Pa-s-L%
~*ToRxEs GEYERA,
: .
fionomble George E. Sheppsrd
Oomptroller of Public Accounts
Auatip.,Texas
Opinion Ro. O-3594
Rer Constructlon of Art. XV, House
Bill Ro. 8, Acts, Regular Ses-
sion, Forty-seventh Legislature,
levyinS an excise stamp tax up-
on stock transfers.
Deer Sir:
Your letter of l5cy 24, 1941, submits for our
opinion certain inquiries reOardlng the incidence and
application of the excise stamp tax levied upon stock
transfers by Art. XV, House Dill Wo. 8, Acts, Regular
Session, Forty-seventh Legislature. To this end, you
attach a list of questions and copy of s letter of date
May 19, 1341, addressed to you by Snitbdeal.& Lefko-
wltz, attorneys of Dallas, Texss. To a.voldcon:uslon
end promote clarity, if possible, each of such ques-
tions will be stated in connection with our discussion
and conclusion thereon.
Your first question is as follovsr
“Does the tax apply to au origfnal issue
of.stock, that is, the Issuance by a corpora-
tion of shares of stock to the persons who sub-
* SC rlbed therefor?”
Section 1 of Art. XV, House’Bill No. 8, Acts,
Regular Session, Forty-seventh Legislature, levies the
. following tax:
‘There is hereby imposed and levi.eda tax
as hereinafter provfded on all solos, agreeuents
to sell, or memormXla of sales, an3 all deliver-
ies or transfers of shares, or certificates of
.
.
,
: BOn. George H. Shsppard, Page 2
stock, or certi?icstes for rights to stock, or
certificates of doposit representing an inter-
eat in orrtpresenting oortifioates made tax-
abla under this Section in any donestlc or for-
eiSn associetim, co.vpany,or oorgorotion, or
certificates of intsrest in any business con-
ducttXlby trtisteeor trustees xade aftsr the
effective d&e hereof, whothar nsde upon or
shown by the books oftho association, oo3Fany,
corporction, 01 trustee, or byeny assignnest
in blank or by any dolivery of sny papers or
agrsenent or rremorandu%or other evidence of
aals of trsnsfsr or crdor for or agree36nt to
buy, r!hethsrintnrr,edi.ateor.final, and whethr
investinS the holdar with the benoficial~intsr-
est in or legal titLe to mch stock or otier
certificnte taxabl.ehereunder, or %ith the
possession or use thereof for any Furpose, or
to seoure the future pyxent of noney or the
future transfer of any such stock, or certifi-
cete, on esch hundred dollars of f'aoevalus
of frsotion thereof, three (3) cents, except
in cases where the shnres or certificates are
issued without.designsted monstsry value, in
which caee the tax aLeI. be at the rate of
three (3) cents for each and every shars. It
shall be the duty of the ,~ersonor persons
making or effectuating the sale or trensfer to
procure, affix, and cancel ths stamps and pay
the tax provided by this Article. * * 8 *
1% find ncthing in the quoted 1anguaS.sto inal--
catg a legislativs Intent to tax an orig.inolisauo of
stock, authorizsd,under the corporction*s chsrtor and
issued pursuant to subscription contracts. The inten-
tion is manifest, rather, to place this excieo tax burden
upon the persm, Pirx or corporation tnekin~or sffact-
uati.?P,
a taxable se16 or tra.lsferof outstandIn& sharos
or certificntos of stock rather thnn u~cn the corporation
whose stock is trafficked in. This mm interpretation
has bsen placed unm similar t3X 13Vi3S of the states of
New York ant? Fennsylvanie: 3p the adninistrctive dopart-
monts charged cith the enforcesent of such measures, end
..-
m-2
Hon. George H. Sheypard, Page 3
Co., 106
by the courts. See PZOPLP V. DUFFY-XcIX?.;:R-3Y
N.Y. Supplenent; 878; affirmed, Court of Appeals, 86 M.z.1129,
This ooaclusl& ‘as to,..thenor-taxability of
original issue stock does not.,extend to and embrace
treasury stock, so-called,,which has been cnce cutstand-
ing in the heads of the ,;ubiic and has been purchased
by the corporation for resale. Such&ock is liot origi-
,nal lsspe stock and 5s. taxable?
Your second question’is stated as follows:
“Does theetax apply to the transfer of
stock oa the books of the corporation or of its
transfer agsnt where no other part of the trana-
action.Is taxable? ~..~.
~PXEPLE .EO..i: A Raw Yo%k resident sells
stock to another X-enYork.resident, the sale
beiq, Initiated and consumnsted in %wi York,
The purchaser sends the stock for transfer to
the orfico of the corporation or its transfer
agent in Taxas.
