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                                        EY    GENERAL




        Honorable Robert S. Calvert          Opinion Ro. (c-346)
        Comptrollerof Pub1,icAccounts
        Capitol Station                      Re: Whether under stated facts
        Austin, Texas                            a "lessor" of motor vehi-
                                                 cles propelled with special
                                                 fuels which are leased to
                                                 and operated entirely by the
                                                 "lessee" or his drivers in
                                                 interstate commerce may be
                                                 construed to be the "user"
                                                 of the special fuels de-
                                                 livered to such vehicles or
                                                 imported in the fuel supply
                                                 tanks of the motor vehicles
                                                 and consumed on the Texas
        Dear Mr. Calve&:                         highways.
             We quote the following excerpts from your letter requesting
        the opinion of this office on the above captionedmatter:
                 "A number of truck leasing companies are engaged
            in the business of leasing commercial trucks and trailers
            owned by said companies to carriers for use in interstate
            commerce. The truck owner or 'lessor' enters into con-
            tract with the 'lessee'under which said lessor agrees to
            furnish everythingnecessary to the proper operation and
            maintenance of the vehicles including the special fuels
            consumed in the operation of said motor vehicles. Under
            the agreement the lessor delivers the fuel to the vehi-
            cles from various bulk storages maintained by said lessor
            whenever possible and agrees to reimburse the lessee for
            the cost of any special fuels necessary for the lessee to
            purchase elsewhere.




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Honorable Robert S. Calvert,,Page2     Opinion No. (C-346)


         "The lessors of such vehicles urge that the
    furnishingof special fuels from lessor’s  storage to
    leased vehicles owned by the lessor or reimbursement
    to the lessee fom     cost of fuel purchased else-
    where qualifies the lessor as user of the fuel as the
    term )userl is defined and that said lessors should
    be authorized to furnish bond and secure user-import
    permits to report and pay taxes accruing on special
    fuels used in such leased vehicles and to claim refund
    of the tax paid on special fuels purchased in Texas and
    used in such vehicles in other States. In fact, some
    of the lessors acting under the above impressionhave
    filed applicationsand secured user-importpermits
    under which they have filed refund claims for tax paid
    special fuels used in such leased vehicles in other
    States.
         “For ready:reference, it appears that it will
    be necessary to examine the following provisions of
    the special fuels tax law - Chapter 10, Title 122A,
    Taxation-GeneralI
              'Article 10.03(l) imposes the tax
         upon the use of special fuels for the
         propulsion of motor vehicles upon the
         public highways of this State.
              ‘Article 10.03(3) requires the
         supplier to collect the tax on all
         special fuels delivered to non-bonded
         users - who are classifiedby Article
         10.11 (1f as persons who purchase special
         fuels predominantlyfor delivery into
         fuel supply tanks of motor vehicles owned
         or operated by said user.)
              'Article10.03(5) requires every user
         to report and pay taxes to the State on all
         special fuels imported in fuel supply tanks
         or motor vehicles owned or operated by said
         users (who are classifiedas bonded user-
         importers by Article 10.11(l).)




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        Honorable Robert S. Calvert, Page 3     Opinion No. (C- 346)

                       tArticle10.02(8) defines 'user' as
                  follows:
                          “(8) 'user' means and includes
                    every person who delivers any special
                    fuels into the fuel supply tanks of
                    motor vehicles owned or operated by
                    him. 'User* also means any person
                    who imports special fuels into this
                    State in the fuel supply tanks of
                    motor vehicles owned or operated by
                    him."
                      'Article 10.07. Tax Liability on Leased
                 Motor Vehicles. "Any user who as lessee, in
                 furtheranceof his business, enters into a
                 lease or contract or other arrangementwith
                 another person for the operation of a motor
                 vehicle, the operation of which will create
                 a liability for the tax herein imposed, shall
                 be deem to be the operator of said motor
                 vehicle and shall report and pay the tax
                 accruing by reason of the use under such lease
                 or contract. This provision shall not be
                 construed as relieving any lessor or person
                 acting as a user from the payment of the tax
                 herein imposed in cases where the lessee is
                 not qualified as a licensed and bonded user
                 as required herein. Nothing herein shall be
                 construed as requiring the filing of more than
                 one (1) report covering a given special fuel
                 use operation or as,requiringthe payment of
                 the tax herein imposed more than once on the
                 same special fuels." (Note: See Comptroller
                 Rule and Regulation No. VII, in reference to
                 Article 10.07 attached.)
                       'Article 10.08. Optional Computationof
                  Tax. "In the event the tax herein imposed on
                  special fuels imported into this State in the
                  fuel supply.tanksof motor vehicles. . .can be
                  more accurately determined on a mileage basis
                  (that is by determiningand using the total
                  number of miles traveled and the total gallons
                  of fuel consumed), or in case it is more
                  practicableto so determine the tax, the Comp-
                  troller is hereby authorized to approve and
                  adopt such basis." (Note: the mileage basis-



