Attorney General Opinion WW-0052

THEATITORNEY GENERAL OF TEXAS WI& WILSON A~TORNEYGENERAI. March 20, 1957 Hon. Robert S. Calvert Opinion No. WW-52 Comptroller of Public Accounts Capitol station Re: Whether or not a sales tax should Austin, Texas be paid on the transfer of the motor vehicles from the Dresser Industries, Inc., to the Lease Plan, Inc., and a use tax on the transfer of the motor vehicles from the Lease Plan, Inc., to the Dresser Dear Mr. Calvert: Industries, Inc. You request the opinion of this office upon the questions con- tained in your letter of February 27, 1957, as follows: “We are enclosing a letter we received from Mr. R. J. Banks, attorney for Dresser Industries, Incorporated, Dallas, Texas1 also copies of two agreements, one covering the transfer of motor vehicles sold by Dresser Industries, Inc., a Delaware corporation, to Lease Pike, Incorporated. The other agreement refers to the lease of the+motor v.ehicles by.the Lease Plan, Inc., to Dresser Industries, Inc; “The agreements refer to a financing arrangement between the two corporations, and Mri Banks stated in his letter that he was of the opinion that the sale and use tax levied in Article 7@47K, Section 2-a should not be paid OP the transfers. “You will please edvls,e us whether or not in your opinion a sales tax should .be paid on the transfer of the motor vehicles from the Dresser Industries, Inc., to the Lease’ Plan, Inc., and a use tax on the transfer of the motor vehicles from the Lease Plan, Inc., to the Dresser Industries, Inc.” Your questions reframed are: 1. Is the Sales Tax imposed by Section 1 of Article 7047k, V~ernon’s Civil Statutes, upon retail sales of motor vehicles sold in this State due by virtue of the contract of sale and purchase made between Dresser .Industries, Inc., as the Seller and Lease Plan, Inc., as the Purchaser, said contract of sale and purchase being dated February 15, 1957, a copy of which is submitted with your request. Bon. Robert S. Celvert, pege 2 (WW-52) ‘;.. ‘2, Is. {the Use .Tax impixed. bye Section 2: tif. Artirle 7tMn, V.C.S., on vehicles purchesed et retail sale outside this State and brought into tliis S~tate bi. ‘use upon the :pubiti highwa)rs :thtieof by n firm 0s cor~tation~,d~ictled xir :~:doirig ;bu’tiEin&s’s :.in t&Is St&w, .lnK viru:e bf the.. rdntoett:.of: ~h&ie .sr.rZ ~urc&se bbetweeii te&e. Stan;. .~nc..,:i &d Dre,ssar IndpstrfGs;. I&.;. aSd ‘~,the i&se, &g&emu& bbt&ee~ti:.Lease PLnn, flic;,~ as::Ilensozr.,&nd :Drissek. Inddstr&es. .&sci~, .irszP;es”seei: :shid. led& ( being :~rted:~Eh~sfSelutrjr-~.1~;::. l957r,, a copy of .-prhic~~sesLbinitUd::,\liit;; your i~llest;~’ , ,.,:“., : ~” .:, ‘,: ..‘I.. ” ,‘.‘Y~ :::’ ..,:.:.. “‘. ..‘I ,. ::; We answer your qnestions in the foregoing order. Section l(e) of Article 7047k, V.C.S., levies e tax of 1.1% of the total consideration paid to the Seller by the Buyer of motor vehicles sold in this Stete, with some conditions not material here. We must determine if the contract of sale and purchese of February 15, 1957, between Dresser Industries, Inc., designated in the contrect as the Seller, and Lesse Plan, Inc., designated in the contract es the Purchaser, constitutes e sale of motor vehicles within the pur- view of the statute, and therefore taxable. An exarninatioa of the entire contrect is therefore necessary. It is a6 follows: “This egraament ‘entered into this 15th day of February, 1957, by and between DRESSER INDUSTRIES, INC., e Deleware corporation,: which, with Lts successors and as~igas, Le~hereinafter termed the”SELLBR’~ and LEASE PLAN, INC., a New York Corporation, which, with Us successors end assigns, is hereinafter termed =PURCBASER’, WITNESSETH: ‘1. In consideration of the sum of $4,522.699.99 qd the covsnan~ and premises herein recited, the SELLER and its undersigned subsidiary companies here- with agree to sell, end the PURCBASER herewith agrees to purchese, all of the equlpmept described in that cer- tain proposed Equipment Lease ‘Agreement, a cozy of which is attached hereto and mark&i Exhibit “A , which exhibit ,is made B part hereof for all