~~XAXFL3.~~0.2: A ‘sale in Texss betvmm
Texas residents was completed before the Act
went into errect, but the certil’ioetewas not
presentsd for transfer until aftsr it went fin-
to erreot."
All or the portion 'of gonr second question QX-
cept nexaznpleRo. -2” is specifically mmvared in our
opinion 110. O-3713, directed to ycu, and we respectfully
refer you to same.
our answor to %xmple ?:o. 2” of your sscoDd
question is that e s~J.a In Texas betman Texss residents
0r shares or certiflc:tss of. stock, executed prior to
the efl’ectivedate of the stook transfer tax aot mder
coesidsration here, would not be taxa’slsthoraundar,
because, to do so would be to .*zivethe statute a rot-
reactive and, therefore, unconstitutional effect. Flov;-
ever no such constitutional objocti% lies to tha tax-
,. atlon of a transfor, in Texas, of such shares or certi-
ficates upon tho bcoks of tho corpmation or by its
. ‘:.
:- or33
0
.
Hon. George R. Sheppard, Peg8 4
transfer agent, subsequent to the effeotiva date of said
Aot; and, since such transfer is one of the Independent
transactions which is made taxable, reZerdless of the
perfor?ance or execution in Texas of the other naned acts,
transactions, egreenents or contracts, we think It patent
that the Le&islaturs lntonded to tax such transfers as
occurred after the pzissagoof the Act.
Your third question reads as follot;sr
When tco or more .stepsin the sale and
transfar of stock take place in Texas, is it
the $rtentlon of the statute that only ens tax
shall be oolleotea on the transaction, ragerd-
less of the number of steps in the transaction
and the lenngthor time elapsing be&eon the
sxoouticn of the agreement and the transfer of
the stock on the books of the corporation?
uEXA’LFLD:A and B are both Texas residents.
They sign an agreement whereby A agrees to sell
to B 100 shares of stock; the rsxt day the sale
is consunmated; the stock is dalivored to B; and
B has it tracsferred on the books of the issufi~
corporation in Dallas. Is a separate tax im-
posed on the agreement to sell, the sale, the
delivery and the.transfor, or Is the transaction
vielvedas a whole and only one tax imposed?”
v:e believe you will find that thin question has
bson adequately and affirmatively ansvioredin our opin-
ion No. O-3713, aadresood to you, and \TO,therefore, refer
yoa _.
to same wlthout,furthor dieoussi~n hers.
By Subdivision (a) of your fourth question you
desire to know if the following transaction is taxabla:
“ia) A, a resident of Dallas, carries on
. the following conversation by telstype c-ithB, .
a resfdont of New York:
“At ‘Dow are you quoting XYZ stock?’
c c “~3: ‘mrket 112 bid 113 as:~3d.’
,
.
.
Hon. &or&a Ii. Sheppard, Pace 5
'Will tska
~A'A:~ 100 shares at ll%3/4.*
*BB~ 'Sorry 113 best.'
f "-, ('0 K v8 &uy 100 eheres at 113.
:wA'~t,
~~~.Please oonfim realttlng direct with
trahclfer~Gtructiona.~
.,____,___--
I----
*B imediately sends A by mail the follow-
ing oonfirms~tion:
w3, IriO.
New York
Order accepted
my 24, 1941
“‘A
Dallas, Texas
"'1% take pleaouro in accepting your order i
and horeby SZLL to you today: f'
"l?o. of shares Security price
100 xs'z Corporatim (jll30.00
,'
*Vote: In this transaction we do not act as
your broker, but as deal& for our of9
acoount. This bill 5.8payable upon re-
oeipt.'
*At the sa%e tine A liksniso confirms tha
purchase and sands the following oonfiimation
to B by wirer
“‘A
Dallas, Taxas
. l
Date Hay 24, 1941
N*B, Inc.
New York, I?.Y.
acT!eas principala, confirm PUNXASE FRO:8
!
9
I :
.
..
Ron,.boorge H. Sheppard, Page 6
YOU of tho follotvingseourities:
*tNo, bf shares
100
**Mall street name to us New York exchange for
#lUO.OO attached hereto. t
Upon recolpt OS A’S check, B mails tho
stock oertificstes to A, who reoeivos them in
Dallas.I1
As more Sully pointed out In our opinion MO,
o-3713, Seotion 1 of Article XV, Xouae Bill No. 8, Acts,
Regular Session, Forty-sevanth Legislature, levies and
imposes an excise stamp tax upon one, but only one, of
the following transactions:
I, An executory contraot m agreement to
sell shares or oertifioates of stock,
whether oral or evidenced by the "bill
or memorandum of sale* required by
Section 1 of the Act, or,
2. An executed contraot of salo of share9
or certificate of stock, whether oral
or evidenced by the “bill or memorandum
of sale” required by Seotion 1 of the
Aot, or,
3. A deliverjrof shares nor oertifioates of
stook, or
A. A transfer of shares or certificates OS
stook upon the offioinl ;boaks and r ec-
ordo of the corporation.
