Untitled Texas Attorney General Opinion

Honorable ffeorgeH. Shep&d Qpihion Ho, o-5376 Comptroller of Public Accbunts Re: Application of Stock Austin, Texas Transfer Law. Article ~t;fL~;uae Bill No.a, ., B.S., P-269, to certain factual sltua- Dear Sir: tlona. We received your letter of June 9, 1943, request- ing our opinion as to the application of the Stock Transfer Law to certain factual situations. We copy from said letter aa followa: "In administeringthe Texas Stock Transfer Tax Law this departmenthas followed the practice of collecting 39i on each share where the value of the ehare was less than $10.00. The question has now arisen, in transferringstock, as to whether the tax Is levied against the shares or the aggregate value of shares, to wit: "1. A broker presents four stock certifi- cates aggregating100 shares. All the certificatesstand in the name of the same person and are to be transferred to one pereon. Is it permissibleto treat these four certificatesaa an ag- gregate for the purpose of computing the tax at 304 or must each certifi- cate be considered separately for the purpose of computing the tax? If they are consideredseparately, then the State tax would be 94 per certificate or a total of 364. “2. Consider the same state of facts as question 1, except that all four cer- tificates stand ln the names of dif- ferent persons and are to be trans- ferred to one person. Honorable Qeorge H. Sheppard, Page 2. (O-5376) “3. Consider the same state of facts as question 1, except that the certlfl- catea are presented by a broker with a memoranda of sale attached. Stamp taxes are affixed to the Memoranda of sale as though the four certificates should be taxed in the aggregate and not separately. n. . . R4. Where stock Is transferredto a cus- todian by the owner or to the nominee of a custodian, 1s the Texas tranafer tax payable or ia the transactionnon- taxable? I am Informed that such trans- actions are specificallyexempted by the Federal and New York atock transfer statutes, but the Texae .statutecon- tains no specific exemption. "I will thank you to advise this departmentin anmwer to these questions." Section 1, Article XV of H.B. NO. 8, supra, provides in part as followa: "Section 1. There 1s hereby imposed and le- vied a tax as hereinafter provided on all sales, agreements to sell, or memoranda of sales, and all deliveriesor transfers of aharee, or certlfi- cates of stock, or certificatesfor rights to stock, or certificatesof deposit representing an interest in or representingcertificatesmade taxable under this Section In any domestic or foreign association,company, ar corporation, or certificatesof interest in any buslneas conducted by trustee or trustees made after the effective date hereof, whether made upon or shown by the books of the association,com- pany, corporation,or trustee, or by any as- signment in blank or by any delivery of any papers or agreement or memorandum or other evl- dence of sale or transfer or order for or agree- ment to buy, whether intermediateor final, and whether Inventing the holder with the benefl- .’ clal inte?est: lh @-? legal:ttt,lettbsuch‘stock or ot-hercertificatetaxable hereunder,or with the posseasianor use thereof for any purpose, Honorable George H. Sheppard, Page 3. (O-5376) or to secure the future payment of money or the future transfer of any such stock, or certifl- cate, on each hundred dollars of face value or fraction thereof, three (3) cents, except in cases where the shares or certlflcaten~arels- sued without designated monetary value, In which case the tax shall be at the rate of three (3) cents for each and every ahare. It ahall be the duty of the person or persons mak- ing or effectuatingthe sale or transfer to procure, affix, and cancel the stamps and pay the tax provided by this Article. It 1s not intended by this Article to impose a tax upon an agreement evidencing the deposit of certlfl- cates as collateral security for money loaned thereon, which certificatesare not actually sold, nor upon such certificatesso deposited, nor upon transfers of such certificatesto the lender or to a tiomlneeof the lender or from one nominee of the lender ta another,provided the same continue to be held by such lender or nominee or nominee8 as collateralsecurity as aforesaid, nor upon the retransfer of such cer- tificates to the borrower, nor upon transfer8 of certificates from a fiduciary to a nominee of such fiduciary, or from one nominee of such fiduciary to another, provided the same contln- ue to be held by such nominee or nominees for the same purpose for which they would be held if retained by such fiduciary, or from the nom- inee to such fiduciary, nor upon mere loans of stock or certificates,or the return thereof, nor upon deliverlea or transfera to a broker for sale, nor upon deliveriesor transfer by a broker to a customer for whom and upon whose order he has purchased the same . . . . . Where the transaction Is effected by the de- livery or t~ransferof a certificatethe stamp shall be p.lacedupon the surrenderedcertifi- cate and canceled; and In cases of an agreement to sell, or where the sale Is effectedby de- livery of the certificate