purposea. “2. The SELLER hereby represents and warrants that all of said equipment 18, and at the time of ,the trents- fer of tUle will be, la good date of repair and operating conditicm$ that SELLER and Ua subsidiuy companies have clear tltie therbto, ,ssd that rll of such equipment 1s free end clear of all itons and encumbrances whatsoever. *The SELLER and Its subsidiary companies do hereby sell, assign end &nwsfer to the PURCHASER all of their Hon. Robert’ S. Celvert, page 3 (WW-52) right, title and interest in end to said equipment end warrant that the seme is free end clear of all liens ,end encumbrances whatsoever end egree to warrant end defend the same against all end every, person or persons whofnsoever. “The SELLER end Lts subeidibry companies will ekecute duch bills of sale, certiflcetes of title or other lnstturrlents of convey&ice which may bo legally necessery to confirm the ‘foregoing sales end transfers of unencumbered title to the PURCBMER. the pa$es hereto thet in addition to the purchese It is understood end agreed by end between price hereinefter referLed do, one of the considerations for SELLER entsring tdto this agreement to sell the equipment, hereinabove referred to, to PURCHASER is the agreement ,of PURCHASER, es evidenced by said Exhibit A “, to leese sdid equipment to SELLER in accordance with the terms end cpnditions of said Exhibit “A*. -4. The purchase price of $4,522,699.99 for the equipment now described in Exhibit UA” shell be peyeble in cash by the PURCHASER to the SELLER upon the execution of the Equipment Lease Agreement es set forth in Exhibit “A”. “‘Each of the undersigned companies, except SELLER end PURCHASER, do hereby euthoriae PURCHASER and MANUFACTURERS TRUST COMPANY, 55 Broad Street, New York City, New York, to pay the purchase price for such equipment to DRESSER INDUSTRIES, INC., end do further euthorise DRESSER INDUSTRIES, INC., tb receive end receipt for sit moneys received in connection with the sale of such equipment, ,end such companies do further agree to hold PURCI-IASER end MANUFACTURERS TRUST COMPANY harmless from any end all claims, demands, or right to receive payment fortthe sale of any such equipment. ,. . . “IN WITNESS WHEREOF, the parties hereto hsve affixed their signatures on the day, month end year hsre- inebove sat forth et Deltas, Texas. We do not know if all or only e pert of the equipment covered by the aforesaid contract consists of motor vehicles. We assume that e substantive portion of it does. This opinion & con- fined, in answering your first questlou, only to motor vehicles covered by the contract, low&d wlthln this State es of the date of the contract Hon. Robert S. Calvert, page 4 (WW-5.2) and which have not been tahen out of the State and. resold prior to the date of the contract. The statute defines. “sale” or “sales” and “retail sale” or “retail sales” as follows: “The term ‘sale’ or ‘sales’ as herein used shall include instalment and credit sales, and the exchange of ‘property. as well as the sale thereof for money, every closed transaction constltutlng a sale. . . . “The term ‘retail sale’ or ‘retail sales’ as herein used shall include all sales of motor vehicles except those whereby the purchaser acquires a motor vehicle for the exclusive purpose of resale and not for use.* We think the contract construed in its entirety imports a “sale. . . for money” and is a “closed transaction” and 1s a sale for use and not for resale, all features .of a taxable .sale under the statute. I! You are therefore respectfully advised that as to all motor vehicles located in Texas, where they have remained without a resale outside the State, that are covered by the contract, the tax imposed by Section l(a) ?f Article 7047h, V.C.S., is due. In answer to the second part of your question, you are advised that the use tax imposed by Section 2 of Article’ 7047k, on purchases of motor vehicles made outside the State and brought into this State for use upon the public highways by a resident of this State or by firms or corporation& domiciled, or doing business in this State would apply to any