It was further pointed out that under fundaaent-
al prinoiples of law end comity the exoise stomp tax in
question has no extra-territ rial oncr?>kog gnd go iax
jigu&gcErue IS 9&1beJo&
0; We tff$“~~m%?%?t~e
ransgirs SF”,“;“”Gi””
the othgr hand, if only one & such acts or tr&~ctiona
tranopiras v:ithln the state the t3x accrues 8vGn though
all of the others ocour outside the state. Cut if all
*.
.
Hon. George H. Sheppard, Page 7
of such taxable transactions or acts occur within the
stote OS Texas, the exoise tax will not cumulate but
will reat upon only one of such taxabla transactions
or sots,
Contraots SOr the sale of stock are Governed
by the Sam8 legal principles as other ,contraots. As .
with other contraots the ninds of tb buyer, ana seller
must neet as to the price of tha stock, the terms of de-
livery and ths pagnent. The oSfar of tho ssllar is not
binding upon hln unless aooepted by the other party.
The absolute aoceptance ofan offer without conditions,
results in an exaoutory contract with a mutuality of
obligations and ramedi8s. Wsre an offer is acoepted
by a party it Is not necessary for tho person mekiw
thaoffsr to aooept the acceptance. EIutualprvnises to
sell and purchase stool:ax6 a suffioiant consideration
to support theagroemnent. ‘An exeoutory contract or ssle
become azeoutod by a timely and the proper tsnder of
the stookr The validity of a oontraot for the sale of
stock is governed bytho laws of tti E tate in v:hichthe
contract is made (SGQ ganarally, volu*m 3, TXUPSON OH
CORPOPATIOXS, Third Edition, Seotions ,905, 4l06, 4~6,
4l.21 and 4126b
:
Is any one of the Sour taxable aventa or trans-
aotions tia3edin the Act and above, present under this
speoial Saotual s ituation IV-a and these general prin-
oiplos of lavf,so as to accrue a tax?
The offer to purchase stock was made by a ras-
ident or Texas, (IfAn)but suo h OSSer 1~s aOOepted in New
York by a resident thereor (MBe).and conSirmed by mail.
The nubsequont confirmntion OS the purohane by nA’tby
Pyire,although probably nacossary according to Wages Of
the trade, was unnocass3ry under the lnufof contraots to
complete a binding and sbsolute a~roomnt or contract to
8d.l~ In fact, it was not*hingmore than an aoceptance
oS an aoceptenoe whioh is not nacosnary to orsate mutu-
ality of obligatlm a0
Therefora, prior to the delivory of the stock
to purchaser ItAnand receipt OS the purchase money thora-
for by seller oB1’,only an axscutory agroozant or oon-
traot to 3811 thendesignated stiras axistad, Such
.
4
.
Eon. George H. Sheppard, Psge S
. ..
eX8cutorp RgPe8.33lJt,~hOxmP~T,~VFaS Rn 5b5Oluta Contraot
ana not a sale on condition or an option contract. It
was a bigding contract with nutuclity of obligstlon and .
was clearly the %&rtmxent to selln which was mado tax-
able under the hot, if it ocourrea in Texas.
donerally speaking;tho’placa of making a con-
traot, 1noludihS an exeoutory oontraot to sell 8 took,
is aetertiinedaoccrding to the parties1 intention; as
a rule, it Is oonsldWed to be the place where the offer
is aocepted, or where thenlast act nsooosery to a msot-
log of the ninds or to ooaplete the contraot 1s pa-
f023nea.
17 O.Y;S, 613, saotion 356)
11 dmrioan Jur. 394, Ssotion 211,
Under facts substantially identical to the Instant oasa,
but involving an aGresxent to sell stock batmen a citi-
zen of l?ewYork and a oitizen of Pennsylvania, tha court
held that the %greamnt to sell” ~'108 mde in Nam York,
preliminary to the sending of the certificate to Pemsyl-
vanla; O%ANE, Jr,, ET AL var STATS OF NEW YOPX, 16 1JpS
(26) 320; affirmed, Court of Appeals, 28 hi (2d) 905.
