Untitled Texas Attorney General Opinion

THEA~TORNEYGENERAL
OF !lYExAs
AUSTIN ``.TEXAS
November 19, 1959
Honorable Robert S. Calvert Opinion No. ``-738
Comptroller of Public Accounts
Capitol Station Re: Whether the Hotel Occu-
Austin 11, Texas panty Tax applies to
officers and, employees
of the Federal Reserve
Bank while travelling
on official business of
Dear Sir: the bank.
In your letter dated September 17, 1959, you state:
“I am in receipt of a letter from Mr. George
F. Rudy, General Counsel, Federal Reserve Dank of
Dallas, asking our opinion as to whether the Hotel
Occupancy Tax applies to officers and employees of
this Federal Reserve Bank while travelling on
official business of the bank. I am enclosing his
letter herewith and will thank you to advise me in
your opinion the correct answer to give Mr. Rudy.”
Articles 23.02 and 23.03, Chapter 23, H.B. 11, 3rd
C.S., 56th Leg. , impose the Hotel Occupancy Tax upon occu-
pants of any~ space in a hotel, and provide that the hotel
shall collect such tax.
As correctly pointed out by the letter referred to
in the above quotation, Section 7 of the Federal Reserve Act
( 38 Stat. 258, 12 U.S.C.A., Section 531) exempts Federal
Reserve Banks from taxation in the following language:
“Federal Reserve Banks, including the capital
stock and surplus therein, and the income derived
therefrom shall be exempt from Federal, State, and
local taxation, except taxes upon real estate.”
Under the authority of this Section it appears
that when the Federal Reserve Bank contracts directly, or in
its name through an agent, for a space in a hotel, and pays
the hotel for such space from its funds, it would not be
liable for the tax imposed by Chapter 23 of House Bill 11..
See Attorney General’s Opinion No. V-1492 (l952), and Kern-
Limerick v. Scurlock, 347 U.S. 110 (1954). However, i
1 .
Hon. Robert S. Calvert, Page 2 Opinion No. W-738
different result obtalns where employ,ees or officers of the
Bank rent hotel rooms while travelling at the expense of the
bank.
There are essentially two methods of reimbursing
employees for the expenses of travelling. The first Is the
per diem method. This, in effect, compensates the employee
on an “in lieu” basis, i.e., the employee does not receive
reimbursement for actual expenses but instead receives a
specified amount for each day that he is on the road.. This
amount is received by the employee regardless of how much is
paid for the hotel space, or whether the employee even rents
such space. Under this state of facts, it is apparent that
the Federal Reserve Bank does not contract directly with the
hotel for the occupancy of a space in the hotel; consequantly,
the tax is not imposed upon the Bank. The employee contracts
with the hotel in his private capacity and is liable for the
Hotel Occupancy Tax in such capacity.
The second method of compensating employees travel-
ling at the expense of the Bank is by reimbursement of actual
expenses. Here agains the Bank does not contract directly
with the hotel. The employee contracts with the hotel in his
private capacity; the consideration for occupancy of the
hotel space is paid to the hotel by the employee likewise in
his private capacity. The Federal Reserve Rank, by virtue
of its employment agreement, contracts with the employee to
reimburse him for actual expenses incurred; the Hotel Occu-
pancy Tax is one of such expenses. The tax is an individual
liability of the employee. It is not imposed upon the Bank;
the fact that it is passed to the Bank does not make it an
invalid imposition on the Bank.
Two cases furnish direct support for this conclu-
sion. In the case of Alabama v. King -- and Boos, 314 U.S. 1
(1941), King and Booze7 sold lumber on the order of a con-
tractor for use by the latter in constructing an army camp for
the United States. The contractor sold the lumber to the
United States pursuant to a “cost-plus-a-fixed-fee” agreement.
The question was whether the Alabama sales tax, chargeable to
the seller but required to be collected from the buyer, was
unconstitutional as being a direct tax upon the United States.
The government contended that under the peculiar facts con-
cerned it was the purchaser and the tax was directly upon it.
The Supreme Court held that the tax was the liability of the
contractor, and the fact that it was passed directly to the
government under the cost-plus contract did not invalidate
it.
. .
Hon. Robert S. Calvert, Page 3 Opinion No. ``-738
The case of Federal Reserve Bank of Chica o v
Department of Revenue of State, 339 Mich. 5b’( 6’-i++2d
639 (1954) i nvolves the tax exemption quoted’above’and
facts closeiy analogous to those in question in Alabama v.
King and Boozer, supra. This case held that a retailer
was not exemot from a retailer’s gross receiots tax on oro-
ceed.s from sales to the Federal Reserve Bank: The basis
for the decision was that the legal incid,ence or the tax
was on the retailer; the fact that the tax was passed to
the Federal Reserve Bank did not make it a tax on the Rank.
(The act levying ths tax expressly permitted passage of
the tax to the purchaser, and prohibited advertising to
the effect that the tax was not included in the price of
articles sold. In reaching its decision, the Court
stated (page 61 5):
II. . . . The state sales tax statuts operates on
retailers in Michigan. They alone are obligated
to pay the tax. The purchasers are under no
such obligation sxcept as they assume, by con-
tract of purchase, to shoulder the economic bur-
den. . . .”
As pointed out above, in the instant case ..the
Hotel Occupancy Tax is a liability of the smploy~ee; only
the economic burden thereof, which is assumed by the Bank
through the employment contract with the employee, is
borne by the Federal Reserve Bank.
(The foregoing opinion is limited to the facts
assumed therein. The opinion request does not set forth
the exact method by which ths Federal Reserve Ban:: compen-
sates its employees for travel expenses. )
SUMMARY
The Hotel Occupancy Tax applies to
officers and employees of the Federal
Reserve Bank while travelling on offi-
cial business of the bank, where such
officers and employees are compensated
by the Bank for the cost of hotel occu
panty either on the “per diem” basis or
. .
Hon. Robert S. Calvert, Page 4 Opinion No. ``-738
by reimbursement of actual expenses
incurred.
Very truly yours,
WILL WILSON
Attorneys General
JNP:bct
APPROVED:
OPINION COMMITTEE:
Morgan Nesbitt, Chairman
Phocion Park
Jerry~ Roberts
Robert A. Rowland
Robert Shannon
REVIEW-EDFOR THE ATTORNEYGENERAL
By: W. V. Geppert