of the motor vehicles covered by the contract or lease agreement pur: chased outside the State, but brought into the State for use upon the highways of this State. The use tax may accrue under circumstances such as covered by our Opinion No. V-1044, a copy of which you have. Therefore, if Dresser Industries, Inc., should bring into the State motor vehicles, covered by the contract, that were purchased outside the State but brought into the State for use upon the highways of the State, the use tax would be due by the one who operates said motor vehicles upon the public highways of this State. This 1s provided for by the statute in this language: s n . . The tax shall be the obligation of and be paid by the person, firm, or corporation operating said motor vehicle upon the public highways of this State.” The’ statute contains the only exemption from the tax which we are privileged to recognize’; that is where the purchase is made for resale and not for use. It is quite clear that the motor vehicles involved hare are for use and not for resale. We do not regard the lease agreement as modifying or changing then otherwise plain and unambiguous language of the contract of sale and purchase. No tax is - . Hon. Robert S. Calvert, page 5 (WW-52.) imposed under the statute upon the leasing of motor vehicles, but only upon sales. You are therefore advised in answer tom the second part of, your question that the use, tax imposed by Section 2 of Article 7047h, depends upon whether there ,ie involved motor vehicles purchased outside the State but brought into the State for use upon the public highways.~ This, of course, ,is a question of fact which we are not authorlsed to pass upon. This taxing statute (Article 7047k. ~Vernan*e Civfl Statutes) must of’s necessity be c~onstrued in,~co.nne~ction with Article 1436-1, Vernon’s Annotated Penal Code commonly referred to as the Certificate of Title Act. This Article of the Penal Code is divided .:lnto many sections. and subsections and a detailed analysis ‘is not required for the purpose of this Opinion. Suffice, lt to say that it covers ~every step of the way referable to the sale, mortgage,. etc., of motor vehicles. The Couet of Civil Appeals: in the case of Commercial Credit Corporation, v. Harris, 227 S.W.2d 886 ~(no~wrlt history) expressed it as follows: “Since 1939, Article 1436-1, Vernon‘s Penal Code; which article is ‘divided into more than sixty-four sections and subsections, has been in effect in this State. The act is very complete in its detail and covers every step of the way referable to acquiring, owning, operjtlng, buying, selling, mortgaging and otherwise creating liens on motor vehicles. All persons in this State are charayrble with notice of its provisions and’must ln ~thelr~ dealings ,be governed thereby. . ..* The ‘case of Gr,iffin v. Moon, 288 S.W;2d 543 (no writ history) holds that the provisions of Article 1436-1, Varnon’s Annotated Penal Code, if not strictly observed, neither a~ sale nor a ‘mortgage is accomplkhed and the ,partles ~111 be left as the Court. f&ids them. The Supre~me Court in the case of Motor Investment CO. ‘v. City of Hamlin, 142 Tex. 486, 179 S.W.2d 278, kaidZtl#*-rfaliowing: u . . . The obvious the whole field of sales vehicles. It carries the or parts of Acts Act are hereby SUMRMBY The sslea tax imposed by Section 1, of Article 7647h. V.&S., accrues upon ail ‘retail. sales of motor vehicles sold in this State and the use tax imposed by Section 2 of Article 7047h, V.C.S., - - Hon. Robert 6. Calvert, page $ (WW-52) accrues’ ok all purchases of motor vehicles made outaide this State, bit brought ‘into this State foi use upon the public highways by a resident of this State, or a firm or cbrpora- tton domiciled or doing business in tliis State and the ta% is imposed upon the user of the vehicle upon the highways of this State. This tuing etatute should be construed in connection with Article 1436-1, Vernon’s Annotated Penal Yours very truly, LPL: C6 . APPROVED! , OPINION COMMfTTSE H. Grady Chandler, chrlrman WILL WRhSON Attorney General BY -&/“w L. P. Lo1 r Assistant .