Untitled Texas Attorney General Opinion

. -r- Honorable George H. Sheppard Comptroller of Public Accounts Austin, Texas Opinion Wo, P-253 Re: The a plicability of the 1,# sales tax to a sale by a new car dealer to a used car dealer. Dear Mr. Sheppard: You have requested the opinion of this Depart- ment based upon the following fact situation: "A manufacturer of motor vehicles sells a motor vehicle to an authorized new car dealer. After the sale is made the authorized new car dealer sells the car to a used car d~ealer, operating in some other Dart of the State of Texas, and the used car d~ealer resells thjs I car to an individual who is required to pay a 1% sales tax." Your first question is: "Will it be necessary for this used car dealer to register the car and pay a 1% sales tax before offering the car for sale or d~oes this used car dealer have the same right to sell a new unregistered car as a first sale, even though he does not hold a contract with any manufacturer to sell new cars?" The pertinent parts of Chapter 184, Article VI, Acts of the 47th Legislature, 1941 (codified as Article 7047k, Vernon's Civil Statutes) follows: "Sec. 1. (a) There fs hereby levied a tax upon every retail sale of every motor vehicle sold in this State, such tax to be equal to one (1) per cent of Hon. Geo. H. Sheppard, Page 2 (V-253) the total consideration, paid or to be paid to the seller by the buyer, whSch consideration shall include the amount paid or to be paid for said motor ve- ,hicle and all accessories attached thereto at the time of the sale, whether such consideration be in the n~ature of cash, credit, or exchange of other pro- pe rty , or a combination of these. I, D . s “Sec. 3 (a) The term ‘sale or ‘sales’ as herein used shall Include in- stallment and credit sales, and the ex- change of property, as well as the sale thereof for money, every closed transactfon constituting a sale. The transaction whereby the possession of property is transferred but, the seller retains title as security for the payment of the price shall be deem- ed a sale. tail ‘%~, The term ‘retail sale’ or sre- ’ as herein used~ shall include all sales of motor vehicles except those whereby the purchaser acquires a motor ve- hicle for the exclusive purpose of resale and not for use. YZec. 5. The taxes levied in thfs Article shall be collected by the Assessor and Collector of taxes of the county fn which any such motor vehicle is first reg- istered or first transferred after such a sale; the Tax Collector shall refuse to ac- cept for reqistration or for transfer any motor vehicle until the tax thereon is paid. . . . I, It will be noted that Section 5 supra, re- quires the 1% sales tax to be collected by the Tax Collector of the County in which the motor vehfcle is first registered or first transferred after such sale, Therefore the statutes which qovern the registration of the motor vehicle must be considered in oarrf materia with the statute imposing the sales tax. Hon. Geo. H. Sheppard, Page 3 (V-253) The "Certificate of Title Act", codified as Article 1436-1, Vernon's Penal Code, (Acts 46th Legis- lature, 1939, p0 602) has been construed by the Supreme Court of Texas in the case of Motor Investment Co. v, Knox City, 174 S-W, (2d) 482, which involved a fact sit- uation somewhat similar to the one above stated, The pertinent parts of the Court's opinion are here quoted: "Ford Motor Company manufactured an automobile and sold it in ~due course to Boling-Duggan, a partnership, a dealer in Dallas, and delivered the manufacturerss certificate along with the automobile, On March 7, 1940, Boling-Duggan sold the ve- hicle to R. M. Hedrick, taking, a chattel mortgage lien for $770 of the sale price, Boling-Duggan delivered the manufacturer's certificate to its vendee Hedrick at the time of the sale, but did not note thereon the above lien0 Hedrick purchased the auto- mobile for the purpose of converting it into a fire truck and reselling it to a consumer. After having so converted it, Hedrick, on the 30th day of April, 1940, for a valuable consideration sold and delivered the automo- bile to the City of Knox City. At that time said automobile had not been previously reg- istered with nor licensed by the State Hfgh- way Department of the State of Texas, D e 0 "The Certificate of Title Act, Article 1436-1, VernonPs Penal Codes was enacted by the Legislature of this State in 1939 to less- en Andy prevent the theft of motor vehicles, and the importation into this State of and traffic in stolen motor vehicles, and the sale of encumbered motor vehicles without dis- closure of existing liens, The pertinent provisions of the Act are as follows: "'Sec. 4. The term 'Owner' includes any person, firm, association, or corporation other than manufacturer, importer, distributor, or dealer claiming title to, or having a right to operate pursuant to a lien on a motor vehicle after the first sale as herein defined, a 0 o Hon. Geo. H. Sheppard, Page 4 (V-253) "'Sec. 7. The term 'First Sale' means the bargain, sale, transfer or delivery within this State with intent to pass an interest therein, other than a lien of a motor vehicle which has not been previously registered or licensed in this State. "' . . . "'Sec. 9. The term 'Mew Car' means a motor vehicle which has never been the subject of a first-sale. ./r. .I . . . 