.
,.
H NEHEAL.
August 17, 1950
Hon. Robert S. Oalvert opinion BO. V-1084
Comptroller of Public Accounts
Austin, Texas Ret The gross receipts
tax liability of
United Qas Pipe Llm
Oompauy by virtue of
FeGGllt GXtGILSiOZl Of
the oorporate llmite
Dear Sir: of Dallas and Houstm.
You have requested the opinion of thie office
on the above captionedmatter.
The following facts were submitted comerming
the operations of the United Caa Pipe Line Company. In
Dallas, the company has been selling and deliveringnat-
ural gas to the Dallas Power and Light Compauy for many
years for use as fuel in Its geuerating plants. Recent-
ly, the city litits of Dallas were extended so as to In-
clude the various points at which gas is delivered to.
the Power and Light Company; The Pipe Line Company alro
sells and delivers natural gas in Dallas to the United
Gas Corporation,which is a gas distributingcompany Bub-
ject to the tax levied by Article 7060, V.O.S. The Oar
Corporatiouhas among its customerswithin the Dallas.
city limits a small number of "farm tap@ customerswho
are served through tap lines connectingdirectly into
the lines of the Pipe Line Company.
In Houston, the Pipe Line Company sells and
delivers natural gas to the Gas Corporationfor general
distributionwithin the eitx. The Cas Corporationalso
has various "farm tap* aud rural service" customers
within the city limits which are connected directly in-
to the Pipe Line Companyls line. The Pipe Idne Company
has for mauy years cllrectlgserved several indum?ial
consumers which were located outside of the Houston city
liI&its.'Houston extended its city limits on January 1,
1950, so as to include a Syntheticrubber plant operat-
ed by the Goodyear Rubber Company and a generating plant
operated by the Houston Lighting and Power Company. These
tvo industrial consumersare served directly by the Pipe
Line Company.
Eon. Robert S. Calvert, page 2 (v-1084)
Article 7060, V.C .S., reads in part as followsr
*Each Individual,company, corporation,
or association owning, operating,managing,
or controllingany gas . . 0 works . . . lo-
cated within any Incorporated= or city
in this State, and used for local sale and
distributionin said town or city, and charg-
‘ingfor sucfigas . . 0 shall make quarterly,
011the first day of January, April, July, and
October of each year, a Peport to the Comp-
troller under oath e o . showing the gross
amount received from such business done in
each such Incorporatedcity or town within
this State in the payment of charges for
such gas e 0 a for the quarter next preced-
ing* Said Individual,company, corporation,
or association,at the time of making said
report o D . for any Incorporatedtown or
city of ten thousand (10,000)inhabitants
or more, according to the last Federal Cen-
sus next preceding the filing of said re-
port, the said individual,company, corpor-
ation, or association,at the time of making
said report, shall pay to the Treetsurerof
th3.sState an occupationtax for the quar-
ter beginning on said date an amount equal
to one and five thousand one hundred twenty-
five ten-thousandths(1.5125) per cent of
said gross receipts,;asshown by said re-
port. * . .
‘Rothzinghere5.nshall be construedto
require payment of the tax on ~~0898rbceipts
ereln levied more n once on e same
iommyty, and whert?he ccmmodi~~ is pro-
uced y one individual,company, corpora-
tion, or association,and distributedby
another, the tax shall be paid by the dis-
tributor alone.” (Rmphaslsadded through-
out). ,
A question of similar nature to the one now be-
fore us was presented to this office in Opinion Ro. V-994
regarding the sales by the El Paso Watural Gas Company to
three industrial consumerswlthln the City of El Paso. We
quote from that opinion as follows:
“In Opinion Ho. O-3776, dated August
Hon. Robert S. Calvert, page 3 (V-1084)
1, 191, this office held that if there wau
a sale of gas to more than one oustomer or
purchaser within a aity the distributorwas
a ’ ae VOP~S' under the etattrteand subject
to &he tax. We quote from th%t opinion3
.‘It is the opinion of this department
in line with the above quoted casea that 8
individual or corporqtionselling or diatF1~
but$ng 1iqul.dpetroleum gas to more than one
coMwaer in any incorporatedGity vith.3.u the
populatfon brackets stated in Article 7060
would be subject to the gross receipts
dr; ievied the4-eln.t
*It Is thus our oplnhu that the Rl Paso
Ratural @as Company, by vl3tue of the faot
that it sells and distributesnatural gas to
three iudtxttrialconlwier~wlthin an incor-
porated city, is a ‘gas rorkat and subject
to the occupationtax on the PQSS receipts
of such sales aa levied by AP8icle 7060, 8.
