. .
THEA~TORNEYGENERAC
OF, T-E&As
BVILL WIlLSON September 7, 1962
AlTGHNEY GENERAL
Honorable Jerry Dellana Opinion No. WW-1435
County Attorney
Travis County Courthouse Re: Whether wholesaler6 of
Austin, Texas builders supplies may accept
resale certificates for pur-
chases of building materials,
in lieu of the sales tax,
from builders and developers,
who construct houses on land
owned by such developers,
such house6 to be sold after-
wards to the general public
as real estate upon which no
Dear Mr. Dellana: sales tax is colleated.
You have asked the following questions:
“Question 1: Are csrtdrin whole-
salers required to accept resale ce%-
tifiaates from builders and developers
who purchase tangible personal property
and then make said tangible personal
property a part of the real property
that is sold to the general public,
or must they collect the tax at the
time of sale?
“Question 2: Does tha definition
‘Sale for Resale’, Article 20.01 (S)
a8 quoted in part ‘Sale for Resale
shall mein a sale of tangible person-
al:. property to r+
a purchaser who Is
purchasing said angible property for
the purpose of reselling it in t;eiF-
ma1 aourtse of his business a
alude builders and developeriY$”
In your letter you have set out the following facts:
“Builders and developers of homes
in thls area are purchaelng tangible
personal property, I, elo garbage dis-
poaerdl* built-in 8toveBp eto. from
wholesalers and submitting certifi-
autos of resale of tangible personal
. .
Honorable Jerry Dellana, page 2 Opinion No. WW-1435
property. In said certificate of re-
sale, they speclfically state that it
will be resold in their regular course
of business; their regular couree of
business is sale of real estate. They
claim this exemption under Set, (N),
Article 20.04, of Section 1, Chapter 20,
Title 122A.
“The wholesalers, who sell these
articles to the bullders,and developers
are apprehensive in that Article 20.12,
Violations (B) may hold them guilty of
a misdemeanor. . . .I’
Articles 20.01
to 20.17, inclusive, Chapter 20, Title 122A,
Taxati’bn-General, V.C.S., constitute the Texas Limited Sales, Ex-
cise and Use Tax Act. All reference to articles hereafter dls-
cussed will be to the Limited Sales, Excise and Use Tax Act, un-
less otherwise shown.
Article 20.02 reads In part as follows:
“ThePe Is hereby Imposed on each
separate sale at retail of tangible
personal property made within this
State a limited sales tax at the rate
of two per cent (2$) of the sale price
of each Item or article of tangible
pereonal property when sold at retail
in this State.
.: “(A) Method of Collection and
Rate of Limited Sale8 Tax. The tax
hereby Imposed shall be collected by
the retailer from the consumer.
II.‘, .
“(C) Limited Sales Tax Permit Ap-
plication.
(1) Every person desiring
to engage In or to conduct
business as a seller within
this State shall file with
the Comptroller an appllca-
tlon for a permit for each
place of business.
Honorable Jerry Dellana, page 3 Opinion NO. WW-1435
“(D) Limited Sales Permit Ii-
suances. After compliance with
paragraph (C) of thb$ Ai?t&clie.by
the applicant, the Comptroller
shall grant and Issue to each ap-
plicant without charge a separate
permit for each place of business
within the State. A permit shall
not be assignable and ahall be va-
lid only for the person in whose
name it Is Issued and for the trans-
action of business at the place de-
signated therein. It shall at all
times be conspicuously displayed
at the place for which Issued.
“(F) Presumption of Taxability:
Resale Certificate. For the pur-
pose of the proper admlnistratlon
of this Chapter and to prevent eva-
sion of the limited salea tax It
shall be presumed thatall gross
receipts are subject to the tax un-,
tll the contrary 1s established.
The burden of proving that a sale
of tangible personal property is not
a sale at retail is upon the person
who makes the sale unless he take8
from the purchaser a certificate to
the effect that the tangible pro-
party ia purchased for the purpose
of reselling, leasing or renting it,
“(0) Effect of Resale Certlfi-
oate. The resale aertifloate re-
lievee the seller from the burden of
proof only If taken In g&d faith
from a person who 1s engaged In ths
business of selling, leasing or rent-
ng tangible personal property A
resale certificate may be nlvei by
a purchaser, who at the tse of pk-
chasing the tangible personal pro-
perty, Intends to 0411, leas8 or
rent It In tho regular course of
business or lo unable to ascertain
at the tlma of purchase whether the
Honorable Jerry Dellana, page 4 Opinion No. WW-1435
tangible personal property will be
resold, leased or rented or ~111. be
used for some other purpose.” *(Em-
phaais added).
sali( gHrty;;;a;;d Contents of Re-
.