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Honorable Robert S. Calvert, Page 4     Opinion No. (C-346)


         average miles per gallons - was necessarily
         adopted as the most accurate method of computing
         the tax due or refundable on s ecial fuels used
         in interstatevehicular travelP .
              'Article 10.14 provides that, '. . .any
         licensed user who shall have paid said tax
         upon any fuel which has been used by such user
         for any purpose other than propelling a motor
         vehicle upon the public highways, may file
         claim for a refund of the tax or taxes so
         paid. . . .'
               1. . .,

          "The Comptroller'sinterpretationof the law under
     discussion is set out in Rule and Regulation No, VII,
     attached hereto. The ruling did not take into con-
     siderationthe claims now'advancedby the lessors that
     they would deliver most of the special fuels consumed
     in said leased vehicles from their own storage facilities
     or would contract with retail dealers to make such de-
     liveries for the lessor's account into the fuel supply
     tanks of the leased motor vehicles which are owned by
     said lessors - though operated by the lessees.
          11
           . . .II
     Ruling No. VII is headed as follows:
          "Construingthe Law as it applies to:
               TAX LIABILITY OF A LESSEE ON
            SPECIAL FUELS IMPORTEB AND USED ON
            THE HIGHWAY IN LEASED MOTOR VEHICLES."
     This ruling was adopted September 1, 1961 and filed with
the Secretary of State November 15, 1961.
     In quoting the statutory definition of 'user"'as it applies
to user-importers- the ruling underscored "or operated" in the
phrase "motor vehicles owned or operated. . *'




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Honorable Robert S. Calvert, Page 5        Opinion No. (C- 346)


     We quote the following excerpt from the ruling:
         "Therefore,a person who actually imports the
    special fuels in motor vehicles operated exclusively
    by himself, or by his employee drivers, becomes the
    'user' of the fuel, as user is defined; and is re-
    quired by Article 10.03(5), above cited, to report
    and pay the tax on each gallon of special fuels so
    imported and used or consumed in the operation of
    such motor vehicles upon the Texas Highways, and
    regardless of whether such motor vehicles are
    owned by him or are leased from another person.
         "The fact that a lessor of motor vehicles enters
    into a private contract or agreement with the lessee
    to pay for or furnish the special fuels used in the
    operation of the leased motor vehicles, or to reim-
    burse said lessee for the cost of such fuel, would
    not change or alter the status of the lessee as the
    statutory luser* of the fuel consumed in the operation
    of said leased motor vehicles; nor could such agree-
    ment be construed as constitutingor qualifying the
    lessor as the user of special fuels consumed in motor
    vehicles which said lessor does not operate or direct
    the course of operationsin any manner.
         "However,the Legislatureobviously recognized
    that there are cases where a lessor contracts or
    agrees to lease to a lessee motor vehicles to be
    operated by the lessor, or by drivers furnished
    by the lessor, in which the lessor will purchase
    or furnish the special fuels used but will operate
    such leased motor vehicles entirely under the
    direction and control of the lessee, which would
    present a legal question as to whether the lessor
    operating his leased motor vehicles, or the lessee
    directing and controllingthe course of operations,
    or both, would come within the statutory definition
    of aluserl. The Legislatureresolved the question
    by fixing the legal incidence of the tax liability
    and its payment to the State upon the lessee of
    such motor vehicles by the enactment of Article
    10.07 which reads as follows:
          11
               . . .rQuoted, supra, at page 37




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Honorable Robert S. Calvert, Page 6    Opinion No. (c-346)


