Honorable George H. Sheppard
Comptrollers of Public Accounts
Austin, Texas
Opinion No. O-1713
Rk: (a) Is it-necessary that TexasGulf
Sulphur Company, a domestic cor-
poration, keep a stock certifl-
cate book, stock transfer ledger
and other permanent records with-
In the state of Texas even though
it has a stock transfer agent in
New York?
(b) Are such ,records required to re-
flect all stock transfers by the
corporation or only such transfers
as occur within the state and are.
taxable under Art. XV, H.B. No. 8,
Acts, Regular Session, 47th Leg.?
(cl Will such stock transfers in Texas
on the records of the company be
taxable under said Act, even
though all other acts, agreements,
etc. necessary to effect the sale
or transfer of stock certificates
of such corporation, occur beyond
the limits of the state of Texas?
Dear Sir:
Your letter of June 17, 1941 submits for our opinion
the following question, which we quote therefrom:
"The Texas Gulf Sulphur Company is chartered .
under the laws of Texas and 1s domiciled in Harris
Count Texas. This corporation's stock (no par
value Y is listed on the New York Stock Exchange.
There are no stock transfer records kept in Texas
as the stock transfer agent is in New York.
"Section 6 of Article~XV of House Bill No. 8
of the Regular Session of the Forty-seventh Leg-
islature reads in part:
'I* * *every person * * *engaged in whole or
^
Hon. George R. Sheppard~, page 2 . o-3713
in part in making or negotiating of sales, agree-
ments to sell, deliveries or transfers of shares
or certificates taxable under this Article, or
conducting or transactlngrrage business,
shall keep or cause to be kept at some accessible
place within the State of Texas, a just and true
book of account, in such form as may be prescribed
by the Comptroller, wherein shall be-plainly and
legibly recorded in separate columns, the date of
making every; sale, agreement to sell, delivery’or
transfer of such shares or certificates, the name
and number of shares thereof, the face value, the
name of the seller or transferrer, the name of the
purchaser or transferee, * * *I
“Please tell me whether or not it will be
necessary that Texas Gulf Sulphur Company keep
stock transfer and other records within the State
of Texas and whether or not these records shall in-
clude all transfers of stock by the corporation.
“If the law requires that these records shall
include all transfers of stock by the corporation,
and no other act necessary to effect said transfer
Is done In Texas, will such transfers be subject to
the tax?
“I am enclosing a copy of a letter from Mr.
John M. Corbett of Bay City, Texas, with reference
to this matter .‘I
The Texas Gulf Sulphur Company will not be required
to make, keep or maintain In Texas any records of its stock
transfers under that portion of Section 6, Article XV, House
Bill No. 8, Regular Session, Forty-seventh Legislature, quoted
in your letter, because same refers either to’persons or cor-
porations engaged in buying, selling, delivering or transfer-
ring stock, for themselves, as principals, or as brokers or
agents for others. That portion of Section 6 of the cited
‘Act which is pertinent and applicable to the Texas Gulf
Sulphur Company and other corporations whose stock is traf-
flcked in, reads as follows:
“Every association, company, or corporation,
or business conducted by a trustee or trustees
shall keep or cause to be kept at some accessible
place within the State of Texas a stock certlfi-
cate book and a just and true book of account,
transfer ledger or register, In such form as may be
prescribed by the Comptroller wherein shall be
Hon. George H. Sheppard, page 3 . O-3713
plainly and legibly recorded in separate columns the
date of making every transfer of stock or other cer-
tificates included within this Article, the name
and the number of shares thereof, the serial number
of each surrendered certificate, the name of the
parties surrendering such certificate, the serial
number of the certificate issued in exchange there-
for;the number of shares covered by said certifi-
cate, the name of the party to whom said certlfi-
cate was issued and the face value of the stamps at-
tached in payment of the tax on the transfer of the
Xificate. * * +
"Y * *
ff* * * . It shall also retaLn and keep all
surrendered or canceled shares or certificates and
all memoranda relating to the sale or transfer of
any thereof. All such books of account, transfer
led&ers, registers, and certificate books, shall be
retained and kept as aforesaid for a period of at
least two (2) years subsequent to the date of the
last entry made therein as herein required; and all
such surrendered or canceled shares or certificates
and memoranda relating to the sale or transfer of
certificates taxable under this Article, shall be
retained and kept for a period of at least two (2)
years from the date of the delivery thereof. For.