(1) The certificate shall:
kir ~es~~~~da% ii?
dress of the purchaser.
(b) Indicate the num-
bar of the permit, if
any, isauad to the pur-
chaser.
(c) Indicate the gener-
al character of the tan-
gible personal property
sold, leased or rented by
the purchaser in the regu-
lar course of business.
~(2) The certlfi’cate shall be
substantially in such form as
the Comptroller may prescribe.
“(I) Liability of Purchaser Giving
Reeale Certificate. If a purchaser who
give6 a resale certificate makes any use
of the tangible personal property other
than retention, demonstration or dls-
play while holding It for sale, lease
or rental In the regular course of
business, the use shall be taxable
to the purchaser as of the time when
tba tangible personal property la
first no used, and the sales price
of tha tangible perronal property to
hz ahall be deemed the measure of the
I)
YJ) Resale Certificate; Commingled
Fkw~ible Goods. If a purchaser gives
a resale oertlflcate with respect to
the purchase of funglble goods and
Honorable Jerry Dellam, page 5 Opinion No. WW-1435
thereafter commingles these goods with
other funglble goods not so purchased
but of such slmllarlty that the identity
of the constituent goods In the commlng-
led mass cannot be determined, sales
from the mass of commingled goods shall
be deemed to be sales of goods covered
by the resale certificate until a quan-
tity of sllch goods equal to the quan-
tity of the goods so commingled has been
sold.”
Article 20.01 reads In part as follows:
I,. . .
“(S) Sale for Reeale. ‘Sale for
Resale’ shall mean a sale of tangible
personal property to any purchaser who
Is purchasing said tangible personal
property for the purpose of reselling
It In the normal course of his busl-
ness. A sale for resale shall Include
a sale of tangible personal property
to a purchaser for the sole purpose
of that purchaser’s renting or leas-
ing said tangible personal property
to another personr, but not If incl-
dental to the renting or leasing of
real estate a”
Article 20.04 reads In part as follows:
,I. . .
“(19) Sale for Resale: Leasing
or Renting.
(1) There are exempted
from the taxes Imposed
by this Chapter the re-
ceipts from all sales
for resale, leasing or
renting.
(2) .Howevar, If a per-
son purchases tangible
personal property for the
purpose of leasing or rent+
Honorable Jerry Dellana, page 6 Opinion No. WW-1435
lng it to another person,
and if he later sells It
by means of an occasional
sale before he has collected
and paid to this State as
much tax on the rental or
lease charges as would have
been due and payable to
this State had he not pur-
chased the tangible person-
41 property for the pur-
pose of so renting and leas-
ing it, he shall, at the
time of his occasional sale
of said tangible personal
property include In his re-
oelgts from taxable sales
the amount by ,whlch his
purchase price exceeded
the amount of rents collected
by him on said tangible per-
sonal property.
(3) Where a lessor makes
a retail sale of leased
tangible personal property
to a lessee of that tangi-
ble personal property un-
der an agreement whereby
certain rental paymanta
are credited @gainst the
purchase prlce,of the tan-
gible personal property,
he need not collect or pay
any tax on the sale price
to the extent that he has
collected and paid on such
rental payments a”
~Artlole 20.12 reads In part as follows:
Penalty
for Engaging in
BUA!!S as Seller
Without Permlt.
A perron who engages In business
a8 a retailer In this State wlth-
out a permit or permits or after
a permit has been suspended, and
each officer of any corporation
which so engages In business, 1s
Honorable Jerry Dellana, page 7 Opinion No. WW-1435
guilty of a misdemeanor, and such
person shall upon conviction be
fined not more than Five Hundred
Dollars ($500) for each c’onvlc-
tlori. Each day of such operation
shall constitute a separate of-
fense.
“(B) Penalty for Improper Use
of Resale Certlflaate. Any person
who gives a resale certificate to
the seller for property which he
knows, at the time of purchase, la
purchased for the purpose of use
rather than for the purpose of re-
sale, lease or rental by him in
the regular course of business Is
guilty of a misdemeanor, and such
person shall upon conviction be
fined not more than Five Hundred
Dollars ($500) for each conviction.
n(D) Penalty for other Vlola-
tlons 0 Any violation of this Chap-
ter, except as otherwkee provided,
is a misdemeanor, and any person
shall, when found guilty of such
violation, be fined not more than
Five Hundred Dollars ($500) for
each violation. ”
The limited sales tax is Imposed on each separate sale at
retail In Texas of tangible personal property. Xhe tax Is lm-
osed on the consumer and collected by the retailer. Art. 20.02
PA). Where the purchaser of tangible personal property Intends
to resell or lease the same as tangible peraonal property, he
may give a resale certificate to the retailer In lieu of paying
the tax. With respect to the purchase of tangible personal pro-
perty, which the purchaser Intends to lease, note this language
from Art. 20.01 (S):
M
0 e 0 A sale for resale shall
Include a sale of ,tangible person-
al property to a purehaser for
the sole purpose of t,hat purchaser’s
renting or leasingsaid tangible
personal property to,another perso&
Honorable Jerry Dellana, page 8 Opinion No. Ww-1435
but not if incidental to the rent-
ing or leaelng of real estate.”