Therefore, ~778hold that tb Wagraemant to sell”
in the present case was executed in New Y rk and there- L-
fore not taxable under the Texss Act. Bit in addition
to an “agroamnt to 8a1111,the instant faotual situation
includes an executed %alX?” of sharas or certificatss of
stook and a ndeliveryy1of shares orcartlficatcs, tno of
the taxabla transactions or acts nactsdin the statute.
Therafore, we mst next detorninc who,th$r or not either
or both of such transactions oo.ourredvfithin the state
of Texss so ss to bs abject to this tax measure,
As detormlning the place whera an executed con-
tract of sale is tiado,as distioguishcd from au execirtory
oontract or agreaznt to soLI.,shove discussod, w state
the following rule from 11 Ansrican JUT, 395, Section
1131
Welivory of the property is generally,
..
..
..
Hon. George H. Sheppard, pa&0 9
though not necessarily, the aot by which on’
executory contraot bsoomss an exaoutea oon-
,traot. Therefore, In suoh case, the place of
delivery is generally tho place where the ex-
eouted oontraot is deemed to have bean nade. v .
In deteiminin& the place of delivery of proper-
ty (anb stock has bson held to ba proprty) we quote
from the leading case of ALRXAXDXR vs. EZINDPmmJ~R, 221
8..W. 942, whereIn the Commission of Appeals said:
“It Is an ostablishad rule of lam thst,
when proparty Is delivered to a carrier by the
vendor as direct&d by the vendee, or where tha.
contraot Is aileat as to the place of delivery,
delivery to the carrier oparatos as delivery
to the vendee end passas title to him.”
This rule finds support in the statement of the
general rule and authorities cited at 37 Tex. Jur. 37A,,
SeCtIOn 166;’ADKCZS-POLE CO. vs. JOEN BAPSLFY &,CO,, 297
6. w. 757.
Under the.fasts before us, delivery of the stock
OartIfIoate was nade by tho seller nBVtby depositing same
in the United States Ifails in New York forwarding to the
purchaser **A” In Texas,-after receipt of ths purchase
money In New York. V!ethink undor the above prinoipleo
and Specific authorities (17 C.J.S. LO3), as wall as un-
der the express direction of the purohsser in Texss, the
United states mails, In this Instance, was constituted
the oSant of the purchaser,-*lhrrand therefore dalivcry
of the osrtificatas by the seller, 8tBqt,Into the 1Jeils
ln New York wan tantamount to delivery of such sharos..or V
oertlfiontes in Msw YorL. Hence, ths delivery of such
shares which convertad the exacutory agreeaant or con-
tract of sale into an axeoutod contra0t of sale, trans-
pirad extrastate. Thsreforo, neither t ha “delivery” of
suoh oertifiosta nor the “Sale” which it CcmphtSd, was
a tnxabla trsnsaotion In Texas*
The only other remaining tsxoble act or trans-
aotion enunorated in the statute isti??atransfor~~of
such shams or certificates of stock upon the books of
.-
:
-’ .
.
Hon. Qaorgs R. Sheppard, Page 10
the corporation, 80 as to pass legal title fro3 the
seller or transferrer to the vondee or transferrce. It
doeo not appear fm31 the fsctsstatea u:laer your fourth
question vfhethsror not the shares involved were the . :
.. shares or certificates of a domestic or foreign corpor-
ation, or v!h6thsror not such shares or Certificates
were transferred within the state or Texas, and h6nce
we a0 not pa68 upon the question of nhetinsr or not a
taxable *transfer* is ~pressnt. :
You next desire to know if.the transaction 68;
acrib& under parr question Co. IV-b Is taxable. E3
quots :
n(b) This situation is identical.vith the
one outlinsd above except aa to the method of
paynont for, sna delivery of, stock. In this
situation, A(S last message to B reads as fol-
lows :
.
-A: ;“,s;t buy 100 shar6s at 113. Please
Deliver street name to Chase
Nationa; D6v1Pork for our account
against payment,’
*B’confirms the sale exactly as in the first
illustration ana A confirm his purchase as in
the first illustration except -that instead of
saying ...
WWail atr6et name to us ‘ITemYork Exchange
for $1130.00 attached hareto,’
“A’S confimation soys:
“‘Deliver in str6et name to Chase Xation-
al Em:: for our amount against paynont. *
*A then sands the purchase price to the
Chase National Dank, h’swYork City, and upon
recaipt thareof the bank .aailst.h3 stock to A.=
The alteration in the &&~sr of the &livery of
the stock ?nn payment therafor frcu that followed under
Don. George ti;Sheppard, Page 11
the facts appearing in subdivision (a) of your fourth
question does sot require or justify a diffarent c01?-
elusion. The se!??lagal principles discussed in con-
nection w8ith your question IFo.IV-a will apply to this
question, because the only change In the facts is that
the Chase IEtional Pax& of KXY York is substituted for
* the Unitd States Xails as tho agent purchassr of ~'A'l,
to first recairs the certificates of stoc?:frm seller,
*Y, in l&n7York. Therefore, the nagresmsnt to sell,=
the Qale" and ths "delivery" of the shsrea or certifi-
0,;~~9,~;fstock all occurred extrastate so as to be non-
For reasons steted under the foregoing ques-
tion, v:: do not pass upon ths taxability of a subsequent
transfer of such sharas unon the basks of the corpora-
tion, bscause ths facts are not furnished us in this
regard.