't7Sec.' 19. The term 'Dealer' means any person purchasing motor vehicles for resale at retail to owners. "' . . . "'Sec. 27. Before selling or dispos- ing of any motor vehicle required to be registered or licensed in this State on any highway or public place within this State, except with dealer's metal or cardboard li- cense number thereto attached as now provid- ed by law, the owner shall make application to the designated agent in the county of his domicile upon form to be prescribed by the Department for a certificate of title for such motor vehicle. "1. . .' "Section 27 of the Act is the section which requires the procurement of a certif- icate of title as a condition precedent to the right to transfer a motor vehicle. By the ternis of that section such certificate of title is required for motor vehicles 'ra- quired to be registered or linensed in this State, on any highway or pubi% plane within thisState'. . . . 1( . . . . Hon. Geo. R. Sheppard, Page 5 (V-253) "Moreover, under said Section 27, it is only an 'owner? of a motor vehicle that is requirrd to register such vehicle and secure a certificate of title therefor before selling the same. The tern towner,p as defined in Section 4, excludesmanufac- tures and dealers, and includes only those claimin? title 'after the first sale.' The Act divides sales of Automobiles into two classes, namely ?first sale' and 'subsequent sale.' The term 'first sales'means a trans- fer of a vehicle which has not previously been registered (Sec. 71, as distinpuished from a 'subsequent sale,' meanin? a transfer after a vehicle has been registered or should, in law, have been registered (Sec. 8)" Read- ing the Act as a whole, we think it clear that every transfer of a motor vehicle, re- gardless of the number thereof, from manufac- turer to dealer, dealer to dealer, and from dealer to 'owner,s as define-the Act, constitutes a 'first sale,s and that it is not necessary that the vehicle he recs=ed and a certificate of title thereto obtained as a condition precedent toTbe valrdfty of such 'first sale,'" IEmphasis added) In view of the foregoing construction of the law it is not necessary for the used car dealer to reg- ister the new car and since the motor vehicle was ac- nuired by him for the "exclusive purpose of resalev', it is exempt from the motor vehicle retail sales tax under the provisions of Section 3 (b), Article 71347k, supra. Your second question is: Would~ it make any difference i~f the car bought by the used car dealer from the ori,ginnl nuthorived nevl car dealer was a secondhand car:" It is presumed that the secondhand motor vehicle is a 'Used Car" as d~efined by Section 10, Article 1436-1, Vernon's Penal Code, as follows: "The term 'Used Cars means a motor ve- hicle that has been the subject of a first ” .- Hon. Geo. H. Sheppard, Page 6 (V-253) sale whether within this State or else- where." This sale constitutes a "Subsequent Sale as defined in Section 8, Article 1436-1, Vernon's Penal Cod~e, as follows: "The term 'Subsequent Sale' means the bargain, sale, transfer, or delivery within this State, with intent to pass an interest therein, other than a lien of a motor vehicle which has been register- ed or licensed within this State or when it has not been required under law to be registered or licensed in this State." Nevertheless, the "Used car" being acquired by the used car dealer for the "exclusive purpose of resale", the transaction is exempt from the pa,vment of the l$ quoted retail sales tax under the provisions of Section 3 (b) of Article 7047k, supra. SUMMARY A new motor vehicle acquired from the manufacturer by a car dealer, who in turn sells the vehicle to a used car dealer, need not be registered under the provisions of the "Certificate of Title Act", Article 1436-1, Vernon's Penal code, and is not subject to the 1% motor vehicle retail sales tax, (Article ?047k, Vernon's Civil Statutes) when acquired by the used car dealer for the "exclusive pur- pose of resale". Motor Investment Co. v. Knox City, 141 Tex. 530, 174 S.W. (2d) 482. A "Used" car sold by a "New car" de-ler to a "Used Car" dealer who acquires it for the "ex- elusive purpose of resale", is exempt from the 1% retail motor vehicle retail sales tax. Art- icle 7047k, Sec. 3 (b). Yours'very truly, Edd ATTORNEYGENERAL0 @qgy&J& ATTORNEYGENERAL BY C. K. Richards CKR/lh:jrb Assistant