~phasle addep.
Thus, If a person uho operates a bed rental business wants to
purohase from the,manufacturer or distributor a bed, such per-
son Is entitled to give a resale certificate for the purchase
of the bed. The State will receive its tax from the customer
who renta the bed, which tax will be collected by the operator
of the bed rental service, and remitted in his quarterly tax
returns. Rut if the bed Is purchased by the operator of an
apartment house, In order to furnish an apartment, which will
be rented as real estate, there will be no sales tax to collect
from the tenant. Hence, the operator of the apartment house
is the ultimate consumer of the bed so purchased, and must pay
the sales tax to his supplier.
lhe first sentence In Art. 20.01 (S) reads as follows:
“‘Sale for Resale’ shall mean
a sale of tanalble oersonal oro-
perty to any gurchaser who Is pur-
chasing said tangible personal pro-
art for the purpose of~‘reselllng
!w n the normal course of business.N
i?fmphasia addeg.
This clearly contemplates that the tangible personal pro-
perty purohaaed for the purpose of resale must be resold In the
form of tangible personal property, In order for the purchaser
to be authorized to execute a resale certificate and deliver the
same to his supplier In lieu of paying the tax. If a person
purchases a garbage disposal unit to Install In a house which he
owns, with the Intention of afterwards sellln$ the house, such
a peraon clearly does not Intend to resell “It (the garbage dls-
posal unit) to anyone. He Intends to sell a house, whloh is real
estate. To hold that a person who Is In the business of con-
structing houses on his own land, with the Intention of selling
. such houses to the general public, may claim the privilege of us-
ing a Sale for Resale Certificate upon the purchase of a garbage
dlspoeal unit to be Installed In such house, would be to hold
that such person is not In the busMess of selling houses, but
instead Is in the business of selling lumber, nails, bathtubs,
plumbing fixtures, shingles, electrical wiring, etc.
Where a person purchases tangible personal property In the
form of? aonntruotion material to build or repair his own house,
and such person performs his own construction. work, he gets no
axamption from the sales tax. He is neither an exempt person,
1
Honorable Jerry Dellana, page 9 Opinion No. WW-1435
nor are the construction materials exempt products, for neither
Is listed in Art. 20.04. If a person owns his own land, and
contracts with another to construct a building thereon, such
contractor becomes the ultimate consumer of the products so con-
sumed in construction, If the contract is let as a lump sum
contract I) Attorney General’s Opinion No. ~~-1258. If the con-
tract Is In the form of a split bid, the tax Is paid either by
the contractor or the owner of the building, depending on which
one of them furnishes the materlals~ to go into the building.
Art. 20.01 (T). To hold that all these classes of persons must
pay the salee tax, but that a developer who builds houses on
his own land for resale may In effect become exempt from the
tax by urje of a Sale for Resale Certificate when he purchases
builder’s supplies, Bnd thereafter collects no tax at all from
his customer on the ground that,his customer Is purchasing
real property and not tangible personal property, is to reach
an absurd reault.
“The court will never adopt a
construction that will make a sta-
tute absurd or ridiculous, or one
that will lead to absurd conclu-.
slons or consequencea, if the lang-
uage of the enactment is susceptible
of any other meaning.,” 39 Tex. Jur.,
Statutes, Sec. 118, page 222.
Paragraph (Q) of Art. 20.02 reads ,in part as follows:
“Effect of Resale~Certlflcate,
The resale certificate rel%eve& the
seller from the burden of proof on-
ly If taken in good faith from a-
person who Is engaged In the business.
