THEA~TORNEY GENERAL
OFTEXA~
Honorable,George H. Sheppard
Comptroller of Public Accounts
Austin, Texas
Des; Sir: Opinion No. O-2204
He: Does a company which pro-
duces casInghead gas and
gives the same without
compensation to the Texas
Pr.isonSystem owe a gross
production tax on saLa
;gas under Article 7047b
of Vernon' Annotated
Civil Statutes?
'k&e in receipt of your letter of June 9 1940,
ik,,wh& ~$&Irequest an opinion 'of this department ai to
wh&her:,or not &gross production ta,x.is due,on,gas which is
produced and which Is given free of charge to the Texas
Prison System.
The,tax you refer to ls,the tax on producers of
natural gas imposed by Article 7047b of Vernon's Annotated
Civil Statutes. Section 1 of the Act reads, in part, as
follows:
"(a) That from~~andafter the date herein
fixed, every person engaging or continuing with-
in this State, in the business of producing and
saving in paying quantities. for sale or for profit,
any natural gas, Including casinghead gas, from
the soil or waters of this State, and
"(b) Every person who imports natural gas
into this State and thereafter sells the same in
intrastate commerce in this State, the tax to be
imposed on the first sale; (provided, however, that
if any gas is imported into this State from another
State, in whFch latter State a severance, occupation
or excise tax is Imposed, the person importing such
gas shall not be requLred to pay another tax thereon
under the provisions of this Act),
"(c) Are hereby declared to be 'producers
Hon. George R. Sheppard, page 2 O-2204
and engaged in the business of producing natural
gas within this State * * *'
It is apparent from the reading of the above quoted
portion of the Statute that not every person who produces gas
from the earth is a "producer" within the meaning of the tax
act in question. Specifically under Section 1 (a), supra,
before a person is a "producer" he must be producing natural
gas and saving the same in paying quantities for sale or for
profit. In numerous other places the tax act recognizes
that not every producer of gas must pay a tax under the act,
and also recognized the limited application of the term "pro-
ducer" as explained previously.
It is the opinion of this department that a company
which is producing casinghead gas from the earth but which Is
giving the same without charge to,the Texas Prison System
would not be a producer under the terms of the act as to the
gas so disposed of and would not have to pay the tax on such
gas as imposed under Article 7047b.
In the enclosed contract it 'isstated that it might
become necessary for the Texas Prison System to account to the
royalty owners for the gas taken. If this contingency happens,
then the gas would be in the status of having been sold to the
Texas Prison~System and the company would owe the tax thereon.
Yours very truly
ATTORNEYGENERAL OF TEXAS
By s/Billy Goldberg
Billy Goldberg
Assistant
BG:RStwc
APPROVED JUNE 14, 1940
s/Gerald C. Mann
ATTORNEYGENERAL OF TEXAS
Approved Opinion Committee By s/BWB Chairman