By subdivisicn (c) of your fourth qusstion you
aesire to kr10!7 if the following transaction is taxable:
n(c) This oituation in IdmtiCal with the .*
two illustrations given above except es to the
methoa of payment for, and delivery of, stock.
1x1 this situation, k's last message reads:
a* 0 K we buy 100 shares at 1.13. Please
confira. ship street name by draft Dal-
las iirtional.'
@B confirm the salo sxsctlp as in the
first an8 secoud illustrstions, and A coufirxs
his purchsee as in the first illustration, ex-
cept that ht3aa of sayi2g
e*lJailstreet caze to us, New York Ex- :
change for $1130.00 attachsd hereto,*
*Asa confirmation says:
"'Ship in street nme by draft on us
through Dallas National Denk.'
"R then ottaches ,tho'stockcortificete to
hi3 draft on A, who pays tha draft and recsivao
ths stock when ths draft.13 presentsd for pay-
nellt,"
.
.q ‘.
.
Bon. Qeorgd Ii. Sheppard, Page 12
i
.
fn this instance the ohange in the methoa of
payment for and aSm0rjr of the shares or CartifiC3t68
of stock 0~11s for a different application of ths legal
principlss discusse8, and, in our conclusion, results
in the taxability of such transaction. It is true that,
as in ths cases of subdivisions (a) and (b) oi your
fourth question, the na&re8czentto sell” 1728 consm-
mate& extrastote SO a8 not to be taxable; but undsr the
~‘. given method of payzent and delivsry which cozplotea tha
contract of sala, such “sale” of the sheres or certifi-
cates of stock, as well as the Wcelivery*fthereof.oc-
ourred lvlthinthe stato of TSXa8, SO as to zake one or
the other,.but not both, of such transactions taxablo.
Under subdivisions (a) and (b), tha Texas pur-
ohaser, “A”, had, in contex?lation of la-w,an eCent in
New York in the United States ?+!ails and in the Chase
National Bank, renpootivoly, to receive such shares for
.. hla In 178-N York; but under tho facts of subdivisfoll(o),
no New York agent of ffA1vis present .toracaive the stock
, and pass title thereto in that state, but, on the contra-
ry, title to the stock does not pas8 until after tha
receipt of the chrtificates by the Dallas National Dank
and tha honorinS, by ‘IA”,of the draft thereto attached.
In other wordsI .tha Dall.asNstior,alBank is the agent
of llB*c,the hen York seller, ratherthan of “An, ths Texas .
purchaser, and theraforo .a taxable %alel* or “delivery”
of the sheres or certificates occurred in this State.
Your fifth question \vith its subdivisions (a),
0) I and (C) iS qlotea as fO11OW8:
W~pposa that in the situations outlined
in Question IV the transaotion was initiated
by B, v?homade an offer by taletyrs to sail tbs
stock to A, so that the teletype cocversation
a0loa to the point or the instructions for ds-
livery and payment was as follows:
*B: We offer you 100 shsres IX stock at
113.’
HA: ‘Y!illtake 160 shares at 112-3/A.*
"B: 'sorry 113 best.'
Hon. Goorge R. Sheppard, Page 13
ad; ‘0 X w buy 100 shares at 113.1
“(a) With this zodification, and assuclius
that othamf.se the transaction vms identical
with that stated in (a) of o,uestionIv, wculd
the transaction be taxable?
n(b) With this mcdificaticu, ard asstizisg
that @themlse the transaction,was identisal
with that stated in (b) of ;uestion IV, wuld l
the transaction be taxable?
“(c) Q!iththis modification, an3 assusiry
that otherwise the transaction was identical
With thct 8tOt6a iII (C) Of QUieStfOZI m, RJUld
the traneaotion be taxable?*
This factual situation presents the Ccnvcrse of
that appearing in your fourth que:otion,ragerding the
executory agreont or co&mot to sell shsran or c6r-
.tlficatssof stock. Eare tha offer to ~911 is ncf3s by
*Sac,the NelvYork seller, aml the acceptance cf such of-
fer I8 nade by -An, the purchaser ih Texas. Thuus the
acceptance of an offer which completes the obligation
and mutuality of the contract or agrse.xenttakes place
in Texas rather than in FccnYork, so as to accrue the
excise stag> tax 02 one of the taxable trannactiors or
events mmtioned in the statute, i.e., an wagreezent
to sell.” .