C.S.’
The only reported case which ve have found oon-
strulng the meaning of the term “gas works" as used in
Article 7060 Is that of Utilities Ratural Gas Ga. vi State
133 Tex. 313, 318, 128 S.W.2d 115=1155 . 0' our4
said;
0 we have no doubt th%t the aim-.
ple fait’& a delivery of gas la made In
the city, by means of said pipe line, to a
single customer, and to nobody else, was not
Intended by the legislatureto be compre-
hended by the term tdistrlbutlon’as used.
This term as used does not mean the trans-
fer of the poaseaaion of gas, by mean8 of the
pipe line, to a sinnle wrah%ser where such
‘individualsor conoerns in the city. Any
other oonstruatlonof the term vould, in out
oplnlon, involve a departure from the legls-
lative intent.”
Under that decision the sale to one Industrial
customer within a city does not mean,that a pipe line
Eon. Robert S. Calvert, page 4 (V-1084)
company 3.8engaged in operatinga "gas vorks" for the lo-
cal sale and distributionof gas. It is our oplnlon that
while the United ffaSPipe Line Company is engaged in mak-
ing "local sales" in Dallas, it is not a *dlstalbutor*of
gas as that term was construed by the Court in the Utlli-
ties Ratural Gas case. The Pipe Line Company in senx
the~Gas CorporationIs selling to a 'distributor'who
li.subject to the tax rather than to a consuming or ouatom-
Thus the Pipe Line Company is selling and delivering
g& to only one industrial consuIper in Dallas (the Dallas
Paver and Light Ccuapany),and it is our conclusionthat It
is not liable for the occupationtax levied by Article 7060.
With respect to the sales within Houston, it is
submitted that the Pipe Line Company is making sales and
deliveries to two Industrial consumers or customers. It
has been our opinion that persons engaged in the distr$.bu-
tion and sale of gas to tvo or more customers vithin the
corporate llmlts of cities and towns are operatinga 'gas
works" and are liable for the occupationtaxes levied by
Article 7060. It is therefore our concluslcnthat the
United Gas Pipe Line Company 3s liable for the tax in the
amount of 1.5125 per cent of gross receipts arFsing from
the sale of natural gas to all its consumers or customers
within Houston from December 31, 1949 the date the com-
pany began operatinga "gas workss wl&tn that city.
It Is our understandingthat the United Gas
Pipe Line Company is a wholly owned subsidiary of the
United GasCorporation. We have, for purposes of this
opinion, assumed that the sales to the fazestap and PU-
ral service customerswithin Dallas and Houston vere
bona fide sales to the distributorand that the Pipe
Line Company is not, through a joint operation,dlrect-
ly engaged or financiallyinterestedin the actual dis-
tribution of gas to those customers.
A pipe line company vhich sells to two
ormore industrial consumerswithin a aity
is operating a "gas works" and is liable for
the occupationtax levied by Article 7060,
V.C.S. A oompany whlah sells to only one in-
dustrial consumer is not subject to the tax.
.
I
Hon. Robert S. Calvert, page 5 .(v-1084)
Utilities Rat-UralGas Co. v. StEt:e,$3
31 126 s w 2 115 (1939)
I",: Ho:: V-9g'+*&ddO-37;6.
APPROVED: Yours very trrily,
W. V. Geppert PRICE MRIRL
Taxation DlvLaion
Everett Hutchinson
Executive Assistant
Charles 13.Hathews
First Assistant
FL/mwbrm