of selling, leasing orrenting tant:
1 personal property. ‘D 0 .‘(
ptasis addedJ e
The above quoted sentence from Par. (Q), Art, 20.02, shows
the legislative Intent. For a purchaser of tangible personal
property to be authorized under th,e Limited Sales, Excise and
Use Tax Act to we a Resale Certificate In lieu of oavlnn the
tax at the time3 of his purohaeep he’must be “# 0 a &&ag;d 1;
the b usinesa of sellin * leasing dfl renting tanglble.persona
In the busihess of selling real estafe
IiF% 3 orm of lots with housea,aff13.xad thereto is not engaged
in the business of selling tannible ,peraonal property, And a
Demon engaged In eellinE both lumber at retail and houses as
seal eata&-oould we his Resale Certificate only for the ~
Honorable Jerry Dellana, page 10 Opinion No. b-1435
lumber he sells as personal property,
In both Arts. 20.01 (S) and 20.02 (5) reference is made
to purchasers who Intend to sell or resell “it” In the “normal
course of bualness” or “regular course of business.” Such
second,,sale or resale of “it” refers to “tangible personal pro-
g e r ty lThere is no resale of tangible personal property, or
it” as such, In the situation described in your letter. It
Is true that theae developers are engaged In a “normal course
of buelnese” and a “regualr course of business”, but their
business is the sale of real estate, not tangible personal pro-
perty.
An Exemption Certificate Is used only by an exempt legal
entity or exem t organization, which are listed In Paragraph
(F), Art. 20.0!. Real estate developers are not listed in this
paragraph a Some products are exempt b name, such as food for
human consumption (not served a8 meals 7. Some products are
exempt> because of taxes which have already been Imposed there-
on, such as cigarettes. Some products, without naming them spe-
cifically, are exempt becauee of some circumstance which has al-
ready occurred with respect to them, such as sales of tangible
personal property under contracts executed prior to the effec-
tive date of the Act; or occurs at the time of the sale, such
‘as an occasional sale; or are destined to be used in a parti-
cular manner In the fu,ture, such aa fuel for a locomotive en-
gine e Nowhere In the Act do we Elnd “builders1 Supplies”
listed as an exempt prdduct, a6 such, The only time builders’
eupplles aan fall within the Sale for Resale Exemption Is when
the sale ia made to a wholesale or retail buildera’ supply es-
tablishment, which truly Intends to resell “it” In the form of
tangible personal property In the “normal” OP “regular” course
of business, and ribt to one who Intends to consume or use It.
nn e 9 when the legislative Inten&
ascertained, or Is plainly manifest, .
:: Is binding upon the courts, and must
be given effect if It Is legally possible
to do so. To Ignore the legislative ln-
tent and give a statute a construction
obviously contrary thereto, or to refuse
to enforce a statute according to the
legislative Intent, when ascertained, Is
said by the Supreme Court to be ‘an in-
excusable breach of judicial duty’ and
‘an unwarranted Interference with the
exercise of lawful legislative authorlty.l”
39 Tex, Jur. 171-172, Statutes, Set, go.
.
Honorable Jerry Dellana, page 11 Opinion No. WW-1435
In answer to Question No. 1, we hold’. that wholesalers of
builders’ supplies, who sell to developers, builders, and lum-
ber companies who purchase tangible persona> property for the
purpose of Incorporating such tangible personal property Into
real property owned by such developers, builders, and lumber
companies, such real property to be sold thereafter to the gene-
ral public as real estate, must collect the sales tax from such
developers, builders, and lumber companies.
We answer Question No, 2 by holding that Art. 20.01 (S),
of the Limited Sales, Excise and Use Tax Act, which defines
“Sale for Ressle”, does not Include such developers, builders,
and lumber companies within the meaning of “any purchaser”,
since that phraae only includes those who sell “It” In the
‘hormal course of his business”; the word “It” referring to
tangible personal property and such developers and builders are
not so engaged, but are engaged In the business of selling real
estate.
SUMMARY
Wholesalers of builders’ supplies, who
se&l to developers and builders who purchase
tarlglble personal property for the purpose of
Incorporating such tangible personal property
into real property owned by such developers and
builders, such real property~to be sold there-
after to the general public as real estate,
muat collect the sales tax from such developers
and builders.
Art. 20.01 (S), of the Limited Sales,
Excise and Use Tax Act; which defines “Sale
for Resale”, does not include developers and
builders within the meaning of “any purchaser”,
since that phrase only tincludes those who sell
“It” in the “normal course of his business”;
the word “‘It” referring to tangible personal
~~~p~~t~~~~~d~“~~t”~~~l~~~~e~~~~~~d~~~~~re
ness of selling real estate.
Yours .very truly,
WILL WILSON
Attorney General of Texas
Ronorable Jerry Dellana, page 12 Opinion No. UW-1435
Riley Eugene Fletcher
Afisletant
APPROVED:
OPINION COlvMIlvEE
W. V. Geppert, Chairman
Arthur %n~lln
J. C. Davis
IWIBiWEDFORTHEATTORNEYffBNl!RAL
BY: Leonard Pasemore