We reach tl;incoaclusicn das-;itethe conten-
tion'thot the tax .3.evyis upon the 8aie or egeement to
.sell rothsr thsn upon a purchase or e.gaemnt to -,ur-
chase stock, ana under this hypothetical ca39, oc1y.a
3uro!:930is invoived in Taxao. It should be svar irspt
in nind that tinetax levy under coaaidcratioa is, actu-
ally and fun2ansntally, an excise tax upon tinsprivilege
of transferring shares or cortificstes of stock. .Ths
t8sm Y,Tansfer* is used hare in its broad and co.lprehen-
61~3 sense to ma;1 IAe passing of the legal or eqdit-
able title to ahxces or certificates cif stock frcz one
person to another, by aal0 or gift, rathsr t&an tha
nsrsm;ar asnnfng of the mre recording of such tranefsr
upon the stock trmsfor records ofthe corpomtiun. It
.
Eon. George B. Shappard, 3eee 14
is true this tax levy Spaclfically lmpos8s the tax on
all w8a1eS~~,Negrsezsnts to S811", or "nenoronda of
StJ18S" 8ud all "dt3liVfJri8S"
Or "trMSf9rS" of Sh&r8S
or CertifiCet86 Of stock, bat th8S8 ar6 P8rely StEipS
in th8 COxpl8ted tronsfar of shsres or certific3tss
from one stockholder to anothsr. Bents, 'the argwent
is not t8n8bl6~that this excise tax levy ie upon the
sole of .stockrnthor than Upon the uurchose of stcck.
Theterms v~ale*~and nagr28rP,Bnt:to ~l~%Drahend a
pUrChaS8 cf stock as well as 8 sale, whether the con-
tract is executad or executory, because there cannot
be, contractUally, a sellor without a ~UrO!:aSerend
Vh8 Versa. Therefore, we say a taxable "agreement to
sell*'did occur in Texas, although the seller resided
in H~VJYork.
Thla one taxable transaction or act being pre-
Sent, It
matt6rS UOt t$4t Under ths C~rCU.nStamXS Of th8
del.ivsryOf th8 Sharas or C8rtifiCatCS and th8 payment
therefor, Md9r Subdivisions (a) and (b), the %alen and
"daliverge of such-shares or cartificzt6s occurred, as
Under TV-a and (b), in rJer York rather than Texas. On8
taxable transaction or act will suffica to accrua the
tax 8Ven tbough all other t,xabla transactions or evsnts
designated in the tax levy transpire extrastate, Hos-
BVBT, for the reasons stated in our discussion under
your question Iv-c, there is present, in connection with
th8 facts of the delivery of and ~ay:sentfor the stock
lUId8rsubdivision (0) Of your fifth qUeStiOn, tYJ0 addi-
tions taxable transactions or events, na:nel.y, an,executed
%ala* of the 6hsreS or certificates in Texas end a
*delivery* of Such certificatas in Texas.
To fully state the important and essential faots
of yoUr next quastioa v8 quote Same from th8 attached
letter to you of date ?Zay19, 1941, frm Smithdeal 6:
LsfkowLtz, attorneys of Dalias, Texas:
"%8 lWpr6S6Et SO?uB brokers T!hOare msmbars
of the Dew York Exchange. They take offers to
883.1at their s8Veral OffiCcS in %;'.aS8nd tTanS-
mlt bhem by wire to Mew York. If the offers ers
8CCoptGd, a report of the sale is teleGraphed to
the Texas ofi'iceand a confirmation nailsd to
.
Hon. George II.Sheppard, Page 15
the CUStOZ8l’. If the stocks are sold and the
custoner has possession of the certificatss,
they are delivered to tha Texas office and for-
warded by tha Tsxas OfSiccato th8 placa where
the sale is raada. A receipt is given to the
onstoxer for the certificates. The Texas of-
fice does not aake au agreamnt with tha cus-
toner to Sell the stocks. It impliedly agrees
to trana?!ittha Offer. hi 9038 Oases the prise
asked for the stocks can not b8 obtained, and
the offor:is not accoptod. In sost instences
the stocks am sold.
