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. byeSection 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’
:.in
s t&Is St&w, .lnKviru: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& (
l957r,, a copy of .-prhic~~sesLbinitUd::,\liit;; your
being :~rted:~Eh~sfSelutrjr-~.1~;::.
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.
It is understood end agreed by end between
the pa$es hereto thet in addition to the purchese
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 thenotherwise 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 tomthe 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~ctionwith 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,
WILL WRhSON
Attorney General
BY -&/“w
L. P. Lo1 r
Assistant
LPL: C6
. APPROVED! ,
OPINION COMMfTTSE
H. Grady Chandler, chrlrman
.