asalgned In blank, there shall be made and deliveredby the sell- er to the buyer, a bill or memorandumof such sale, to which the stamp provided for by this Article shall be affixed and canceled, . . . .' Honorable George H. Sheppard, Page 4. (O-5376) The Stock Transfer tax is an exoiae tax upon the’ privilege of transferringshares or certificatesof stock. Our Opinion No. 3594. The tax It not levied against the value of the stock. The value of the stock la only a fac- tor In determining the amount of tax Imposed on the prlvi- lege of transferringstock or certificatesof stock. Our Stock Transfer Act is not entirely clear with respect to the computationof the amount of tax Imposed in the factual situations contained In your letter. The Act does provide that In those instanceswhere the transaction la effected by the delivery or transfer of a certificate, the stamp shall be plaoed on the am-rendered oertlflcate and canceled. This leads us to believe that the Legltla- ture Intended that each certificatebe treated aeparately when computing the amount of tax due. In those transaotlonawhere the certificatesare assigned In blank, the Act requires that a memorandum of sale must be delivered by the teller to the buyer to which the tax stamps must be affixed and canceled. To our minda this indicates that the aeveral oertlflcateashould be con- sidered in the aggregate when computing the amount of tax due. Hhlle we have been unable to find any cases on thla question, we do find the following pertinent language in “The Wansfer of Stock", Christy and McLean (Second Edl- tlon) pages 516-517: "In the case of shares having a par value, under all of the laws except Hew York, the tax it computed on the total par or face value of the certificate,and notion the par value of each share. For example, under the Masaachu- setts and Pennsylvanialaws the transfer of a certlflca e for one share of atockof the par value of i10 It subject to a tro cent tsx; and a tax of the aame amount is payable on the transfer of a certificaterepresenting10 Shares of such stock. The trans,ferof a certificate for such stock representing51 or 20 shares would be taxable In the anwunt of 4 cents. Slm- Honorable George H. Sheppard, Page 5. (o-5376) llarly, under the Federal statute the tax on the transfer of a certificatefor such stock representing11 shares or 20 shares would be 8 cents, provided the transfer did not repre- sent a sale for $20 or more per share, in which case the tax would be 10 cents. Under the New York law the tax is computed on the basis of the number of shares represented by the certif- icate. The tax la 3 cents on each share sold for leas than 20.per Share and 4 cents on each share Bold at !20 or more. The tax Is 3 cents per share on transfers which do not involve a tale. "Under the Federal statute, where four certificates,registered in the names of four different persons, are presented for transfer to another person In the form of a single cer- tificate, the transaction representsfour aepa- rate transfers. Uhere four certificates,regla- tered in the name of the same peraon,~arepre- sented for tranafer to another person, In the form of a single certificate,the tax Is com- puted on each certificate,unless the certifl- catea are accompanied by a bill of sale with the stamps attached thereto. Where a broker presents several certificatesfor transfer, and such certificatesare registered in different names and the certificatesare accompaniedby a bill of sale, the tax It computed on the total number of Share0 covered by the memorandumof sale." While the above quote it not conclusiveand while it la based on departmentalIYIliIIgB and regulations,we neverthelessthink that same is persuasiveof the conatruc- tion of our law. To summarize, we are of the opinion that as to your first and second factual aituatlonathe certificates in question should be ConSidered separatelywhen computing the amount of tax due. As to your third factual situation, we are of the opinion that the certificatesshould be con- Honorable George H. Sheppard, Page 6. (O-5376) tldered In the aggregate when accompaniedby a memorandum of sale with stamps affixed thereto. He have assumed that the certificatesmentioned in your thlrd factual tltuatlon were assigned ln blank and this opinion la se llmlted. In answering your fourth factual situation,your attention it called to the first part of Section I, tupra, which provides in effect that all transferaof Stock or certificatesof stock are subjz to the tax In question. The Act does provide certain exceptionsor exemptions. Strictly speaking, the transfer mentioned in your fourth question does not appear to be exempted or excluded by name. However, as we are not furnishedwith any particu- lar facts, we are unable to give you a specific or con- crete answer to your fourth question. We will say that the transfer In question la taxable unless the facts aur- rounding same bring it clearly within the exemptionsor exceptionscontained in the Act. Trusting that the foregoing answers your Inquiry, we are Yours very truly, ATTORNEY QNNERAL OF TEXAS By /a/ Lee Shoptaw Lee Shoptan As010tant Ls:rrrzt APPROVED Opinion Committee By B&El Chairman