Untitled Texas Attorney General Opinion ( 1951 )

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¢ 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
LPL/mwb