Texas Constitution. Con-
1
The severance beneficiary tax is an occupation tax; con-
sequently there is no question about its being the type of
tax against which credit may be claimed.
Honorable Robert S. Calvert, Page 4 (Opinion No. WW-714)
sequently, you are advised that where the Constitution
dictates that one-fourth (l/4),of a particular tax be deposited
to the Available School Fund, credit can only be taken against
the remaining 75%of such tax.
Your third inquiry Is as follows:
"The Gas Production Tax Law, provided,for
by Article 70&7b, V.C.S. provides that the
first purchaser of gas shall withhold the tax
from his remittance 'to the producer and the
purchaser in turn remit the tax to the State.
Please advise me whether or not a purchaser of
gas, who'is entitled to credit, can claim credit
against the tax which he has withheld from pro-
ducers of gas provided that he has assigned the
proportionate amount of the credit to the indivi-
dual producers." .
Article 7047b, Section Za, V.A.C.S, (recodified by'
H.B. 11, 3rd C.S. 56th Leg., as Art. 3.05of Title 1,22a,R.C.S.)
states:
"(1) The tax herein Imposed on the producing
of gas shall be the primary liability of the
producer as hereinbefore defined, and every
person purchasing gas from producer thereof and
taking delivery thereof at or near the premises
where produced shall collect said tax imposed
by this Article from the producer. Every pur-
chaser including the first purchaser and the
subsequent purchaser, required to collect any
tax under this Article, shall make ouch col-
lection by deducting and withholding the amount
of such tax from any payments made by such pur-
chaser to the producer, and remit same as herein
provided. This Section shall not affect any
pending lawsuit in the State of Texas or any lease
agreement or contract now or that hereafter may
be in effect between the State of Texas or any
political subdivision thereof and/or the University
of Texas and any gas producer.
1, . .
. . . .
"(3)The tax hereby levied shall be a liability
upon the producer, the first purchaser, and/or
subsequent purchaser or purchasers as herein
provided."
Honorable Robert S. Calvert, Page 5 (Oi?inionNO. Wd-714)
Since the gas production tax is a liability of the
producer and the purchaser, either, or both, of them may, within
the specim limits, take credit against such tax by following
the procedure prescribed in H.B. 320. .:,Thecredit may be
assigned from the purchaser .to the producer, or vice-versa,
provided,.however, that the assignee may not claim credit
pursuant to the assignment until a copy thereof, certified
to by the assignor, is on file with the Comptroller.
The purchaser may take credit against taxes withheld
from payments to the producer by filing the sworn statement
required by H.B. 320 with the monthly report required by
Art. 7047b;'V.A.C.S. Likewise, the producer may take credit
by filing the sworn statement with its monthly report. In
instances where the producer has properly taken credit against
gas production taxes, the purchaser is relieved of the re-
sponsibility of remitting such taxes (up to the amount of the
credit taken) to the State.2
In connection with the foregoing question you also
state:
"It is quite common for a ,purchaserof gas
to contract with the producer to reimburse
him for any Increased taxes on the gas produced.
Please advise me whether or not the taxpayer,
entitled to credit, can make an assignment to
the producer for the amount of the reimburse-
ment and the producer in turn claim credit for
the amount of the assignment against his gas
.production tax."
.
This ,+ue:;tion
is answered in the preceding discussion;
the producer makes claim for the credit by following the above
specified procedure.
In your letter dated August 24, 1959, which supplements,
your original opinion request, you state that the question has
arisen as to whether or not the'credit may be claimed against
the Railroad Commission Gross Receipts Utility Tax provided
for by Article 6060, V.A.C.S. The provisons of this tax are
as follows:
"Every gas utility subject to the provisions
of this subdivision on or before the first day of
_-.._.--.
2
The facts justifying the failure to remit should be set forth
with the purchasers monthly report; however, this is an
administrative detail to be handled by your department.
I .
