A EiWERAL.
Honorable Robert S. Calvert Opinion No. M-141
Comptroller of Public Accounts
State Capitol Re: Whether under Article 6.03,
Austin, Texas 78711 Section B, Taxation-General,
V.C.S., a car dealer loses
his right to tax exemption
when he uses a vehicle for
other than "demonstration"
purposes to a specific
prospective customer and
related question concern-
ing definition of "demon-
Dear Mr. Calvert: stration."
You have requested an opinion from this office regarding
the above captioned matter and a related question.
The facts which you have furnished are quoted below,
in part:
"Attorney General's Opinions wW-338 and
WW-390 serve to support this Department's
determination that while motor vehicles
used by automobile agencies solely for
the purpose of demonstration should be
exempt from the Motor Vehicle Sales and
Use Tax, we do not believe that this
exemption can be legally extended to
include vehicles that are used for any
other purposes. It is our thought that
the tax is due to be paid on any vehicle
that the automobile dealer, any member
of his family or any of his employees may
use for any other reason whether it be
for personal or business reasons. It
has come to our attention that many
dealers operate motor vehicles, bearing
dealer licenses, in the same manner as
the average citizen would operate his
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Honorable Robert S. Calvert, Page 2 (M-141)
personal family car. Are we correct
in assuming that the dealer loses his
right to the exemption for the Motor
Vehicle Sales and Use Tax when the vehi-
cles are used for any other purpose
than to demonstrate it to a specific
prospective customer? We frequently
find cases of where a dealer will
operate several automobiles on dealer
licenses and will allow all members
of his family to use these vehicles
with no restrictions of any kind. The
dealer's wife may drive one vehicle in
her shopping and to her clubs, and
cases have been known where his chil-
dren will drive other tax exempt vehi-
cles to out of town colleges. We
request that you give us a clear-cut
definition of the word 'demonstration'
as it applies to automobile dealers,
and inform us of the extent of the
rights of both the automobile dealers,
and the State of Texas, with respect
to a tax exemption based on the 'demon-
strator' status of the motor vehicle."
The pertinent provisions which govern these matters
read as follows:
Article 6.01(1.)which imposes the tax states:
"There is hereby levied a tax upon
every retail sale of every motor
vehicle sold in this State, such tax
to be equal to two per cent (2%) of
the total consideration paid or,!to
be paid for said motor vehicle.
Article 6.03, Section (B) states:
"Retail Sale. The term 'retail sale'
as herein used shall include all sales
of motor vehicles except those whereby
the purchaser acquires a motor vehicle
for the exclusive purpose of resale and
not for use." [Emphasis added,)
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Honorable Robert S. Calvert, Page 3 (M-141)
We hold that these articles are clear, unamibiguous and
not subject to construction. Thus contrary opinions of the
Attorney General and departmental constructions must yield.
Calvert v. Thompson, 339 S.W.2d 685 (Tex.Civ.App. 1960, error
ref.) A revenue law is to be liberally construed to effec-
tuate'the expressed legislative intent and objective of the
law and to promote justice if it be subject to any interpre-
tation. 54 Tex.Jur.2d 165-166, Taxation, $ 41; Article 1.01,
Taxation-General; Article 10, subdivision 8, V.C.S. When the
statute is subject to construction and the question is one of
exemption from taxation, the law is construed liberally in
favor of the taxing authority and strictly against the taxpayer.
Where the question is whether the person on whom the tax is
sought to be imposed comes within the statutory provision impos-
ing the tax, the statute must be construed strictly against the
taxing authority and liberally in favor of the taxpayer. Texas
Unemployment Compensation Commission v. Bass, 137 Tex. 1, 151
.W .2d 5b7 (19411 However, since the statute is clear, it is
not subject to construction and rules of statutory construction
need not be employed.