         "The above article does,not relieve a 'lessee'from
    securing the bonded user-dmporpermit required to import
    and use special fuels in leased vehicles operated by him
    or under his direction and control, nor does it relieve
    him from liability for the tax imposed, or of the penalties
    or impoundmentprescribed for operating without a permit.
    But if a 'lessor'acts as .auser of special fuels imported
    in vehicles leased~a~e%~v         oneratina said vehicles
    for and under the direction of such-lessee,he must make
    certain that said lessee is licensed as a user-importer
    to be relieved of liability for the tax. The use tax is
    secured by a preferred lien upon each vehicle in which the
    taxable fuel is used - regardless of ownership of the
    vehicle. Johnson-Burnhamv. State 95 S.W.2d 144."
     You have submitted three questions for our consideration.
The first of which reads as follows:
          "Where the owner and lessor of motor vehicles
     leased to and operated by interstatecarriers will
     furnish and deliver into the fuel supply tanks of
     such motor vehicles most of the special fuels con-
     sumed therein from storage facilities of the lessor
     or from dealer-stationsunder contract to make such
     delivers for the account of the lessor, then, in
     such cases, may the lessor be construed to be the
     luser' of such specialfuelsas the term 'user' is
     defined, and thereby be licensed as a user and user-
     importer liable for the tax due and authorized to
     file claims for refund when refunds are due?"
     We have concluded that under the submitted facts the lessor
is a "user" within the meaning of the Special F'uelsTax Iaw.
Article 10.02(S) makes ownership as well as operation a criterion
of a "user".'Article~lO.OY;after declaring that a tax liability
on leased motor vehicles may attach to a lessee user under a
contract, expressly states that thl.sprovision of the statute
is not to be conr&i%+ued
                       aw-relieing azSylessor or~person~acting
as a user from the payment of the tax imposed in cases where
the lessee is not qualified as a licensed and bonded user.
Under the facts stated to us, the lessee is not qualified as a
licensed and bonded user. Therefore, necessarily the burden
of reporting and paying the tax must fall upon the lessor who
is also entitled to make applicationsfor refunds if any.




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        Honorable Robert S. Calvert, Page 7   Opinion No. (C- 346)


            Article 10.03(5) contains the following provision:
                 "Every user shall report and pay to this State
            the t&x,.&t the rate imposed, on each gallon of
            special fuels delivered by him into the fuel supply
            tanks of motor vehicles unless said tax has been
            paid to a licensed supplier."
        The lessor in the instant case delivers most of the special fuels
        involved into the leased vehicles from its own storage facilities.
        In this instances the tax has been paid to the supplier. When
        delivery is not so ma&the lessor controls and directs the supply
        of fuel by written agreementswith retail suppliers,both within
        and without the state, and pays the taxes due. With re ard to
        special fuels imported into this state, Article 10.03(5e;desig-
        nates ownership or, in the alternative,operation as a criterion
        of texability.
             As you have pointed out, Article 10.03(l) imposes a tax
        upon the use of special fuels for the propulsion of motor
        vehicles upon the public highways of this State. We think that
        the lessor in the case under considerationis, in fact, engaged
        in a business which in large part, is dependent upon and directly
        connected with the use of special fuels for the propulsion of
        motor vehicles upon the public highways of,this State. We think
        that said fuels, which are owned by the lessor, are used by him
        in his business for the taxable purpose of propellingmotor
        vehicles upon the highways of this State ragardless of the fact
        that a third person,,the lessee, furnishes the drivers of said
        vehicles and has no interest in the operation of the lessorqs
        business.
             Since we have determined that the lessor is a "user" within
        the meaning of the Special Fuels Tax Law, he may file claim for
        refunds under the provision of Article 10.14 in those instances
        in which the special fuels have been used for propelling the
        motor vehicles upon public highways other than those of this
        State. The exhibits you have furnished. us show that claims for
        such refunds are based upon trip reports, state line crossing
        reports, delivery receipts for ,fuelreceived from lessor or his
        appointed agent or similar documents or declarations. One of
        the foms furnished us constitutesa recap of miles traveled
        and gallons of fuel purchased, by state, for each truck by
        month.




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Honorable Robert S. Calvert, Page 8      Opinion No. (C-36)


     Since we have concluded that the lessor is a "user"
within the meaning of the Special Fuels Tax Law, he may be
licensed as a non-bondeduser and accorded a bonded user
import permit. We do not reach your second two questions
which were predicatedupon a negative answer to your
first one.
                      SUMMARY
                      -e--m--
         Under stated facts, a lessor $f motor vehicles
    propelled with special fuels is a user" within the
    meaning of the Special Rae18 Tax Law and may be
    licensed as a non-bondeduser and bonded user-im-
    porter even though the leased motor vehicles are
    operated entirely by the lessee or his drivers.
    The lessor in question is liable for all special
    fuels taxes and is authorized to file claim for
    refunds when refunds are due.
                                         Yours very truly,
                                         WAGGONER CARR
                                         Attorney General of Texas




MMcGP:sjl
APPROVED:
OPINION COMMITTEE
W. V. Geppert, Chairman
Arthur Sandlin
Cecil C. Rotsch
Roy Johnson
Robert Lemens
APPROVED FOR THE ATTORHEY GENERAL
By: Roger Tyler




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