$Houss Bill 8 undertakes to lsvy a tax on
all ~3138, agreemnts to sell, or ffianorandaof
Sales, and alldaliveries ortransfers of shares
or c8rtlSicates of stock, whether intamediato
or fir,al,
'. "Our position is, with respect to stocks
, of.tireign corForatiors, that mithsr the tsle-
QSsns sent by the Texas office to the E8w York
office tranmitting the offer to sell, nor the
telegram from the 1%~ York office to the T8Xa8
office advising that a sala has bscn aade, nor
the corfimationofthe sale sailed to the cua-
toXer fro3 out of the state, nor the raceipt
for the certificstos in Cas8S inwhich they am
delivered by th8 customer to the Texas office;
nor Xezoranda made on the books of ths Texas
OffiC8, i8 taxable Unfiar the 1aIlGuagaOf the
statute, and that if the language should bo
. oonstrued 8s taxing such tolegra36, raceipts,
confiraatlons,,ard nemoranda, the ststute will '_
be invalid. In support of our position we cite
the case of J. X. Lee, Coapirollsr of tha
Stete of Flcrida, vs. J. P. Bickell, 292 U. S.
,
415.
v***."
Unlike the factual ststomnts presented for our
cpnsideration by your fourth Andy fifth questions, the
above Sects prassnc an 1nsl;anceVWrre shams or CSrtifi-
cetes of stock are sold or tmnsferred, not boteeen cit-
b. .Y”
i
..,8iE
* Hon. George HI Sheppard, Paage16
hns of Texas and New York, aoting as prinoipals, in
tholr own behalf, but rather where tho sale or transfer
1s effected through tho medium of ‘buying brokers and
sellinS brokers, who m3et on the flcor of the Exchznge
$n New York and Cousummate, not only the exeo.~.torgagree- .
ment or oontraot to sell but likewise the executed oon-
tract of sale and the delivery of the shares or certifi-
.03t6u, .
.
A faatual eituati’onidentical to the above wes
before the Supreme Court of the United States in the case
of LEi3 vs. BICKCLL, 7% L. $d. 1337, 292 U.S. 135, an&
the court held, under a tax statute of Florida substnn-
tlally identical, upon this point, to the ABt before us,
that the scheme of said statute 173s to tax the transfer
of ahareo by stamps affLxe& to those writinga only whfhiah,
in a praotioal 6ense, are the repository of the agree-
ment or ths lnstrwnents or vehicles for the Ghan&e of
.tltle, end not to tax mere ooplss of memoranda ancillary
to transactions ocnsummated outside the state, and henoe
*- the-excise stook transfer tax would not be oollectible
by the tnx authorltlee of FlOrlGa,
Hov!ever,this decision doss not foreclose the
question of the acorual of the tax under the Texas stat-
ute, if the shares or oertificstes of stock purohased
nnder the Pacts outlined, are transferred In the state
of Texas, upon the official stock transfer books and
records of the corporations involvod or by their tra;ls-
fer agent in this state, if any. Neither the decision
adverted to nor the facts ststed, supra, involve such
transfer, ‘butwe hold that if such transfer occurred in
Texas it 1s taxable, despite the fact thet each and
every other taxeble aot or transaction named in the stat-
ute occurred in the ststs of NW York.
The next question subnittod by you, through tba
above mentioned Icttor, is quotsd t!mrofro~ as folloss:
Waction 6 of Article ?IVprovld6sthst
every psrson, firm, company, nssoci~*ion, oor-
poration, or business conducted by a trustea
or trustees, engaged in whole or in part in
the making,or negothting of OalSS, aGrae::ents
. .
Eon...
Gooree H. Sheppard, Pace 17
to sell, dalivaries or transfers of shares or
certificates taxable under .thisArticle, or con-
Uuoting or.transacting a brokorags business,
shall keep or cause to be kapt at some socassl-
ble place wlthiu the State cf Texas, s just
and true book of account, in such form as may
’ be prescribed by the Conptrollar, etc.
.. ‘We should like to know whathor you con-
strue this 1onCuaSa as applying to a parson
who telephones or telegraphs an order to sell
his own stock to a Uaw York broker and forwards
the stock by mall or express to such Maw York
broker, Such person bould be engaged in part
ia tho making or negotiating of sales and da-
liveries or tranqfsrs of shares or 0ert:ficstes
of stock.