the purpose of ascertaining whether the tax im=ed
m.his Article has been paId, all such books of
account, transfer ledgers, registers, certificate
books, surrendered or canceled shares or certificates
and memoranda relating to the sale or transfer there-
of, shall at all times between the hours of ten
o'clock in the forenoon and three o'clock.in the
afternoon, except Saturdays, Sundays, and legal hol-
idays, be open to exam.ination by,the Comptroller or
his duly authorized representative." (Emphasis supplied),
It is apparent from the underlined portions of this
statute that only such stock transfer records are required to
be kept by the Texas Gulf Sulphur Company as pertain to tax-
able transactions, under the above-cited stock transfer tax
act. This language of the statute negatives any Intention on
the part of the Legislature to require the making and keeping
of the described records with reference to sales or transfers
of shares or certificates or stock which are not taxable under
the Act. These records are only required to be kept for a
period of two (2) years and are merely to assist the Comp-
troller In the effective enforcement of the Act.
Hon. George H. Sheppard, page 4 O-3713
But this cannot be said of other pertinent provl-
SiOns'of the Constitution of Texas and statutes thereunder.
Article 10, Section 3, Constitution of Texas, provides, in
part, as follows:
'Sec. 3. Every railroad or other corpora-
tion, organized or doing business in ~thls State
under the laws or authority thereof, shall have
and maintain a public office or place in this
State for the transaction of its business, where
transfers of stock shall be made and where shall
be kept for inspection by the stockholders of
such corporations, books, in which shall be re-
corded the amount of capital stock subscribed,
the names of the owners of the stock the amounts
owned by them respectively, the amount of stock
Paid, and by whom, the transfer of said stock,
with the date of the transfer, the amount of
its assets and liabilities, and the names and
places of residence of its officers. * * * * *'.~
Article 1358, Revised Civil Statutes, reads as fol-
lows:
"Each corporation or joint stock company of
every description, whether organized and acting
under a special charter or general law of this
State, shall keep ,its principal office withIn the
State."
Article 1328, Revised Civil Statutes, in connection
with the duties of directors, provides as follows:
"They shall cause a record to be kept of all
stock subscribed and transferred, and all business
transactions. Their books and records shall at all
reasonable times be open to the inspection of any
stockholder."
Article 1334, Revised Civil Statutes, reads as fol-
lows :
"The stock of any corporation created under
this title shall be deemed personal estate, and
shall be transferable only on the books of the .
corporation in such manner as the by-laws may pre-
scribe."
The requirements of the last statute quoted have
been held by the courts to be mandatory; 10 TEXAS JURISPRU-
Hon. George H. Sheppard, page 5 o-3713
DENCE 814. We think the constitutional and the other statu-
tory provisions, quoted above, should be similarly regarded
because of the use therein of the mandatory term 'shall."
Hence, we are constrained to hold that the Texas Gulf Sulphur
Company, in failing or refusing to make,~keep and maintain
in Texas the stock transfer records and other records contem-
plated by the above constitutional and statutory provisions,
is violating the plain letter of said provis-ions and the
public policy of the State, as declared by the Constitution.
By this conclusion we do not mean to say that the
Texas Gulf Sulphur Company may not continue to maintain a
stock transfer agent and stock transfer records in the state
of New York or elsewhere beyond the limits of Texas. Wee
merely intend to say that such extra state agents and records
must be considered cumulative and additional to the records
requFred by the Constitution and statutes to be made and kept
at all times in Texas. The latter records are controlling
and mandatory, required by law to be kept for the protection
and benefit of stock holders; the‘extra-territorial records,
if any, are permissive and are kept, in the discretion of the
corporation, merely for the convenience of those buying and
selling stocks in other states.
Moreover, we find nothing in the language of these
controlling constitutional and statutory provisions to in-
dicate an intention on the part of the Legislature to limit
the keeping in Texas of stock transfer records to such sales,
transfers or transactions as occur in Texas and are taxable
under Article XV, House Bill No. 8, Regular Session, Forty-
seventh Legislature, as in the case of section 6 of said Act,
hereInabove dlscussed. All sales or transfers of shares or
certificates of stock, whether intrastate or extrastate, must
be recorded on the transfer records of the corportation and
not merely such records of sales, transactions and transfers
as are taxable under said Act. This is the plain intendment
and purpose of such provisions.