Article 6.01 levies a tax on “every retail sale" of
motor vehicles. Article 6.03 defines "retail sale" as all
sales except where the purchaser acquires a vehicle for the
exclusive purpose of resale and not for use. The transaction
between the manufacturer and the dealer is unquestionably a
sale. Article 6.03(A). The question is therefore whether
vehicles in the hands of a dealer were acquired for the exclu-
sive purpose of resale and not for use. The answer must lie
in the facts involved, i.e., what the dealer does with vehicles
acquired from the manufacturer and whether these facts are
consistent with having acquired the vehicle for the sole pur-
pose of reselling it. Based on the facts known to us, we
conclude:
1. If the vehicle is acquired to be used as
a demonstrator to sell other vehicles, it
was acquired for use, i.e., to sell other
vehicles and is taxable. (Attorney General
Opinions Nos. O-3742 and WW-338.)
2. Vehicles purchased as service or work vehi-
cles or for other use in the business are
acquired for use and are taxable.
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Honorable Robert S. Calvert, Page 4 (M-141)
3. A fortiori, vehicles purchased for
i&e by dealers, their families or
employees as personal automobiles
are taxable.
4. If a vehicle is acquired for the
exclusive purpose of resale and is
driven by a prospective purchaser
with the idea of buying that vehicle
there is no tax. The fact that the
prospect ends up purchasing another
vehicle from the inventory of the
dealer, or orders a vehicle from the
manufacturer, not in inventory, would
not alter the result.
5. Similarly, a vehicle acquired for the
exclusive purpose of resale may be
driven by a dealer or his employees
in connection with an attempted sale
to a particular prospect and there
is no tax.
6. Some incidental personal or business
use of a vehicle in the status mentioned
in 4 or 5 above would not change the tax
status, as in this circumstance the rule
of de minimis would apply. However, any
extensive personal or business use will
cause the tax to be payable. This would
include salesmen working strictly on a
commission basis. Attorney General
Opinion WW-390 is overruled to the extent
of any conflict with the holding herein.
All of the above situations necessarily turn on the
facts involved. Many varied fact situations will be faced
and there are practical limitations on the acquisition of
complete facts involving any one vehicle. Thus you may deter-
mine that enactment of regulations under Article 6.04 will
best provide certainty in the minds of both the taxpayers and
the tax collectors as to when a tax is due and permit its
efficient collection. Also, in response to your request for
a definition of "demonstration" or "demonstrator," we should
point out that these terms do not appear in the statute and
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Honorable Robert S. Calve&, Page 5 (M-141)
have no legal significance except insofar as they indicate
the facts involved in a particular situation. To the extent
that these terms are employed in this area they should be
given their common ordinary meaning attributed to them in
the trade. Being terms in common use, they should be read
according to their natural ordinary and proper meaning unless
a contrary intention is clearly apparent from the context or
there is some necessit.yin a particular case for adopting a
particular construction. Board of Insurance Commissioners v.
Duncan, 174 S.W.2d 326, 328(Tex.Civ.App. 1943, error ref.).
A demonstrator is commonly understood to be a motor
vehicle used for the business purpose of "demonstrating'lor
advertising the type of vehicle which the dealer has for sale
to the public, and not itself being exhibited for immediate
sale, although nevertheless held to be resold ultimately at
a lower figure than similar cars which have not been so used.
SUMMARY
The Motor Vehicle Sales Tax applies to all
sales of motor vehicles to a dealer where the
vehicle is extensively utilized for the per-
sonal or business purposes of the dealer, his
family or employees, including use of the vehicle
as a demonstrator to effect the sale of other
vehicles. The tax does not apply where the
vehicle is driven in connection with an attempted
sale to a prospective purchaser; nor to other
incidental use in connection therewith.
Yojd$svery truly,
Attbney General of Texas
Prepared by Kerns Taylor
Assistant Attorney General
KT/fb
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Honorable Robert S. Calvert, Page 6 (M- 141~)
APPROVED:
OPINION COMMITTEE
Hawthorne Phillips, Chairman
Roger Tyler
Hamld Kennedy
Marietta Payne
Dyer Moore
STAFF LEGAL ASSISTANT
A. J. Carubbi, Jr.
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Untitled Texas Attorney General Opinion
Combined Opinion