Judges: JOHN L. HILL, Attorney General of Texas
Filed Date: 11/30/1978
Status: Precedential
Modified Date: 7/6/2016
Mr. Homer A. Foerster Executive Director State Board of Control L.B.J. Building Austin, Texas 78711
Re: Whether state agencies may pay the `special municipal tax or charge' on telephone bills.
Dear Mr. Foerster:
You ask whether state agencies may pay a `municipal franchise charge' which appears on telephone bills. Utilities frequently enter into franchise agreements with cities authorizing them to use the city's streets in exchange for the payment of a percentage of the gross receipts received for rendering services locally. The percentage of gross receipts paid to the city varies according to the individual agreement. The Public Utility Commission has requires Southwestern Bell Telephone Company to file a tariff which provides that the municipal franchise charge will be passed on to the utility customers within the particular municipality. Telephone bills sent to state agencies now include a `special municipal tax or charge.' You question whether this charge can be exacted from a state agency and ask whether it is actually a tax.
Article 1175, section 12, V.T.C.S., prevents telephone companies from using the streets or grounds of a home rule city without first obtaining the consent of the governing authorities and paying a prescribed compensation. Article 1181, V.T.C.S., details other conditions relating to the grant by a home rule city of a `franchise to use or occupy the public streets, avenues, alleys or grounds' of the city. Pursuant to these provisions, home rule cities may grant utility companies franchises to use the public streets in exchange for compensation measured by a percentage of gross receipts. City of Tyler v. Television Cable Service, Inc.,
The Supreme Court has described these franchise charges collected from utilities as charges in the nature of rentals for the use of city streets. Fleming v. Houston Lighting Power Co., supra. It expressly distinguished between such rental charges imposed by the city and a tax on the privilege of doing business. Fleming v. Houston Lighting Power Co.,
Decisions from other states generally hold that the percentage of gross receipts which a city collects from a utility pursuant to a franchise agreement does not constitute a tax. City and County of San Francisco v. Market St. Ry. Co.,
You state in your request letter that the payments are authorized by article 11.06, Taxation-General, which imposes a state gross receipts tax on telephone companies. Section 2 of article 11.06 provides:
No city or other political subdivision of this State, by virtue of its taxing power, police power, or otherwise, shall impose an occupation tax or charge of any sort, for the privilege of doing business, upon any person, corporation, or association required to pay an occupation tax under this Article; provided, that nothing in this Article shall be construed to prohibit the collection of ad valorem taxes as provided or not prohibited by law, or any tax now imposed by franchise, and provided further that this Article shall not affect any contract now in existence or hereafter made between a city and the holder of a franchise.
The Supreme Court discussed the predecessor to article 11.06 in overruling a motion for rehearing in Fleming v. Houston Lighting
Power Co.,
These authorities hold, and we conclude, that the franchise charge is not a tax. However, in some cases, part of the franchise charge may constitue a payment in lieu of taxes. Home rule cities have authority to assess the franchise of a public corporation using the city streets separately from its tangible property. V.T.C.S. art. 1175, § 8; City of Fort Worth v. Southwestern Bell Telephone Co.,
You finally ask whether the Constitution or statutes prohibit state agencies from paying the franchise charge, which we have determined not to be a tax. The charge is part of the telephone rate set by the Public Utilities Commission pursuant to article 1446c. See § 3(d). We find no constitutional or statutory prohibition against the payment of properly established telephone rates by state agencies. Article 606a, V.T.C.S., authorizes the Board of Control to pay for tllecommunications services used by state agencies, and an appropriation is available for that Board of Control to pay for telecommunications at 2856.
Very truly yours,
John L. Hill Attorney General of Texas
Approved:
David M. Kendall First Assistant
C. Robert Heath Chairman Opinion Committee
City of Fort Worth v. Southwestern Bell Telephone Co. , 80 F.2d 972 ( 1936 )
Hanford Gas Etc. Co. v. Hanford , 163 Cal. 108 ( 1912 )
Conlen Grain & Mercantile, Inc. v. Texas Grain Sorghum ... , 519 S.W.2d 620 ( 1975 )
St. Louis v. Western Union Telegraph Co. , 13 S. Ct. 485 ( 1893 )
County of Harris v. Shepperd , 156 Tex. 18 ( 1956 )
Hartford v. Connecticut Co. , 107 Conn. 312 ( 1928 )
City of Weslaco v. General Telephone Co. of the Southwest , 359 S.W.2d 260 ( 1961 )
T. P. Ry. Co. v. El Paso , 126 Tex. 86 ( 1935 )
Fleming v. Houston Lighting Power Co. , 135 Tex. 463 ( 1940 )
Southwestern Tel. Tel. v. City of Dallas , 174 S.W. 636 ( 1915 )