Honorable.Robert S. Calvert, Page 6 (Opinion No. WW-714)
January and quarterly thereafter, shall flld
with the Commlaelon a statement, duly verified
aB true and correct by the president, treasurer
ar -general manager If a oompany or ogrporatlcfn,
or by the owner or one o$ them if an’indlvldual
or oo-partnership, showing the groan reoelpts
of suoh utlllty for the quarter next prnoedlng
or for Buoh portion of said quarterly perlod a0
euoh utility may have been oonduotlng any bualnerl,
and at such time shall pay Into the State Treasury
at Austin a sum equal to one-fourth of one per
cent of the gross inoome reoelved from all
bualnese done by It within thle State during
eald quarter, ”
:
In ocinneotian with this tax, Acts 1931, 42nd Leg.,
Reg. Seaa., page ill, Ch. 73, fl 10, provides: ,
“That article 6060 of the Revleed’Clvll
Statute8 of 1925, except In so far aa It
lmposee a license fee or tax of one-fourth ’
of one per oent againnt persons owning,
operating, or managing plpe;lnes, as pro-
vided In section 2 of artiole 6050, la here- I
by repealed and Bald fund shall be used for
enforolng the provlslons of artlolee 6050 to
6066,’ lnoluelye. ”
Artloles 6050 through 6066, lnoluslve, provide oertaln
regulatlotis governing gas utliltleq. All money oolleoted pur-
suant to Art, 6060 ie held in:the ‘gas utility enforoement
fund” to be used for enforolni suoh regulatlone..
It ia olear that’;.the.:fee bxaoted by ktlole 6060,
V.A.C.9 la a re ulator (as oppoeed to a revenue) meanure,
AB sta& by ChMe Hlokman in Hurt v. Coorfer, 110 S.W,2d
896 (Tex.Sup,Ct. 1937): 8
“It Is eometlmer dlffloult to determine
whether a given statute should be dlassed aa
i a regulatory measure or a8.a tax meanure. The
prinolple of the distinction gemrally reoognlerd
1s that when, from a oonsfderation of the statute ,
aB a whole, the primary purpose of the fees pro-
vided thereln ie the ralaing of the revenue,
then suoh fees are in faot ooouDation taxes and
thie regardless of the namp by ihi.oh they are
. ,
Honorable Robert S. Calvert, Page 7 (Opinion No. WW-714)
To the same effect see H. Rouw Company v. Texas
Citrus Commission, 247 S.W.2d 231 (T s ct 1952) Ii
County of Harris v. Shepperd, 291 S.?2d"$l iTex.Sup%t. 1956).
After citing the foregoing principle, the latter case states: .
"So-called licen'setaxes are of two
kinds. The one is a tax for the purpose of
revenue. The other, which is strictly
speaking, not a tax --
at all but merely an
exercise onthe -ice power, is ,a fee
‘( ---,I
imposed for the purpose of regulation.
Emphasis adm.
It has been held that certain fees exacted by cities,
for the purpose of regulation, were not occupation taxes wlth-
In the meaning'of Article VIII; Section 1 of the Texas Con-
stitution,-'whichprohibits a city from levying an occupation
tax unless a comparable tax is levied by the State.
Fort Worth v. Gulf Refining Company, et al., 83 S.W.2d%5F 1
‘(Tex.Sup.Ct.1935). Ex Parte Denny, 129 S.W. 1115 Tex.Cr.
App. 1910 . See also Ex Parte Cramer, 136 S.W. 61 tTex.Cr.
App. 1311 1 which held that a regulatory fee exacted from an
electrician was not an occupation tax within the constitutional
prohibition .against levying occupation taxes on agricultural
or mechanical pursuits.
In view of the foregoing authorities, you are advised
that the utilities regulation fee imposed by Article 6060,
V.A.C.S., is not a franchise, gross receipts,3 or occupation
tax within the meaning of H.B. 320; consequently, no credit
may be taken against the payment thereof.
SUMMARY
Credits provided for In H.B. 320, 55th
Leg., R.S., 1957, may be taken against the
additional Franchise Tax and Severance Bene-
ficiary Tax provided for by H.B. 11, 3rd C.S.
of the 56th Leg., but may not be taken against
Gross receipts taxes have been held to be occupation taxes.
Ex Parte Walker, 52 S.W.2d 266, 121 Tex. Crim. 145 1932). ,
The case of Reed v. City of Waco, 223 S.W.2d 247, tTex.Clv.
APP. 1949, error refused) held that the measure there in
question was a regulatory device, not an occupation tax, even
though levied on gross receipts.
ii
3
Honorable Robert S. Calvert, Page 8. (Opinion No. WW-714)
.
the gas utility regulation fee exacted by
Art. 6060, V.A.C.S.
Elthe~rthe producer or the purchaser
may, within the limits prescribed by H.B. 320,
take.credit against the payment of gas pro-
duc.tiontaxes by following the procedure set
forth therein.
Yours very truly,
WILL WILSON
Attorney General of Texas
Assistant
.JNP:cm
APPROVED: :
OPINION COMMITTEE:
Geo. P. Blackburn, Chairman
William E. Allen
,LawrenceJones
John Reeves
Fred B. Werkenthin
REVIEWED FOR THE ATTORNEY GENERAL
By: W:V. GEPPERT