The accrual of a stock transfer tax on stock trans-
fers, made by the required stock transfer agent in Texas or
reflected in the stock transfer records and other pertinent
records of the Texas Gulf Sulphur Company required to be kept
in Texas, is indicated by the following language of Section
I of the Act:
"There is hereby Imposed and levied a tax as
hereinafter provided on all sales, agreements to
sell, or memoranda of sales, and all deliveries
. or transfers of shares, or certificates of stock,
or certificates for rights to stock, or certifi-
Hon. George H. Sheppard, page 6 o-3713
cates of deposit representing an interest in or
representing certificates made taxable under this
Section in any domestic or foreign association,
company, or corporation, or certificates of interest
in any business conducted by truste,e or trustees
made after the effective date here, * * *."
(Empahsis Supplied). .~- _ _
The tax levied by this Act is an excise tax upon
the privilege of transferring shares or certificates of stock
by sale or gift, and the duty to pay such 'tax is imposed upon
the seller, or transferror thereof. This tax measure, of
course, can have no extra-territorial operation, under funda-
mental principles of law and comity, but a tax will accrue
and become collectible if any one of the following four trans-
actions or events occurs within the state of Texas:
(1) An executory contract or agreement to
sell shares or certificates of stock, whether oral
or evidenced by the "bill or.memorandum of sale"
required by Section I of the Act. (The phrase
"memoranda of sales" specifically named in the tax
levy, to our minds, does not enumerate another or
fifth transaction to be taxed but merely refers to
the written evidence of "sales" or "agreements to
sell," designated in Section I as taxable trans-
actions).
(2) An executed contract of sale of shares
or certificates of stock, whether oral or evi-
denced by the "bill or memorandum of sale" re-
quired by Section I of the Act, Thi,s taxable
transaction refers to an executed contract of
sale of shares or certificates (stock delivered
and purchase money paid), in contra-distinction
to an executory but absolute and unconditional
contract to sell such shares or certificates.
(3) A delivery of'shares or certicicates of
stock, etc.
(4) A transfer of shares or certificates of
stock uponthe official books and records of the
corporation.
We think it is not the intention of this Act to levy
a burdensome and cumulative tax on each and every one of the
transactions enumerated above and in Section 1 of the Act as
taxable, even though they all occur in Texas; but rather the
intention is manifest to reach and tax only one of such trans-
Hon. George H. Sheppard, page 7 O-3713
actions or steps leading to a complete transfer of such shares
or certificates from one stockholder to another. For instance,
if the executory contract or agreement to sell shares or
certificates of stock is subject to the tax because it is ex-
ecuted in Texas, then the subsequently executed sale, delivery
or transfer on the corporate records of such shares or cer"
tificates, in successive steps, will not be taxed. Similarilg,
if the sale of such shares or certificates occurs in Texas,
so as to be taxable, then the subsequent delivery or trans-
fer upon the records of the corporation of such shares or
certificates will not be taxable.
On the other hand, if each and all of the taxable
transactions enumerated in the statute and above, transpire
beyond the territorial limits of Texas, except the transfer
of such shares or certificates upon the certificate books,
transfer ledgers or other proper official records of the Texas
Gulf Sulphur Company, by it or by a uly constituted transfer
agent, and this latter act or transa fan 2ion,is caused and re-
quired, 'under the mandatory constitutional and statutary pro-
visions above discussed, to be done and recorded in Texas,
then such transfer will be subject to the excise stamp tax
in question. Stated more concretely, such required trans-
fer will be taxable even though the agreement or contract to
sell, the executed sale and the delivery of such shares or
certificates was executed and done upon the floor of the New
York Stock Exchange so as to be exempt from this tax under
.the principles discussed in our opinion No. O-3594, directed
to you.
Trusting the foregoing fully answers your inquiries,
we are
Yours very truly
ATTORNEY'GENERALOF TEXAS
PMN:ob:jrb:wc
By s/Pat M. Neff, Jr.
APPROVEDJULY 29, 1941 Assistant
s/Grover Sellers
FIRST ASSISTANT
ATTORNEYGENERAL
BWB CHAIRMAN
APPRCV?ZDOPINION COMMITTEEBY->-