Untitled Texas Attorney General Opinion

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The H&orib:Le’ Jack ,&is&
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Chief Clerk in.,:~,I,,
,General,,L&d Office:, .:I’,,. :l., ., .., ,,``. ,,,.,:,Re: .,,: .~$abllity .of ,St+te and
Austin,, Texa.s .78701, ,``:~.. :.: ,,, :.:, ~:~..:
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~ ,~. .Its a~gencles ,for A.irway
..~,,,T, ..,.. ~. ,,: ,,.. i]‘se Tax’on civil aircraft
Dear Mr.~‘Giberson: .:
Your letter requesting.our’opinion asks ,whether the General Land
Office, as +,n,agency ,of the State.of Texas, #&required as.a matter of law,
to pay an Airway Us,e..Tax on state-owned ai&craft~a$d”:if it is, whether
the agency ib.o’bligat&d to :pay interest and pen&ties”& the amount not
timely paid.; ,/ ~,::
As bagkgfound to:this request .are. the factk ~that in a cause tried in
.the United states~.DistFict.,,Court,:~or th.:‘:~estcrn1,~i5tljct of Tellas styled
Stat.e of T.&xas,,v.. United State6..of .Aineii&, ~..,thk’::State:,questianea its liabili.ty
under $4261 of Title 26 of the United States ‘&&y Internal Revenue Cod,e
of 1954, fqr taxes. impo’se~d upon,the amount paid .by``emp.loyees of the State
for transportation.?n off+al.State ,business.: The State k’ought a refund.
,.
Tha$.suit was,,$ermi&&d.dy a’.jtidg&ntlof &United States District
Court in June,:of ..1?,72, denying the c:laim ,o! the state. That deci,sion was
affirmed by the ,Uni,t,e,d,zSt+tes Cou,rt.of Appeals f.or,.t&&f’th Circuit, per
curiam, in December,.,,$9?2, &d is’now a final judg&&nt.
....~ In the~meantime,. when the p,uestion:of your+gency’s ,Liabili.ty for the
. tax on the use of civi:l aircraft, .imposed’by 5 4491 of Tit,ie 26,~ ,was ,brought
to the attention, of the Att,orney ,G&eral’s office, : y&~&$$&vis’ed apparent:ly
that this office ,was challlenging the 1iabi:tity of Sta’te age&d; &I payment of
..such taxes an+ that you shou:ld not pay the tax.
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In the pribr suif, which’& &ce,‘fii&b, ‘it ‘was
“’ ” Our c&e&ion that the
tax levied upon transportation of State employees on State business was
p. 697
The Honorable Jack Giberson, page 2 (H-149)
unconstitutional as being violative of an implied governmenta immunity.
The United States District Court, in its conclusions of law, r,ejected this .
contention holding that the tax could be imposed constitutionaIl:ly upon
individual State employees traveling on official State business. The Court
pointed to the fact that the purpose of these taxes was to provide additional
revenue to finance increased government outlays in the expansion and
deve.lopment of airport and airway systems and to impose those additional
costs upon the users of the system. It held that whether the tax was con-
sidered as an exercise by Congress of its power to ,re,gu.late interstate
commerce ‘or as an exercise of the taxing power, it was constitutional as
applied to employees of the State of Texas.
“The airway user charge is not a tax ins the
traditional sense, but instead is a charge for services
rendered and represents a quid pro quo, and as such,
is outside the scope of the doctrine of implied inter-
governmenta, tax immunity. . . . ”
“Nothing in the historical basis of dual sover-
eignty underlying the principle of state immunity from
federal taxation requires that the states continue to
receive the benefit of airwayfaci,lities and services
actual:ly used by states but furnished by the Federal
Government without bearing their equitable share of
the costs incurred in providing those particular bene-
fits. Even employees of the Federal Government must
pay the air transportation charge. No :logical reason
exists why all users of the air transportation system
should not pay their fair share of such costs. ”
Since the issues are not identical, the State of Texas is not estopped
fromquestioning& imposition of the tax on your aircraft. Nevertheless, it
is our opinion that it would be unfruitful to question the tax.
Your letter requesting our opinion also asks whether you. will be
ob:ligated to pay interest and penallties on the unpaid portions of the tax.
p. 690
The Honorabh Jack Gibeison,: ‘page :3”!.(H-149’)
Section 660,l ,of’Title 26 of the United States Code, the 1nt:ernal j
Revenue Code of 1954, requires the payment &interest at the rate of 6%
per annum in the event any tax imposed by the Code is not paid on or
before the date prescribed for its payment. The interest is co:llected
as a compensation for use of the money, and not as.a penalty. Vick:v.
Phinney. 414 F. 2d 444 (5th Cir. 1969);
Penalties,, which are governed by 5 6672 of ,Title 26 are assess’ed
in the nature of punishment for failing to collect and pay over a tax when
due. By the ,terms of the section, those, liab:k are’ “shy person’! defined
in $6671 as including”‘an officer or employee .of a corporation, oi'a .mem-
ber or employee of a partnership, who as such officer, ‘employee or mem-
ber ,is under a duty to per:form the act in respect of which the violation
occur.3. ” Governmental agencies are not included. Cascade County v.
Pemdl, 67 F. S~pp. 253 (D. C, Mont., 1946).
It is our opinion, therefore, ‘that your agency should pay the tax
imposed by 5 4491, et seq., of Title 26 of the United States Code, imposed
for the use of c.ivil aircra.ft and owes interest on’those taxes from the time
they were due.: It is, further our opinion that the State is not liable for
penaltic,s.
SUMMARY
Under the decision in State of Texas v. United States
of America that the governmental immunity of the State of
Texas and the doctrine of dual sovereignty do not exempt
the State from liability for federal taxes upon the use of
civil aircraft where the taxes are imposed for the purpose
of constructing and operating airports and airways, the
Land Office shou,ld pay,similar taxes levied on a state-
owned aircraft. The State may be liable for interest on
the unpaid taxes but is not liable for any penalty.
Attorney General of Texas
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The Honorable Jack Giberson, page,4 (H;149)
APPRQVED:
DAVID M. KENDALL, Chairman
Opinion Committee
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p.’ 700