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THE ATTOEZNEYGENERAI;
OF TEXAS
AUSTIN. TEXAS 78711
February3, 1977
The Honorable Oscar B. McInnis Opinion No. H-938
Criminal District Attorney
Hidalgo County Re: Ad valorem taxation
Edinburg, Texas of sugar cane, raw sugar
and similar products
held by an agricultural
marketing association.
Dear Mr. McInnis:
You have requested our opinion whether Hidalgo County
may lawfully collect ad valorem taxes on sugar cane, raw
sugar, molasses and/or bagasse held by a cooperative
marketing association. Article 8, section 19 of the Texas
Constitution provides:
Farm products in the hands of the
producer, and family supplies for home
and farm use, are exempt from all taxation
until otherwise directed by a two-thirds
vote of all the members elect to both
houses of the Legislature.
The Legislature has not, by a two-thirds vote, authorized
any tax upon the commodities at issue here. Thus, the items
about which you inquire are exempt from ad valorem taxation
if they are "farm products in the hands of the producer."
This office has previously concluded that farm products
held by a cooperative marketing association pursuant to a
standard cooperative marketing agreement are exempt from
payment of ad valorem taxes. Attorney General Opinions
M-632 (1970); O-5404 (1943). This view is supported by
the decision of the Supreme Court of Texas in Texas Certified
p. 3864
The Honorable Oscar B. McInnis - page 2 (H-938)
Cottonseed Breeders' Ass'n v. Aldridge, 61 S.W.2d 79 (Tex.
1933)) and we belleve it tobe correct.
The items about which you inquire are, therefore,
exempt from taxation if they are "farm products." You have
described in some detail the process by which sugar cane is
harvested and reduced to juice and bagasse, with the juice
then boiled and condensed until sugar crystals are formed
and separated from the liquid by centrifugal force. The
sugar crystal in this form is known as raw sugar, and is
stored in bulk in a warehouse until it is shipped to a sugar
refinery. The remaining juice is boiled until it turns into
molasses.
We believe that the products described above are "farm
products" within the meaning of article 8, section 19, and
are, therefore, exempt from ad valorem taxation. A similar
question was addressed by the First Circuit Court of
Appeals in Sancho v. Bowie, 93 F.2d 323 (1st Cir. 1937),
cert. denied. KS. 569 (1938). At issue in Sancho was
the me-of a Puerto Rican law exempting "growingcrops
and products of the land" from taxation. We find the
reasoning of the court in Sancho to be persuasive:
No one would contend that sugar cane when
cut is not an agricultural product and a
product of the land. We do not think,
therefore, that it can be successfully
contended that raw sugar when extracted
from the cane, which must be done as
soon as practical after being cut to
preserve the juice from deteriorating,.
is not also an agricultural product and
a product of the land. The juice of the
sugar cane is clearly a product of the
land and in the process of extraction
and separation into raw sugar is not
mixed with any other ingredient. By
a well-known process the juice of the
cane, after boiling and purifying,
contains raw sugar in crystal form
and molasses. It is then placed in a
centrifugal and the molasses is thrown
off, leaving the raw sugar. The change
of the sugar content of the cane into the
crystal form of raw sugar is necessary to
p. 3865
The Honorable Oscar B. McInnis - page 3 (H-938)
prepare the product for market, and is
not such a change as to render the result
any less a product of the land . . . .
Id. at 326.
A similar conclusion was reached by the United States
Supreme Court in American Sugar Refining Co. v. Louisiana,
179 U.S. 89 (1900). The Court declared, TefGed sugar . . .
is the natural and ultimate product of the cane, and the
various steps taken to perfect such product are but incident
to the original growth." -Id. at 92.
It is our opinion, therefore, that the sugar cane, raw
sugar, molasses and/or bagasse you describe are "farm
products in the hands of the producer," and are exempt
from ad valorem taxation.
SUMMARY
Sugar cane, raw sugar, molasses and/or
bagasse held by a cooperative marketing
association are farm products in the hands
of the producer and are, therefore, exempt
from ad valorem taxation by article 8,
section 19 of the Texas Constitution.
Attorney General of Texas
APPROVED:
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DAVID EM. KENDALL, First Assistax
Jg&:,&&$y,,
Opinion Commit&e
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p. 3866