RVe should also like to know whsthar you
oonstrue Section 6 as requirip* the StGok B-
ohanga broker,,who has a local office in Texa,s
and who narely~trsnsinita,of!‘srsto sail to an
out of the ststa offioa and, when the Offer is
aoceptad.,rscoivos a telesran from the out of
the state office reporting the sale, and in
.oasas 3.nwhioh tha cartlfio~tss ar3 in possas-
slon of the Texas customar gives him a reoeipt
for such oartifiostas and foryrerdsthan to ths
out of the state offioe for dalivery, must kaop
books, on a form prasoribad by the comptroller,
showing such transactions.
n*****
\
This question has triophases;
(1.) records to hs kept by persons, firus
or corporations makinq or negotiatiq
selas, agreecants to ~011, deliveries
or transfers of shares cr certificates
of stock in thoir own bahalf, as prin-
.oipols,and,
[2) pa3!sons,finas or corporations con-
. .*
..
duotin& or traiISaOtingd brokerege
business.
Scotion 6 of the Aot, insofar a8 pcrtimnt,
roe:Ca as folloM:
%wy pmson, firz, cozpang, associe-
ti.oa,'ocr?orationor busineso oonductod by a
truAtU3 OT tl%5keS, O&p~&i in vihol8or in
Dart in the CekinG or ne~otistinn of sales.
ii@mmmts to soli, doli%?rics cr trmsfcri
of shnres cr certificate
Art:clo. or conductirutor Giii
tic- - -~ ~~~~~
at soxe ecc&iblo $.aoe nithi&th&3tetsm~f
Terse, a just nnd'true book of ecoount, in
suoh foivnas nsy be prescribed by the cozp-
trollar, wherein shall be plainly azldlegibly
recorded la ixipornie oolums. the dote of
mk:nG every Glo, aFtri~G:m3tVto ncll, dcllvory
or trmofor of such atcreo cr%rtifiGtesc
Xi70 n&a and-3ZhGKi&sr of ZG3tharoof.
tho face value, the caxe of the seller or'
trennferrsr, the naxo of the :u.r~hzceror
transfureo, the fmo,valu0 g the adhcslve
~te-n^psaffixed and tfie idOntlfglng im-der oi!
tne bi'l.lororanduz of sslc ucod z.a;ro-
vidod.for hsrain. This book ehal.1 slso hqrs
rocordod thorsin mob sopsrcta jxarchzseof
stock transfer stasqs, ohovringtho dtite,tho
amoust and.froa whoa suzchased.*8 (32phasis
supplied),
It is a?pnrcnt thet the first sortion of the
above SQCtiCn a#iOs to Q ;CP3OLl Who tG',fii)hO?leU or
tcle~ra~hs an xdbr to sol1 !~isom stock to a Na-.v York
brakar &Id forxsrds the stock by smI.1or exg-rossto such
Eew York bmkcr. '..a
do not ?a.:3 ~20::the question of
vikothrr mob ~crson is subject t-: t!m lxx, bnonwo sew
:nd sufficis9t fscts are not bcfo~o us,
is not raqu.z"ut.cd
!:omovor, iho statutory duty to !:zeprecords iS i2:osqd
u:on evary porso~, firci,oorporstioc, atc. *en~:!~edin
~2010 or 12 gart in the ?&&:r, or no~at~etin~ of se~oa,
aCri-67xntato sell, deliveries or trzsfera of shzres
Hon. George H. Sheppard, PO@ 19
or ‘oertificatosw, regnrdleos of whether or mt such pcr-
itself lieble for the tzx:. Eov:e
son is himelf or __I- yc3r
8
only such rsoords axe required to be ke$t es reflect
texeble tramactions and if, under the hypothetical case
given, such transaotions exe not tcxablo (rhich we do
not pass upon beceur,esufflcie.?tfacts are not given
regardis transfers, etc.) no recor& of such trans-
actions will be required to be kept. This la ;?atentfro2
the undersoored portions of Section 6, L~0ioatir.Sthat
the only records required to be kept 6ro those pertinent
to taxable transactions, rather than any and al.1records
involving stock tremferb.~
Uith reference to thet phase of your last ques-
tion regardinS the requirozent, under Section 6 of the
Act, thst persona ox aorporstions “conducting or trens-
aoting a brokerage business” shall keep the described
reaords, v;c are of tho opinion that, under the facts *
Btated, so taxabla transsotion or &at trampFret in Texas,
and hence the local office of the Stock Xxchanze Broker
rill not be rcquirod to keep A record of such trazmection.
Xowe~cr, no statement a:!?oorswith refarenca to the
transfer of such shams or certiflcstes of stook u,?on
the stock transfer books or by a transfer agent but if such
does transpire in Texas, tz‘owish to point out that the
local office of said broker vii11 be rscjuircdto keep * ’
the full and co.-9leterecords of the entire tremaotion,
required by the statute.
Trusting the foregoing fully cnsviersyour s?any
inquiries, we are
Yours very truly
A:Tc?;:Y GzJi$&L OF ‘I’-=&
PQXIob Assistant
.
.