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                  H                           NEHEAL.




                                August 17, 1950

         Hon. Robert S. Oalvert         opinion BO. V-1084
         Comptroller of Public Accounts
         Austin, Texas                  Ret The gross receipts
                                            tax liability of
                                            United Qas Pipe Llm
                                            Oompauy by virtue of
                                             FeGGllt   GXtGILSiOZl Of
                                             the oorporate llmite
         Dear Sir:                           of Dallas and Houstm.
                   You have requested the opinion of thie office
         on the above captionedmatter.
                   The following facts were submitted comerming
         the operations of the United Caa Pipe Line Company. In
         Dallas, the company has been selling and deliveringnat-
         ural gas to the Dallas Power and Light Compauy for many
         years for use as fuel in Its geuerating plants. Recent-
         ly, the city litits of Dallas were extended so as to In-
         clude the various points at which gas is delivered to.
         the Power and Light Company; The Pipe Line Company alro
         sells and delivers natural gas in Dallas to the United
         Gas Corporation,which is a gas distributingcompany Bub-
         ject to the tax levied by Article 7060, V.O.S. The Oar
         Corporatiouhas among its customerswithin the Dallas.
         city limits a small number of "farm tap@ customerswho
         are served through tap lines connectingdirectly into
         the lines of the Pipe Line Company.
                   In Houston, the Pipe Line Company sells and
         delivers natural gas to the Gas Corporationfor general
         distributionwithin the eitx. The Cas Corporationalso
         has various "farm tap* aud rural service" customers
         within the city limits which are connected directly in-
         to the Pipe Line Companyls line. The Pipe Idne Company
         has for mauy years cllrectlgserved several indum?ial
         consumers which were located outside of the Houston city
         liI&its.'Houston extended its city limits on January 1,
         1950, so as to include a Syntheticrubber plant operat-
         ed by the Goodyear Rubber Company and a generating plant
         operated by the Houston Lighting and Power Company. These
         tvo industrial consumersare served directly by the Pipe
         Line Company.
Eon. Robert S. Calvert, page 2   (v-1084)


         Article 7060, V.C .S., reads in part as followsr
         *Each Individual,company, corporation,
    or association owning, operating,managing,
    or controllingany gas . . 0 works . . . lo-
    cated within any Incorporated=     or city
    in this State, and used for local sale and
    distributionin said town or city, and charg-
    ‘ingfor sucfigas . . 0 shall make quarterly,
    011the first day of January, April, July, and
    October of each year, a Peport to the Comp-
    troller under oath e o . showing the gross
    amount received from such business done in
    each such Incorporatedcity or town within
    this State in the payment of charges for
    such gas e 0 a for the quarter next preced-
    ing* Said Individual,company, corporation,
    or association,at the time of making said
    report o D . for any Incorporatedtown or
    city of ten thousand (10,000)inhabitants
    or more, according to the last Federal Cen-
    sus next preceding the filing of said re-
    port, the said individual,company, corpor-
    ation, or association,at the time of making
    said report, shall pay to the Treetsurerof
    th3.sState an occupationtax for the quar-
    ter beginning on said date an amount equal
    to one and five thousand one hundred twenty-
    five ten-thousandths(1.5125) per cent of
    said gross receipts,;asshown by said re-
    port. * . .
         ‘Rothzinghere5.nshall be construedto
    require payment of the tax on ~~0898rbceipts
     ereln levied more     n once on  e same
    iommyty, and whert?he ccmmodi~~ is pro-
     uced y one individual,company, corpora-
    tion, or association,and distributedby
    another, the tax shall be paid by the dis-
    tributor alone.” (Rmphaslsadded through-
    out).                ,
          A question of similar nature to the one now be-
fore us was presented to this office in Opinion Ro. V-994
regarding the sales by the El Paso Watural Gas Company to
three industrial consumerswlthln the City of El Paso. We
quote from that opinion as follows:
          “In Opinion Ho. O-3776, dated August
Hon. Robert S. Calvert, page 3   (V-1084)


     1, 191, this office held that if there wau
     a sale of gas to more than one oustomer or
     purchaser within a aity the distributorwas
     a ’ ae VOP~S' under the etattrteand subject
     to &he tax. We quote from th%t opinion3
          .‘It is the opinion of this department
     in line with the above quoted casea that 8
     individual or corporqtionselling or diatF1~
     but$ng 1iqul.dpetroleum gas to more than one
     coMwaer in any incorporatedGity vith.3.u the
     populatfon brackets stated in Article 7060
           would be subject to the gross receipts
     dr; ievied the4-eln.t
          *It Is thus our oplnhu that the Rl Paso
     Ratural @as Company, by vl3tue of the faot
     that it sells and distributesnatural gas to
     three iudtxttrialconlwier~wlthin an incor-
     porated city, is a ‘gas rorkat and subject
     to the occupationtax on the PQSS receipts
     of such sales aa levied by AP8icle 7060, 8.
     C.S.’
          The only reported case which ve have found oon-
strulng the meaning of the term “gas works" as used in
Article 7060 Is that of Utilities Ratural Gas Ga. vi State
133 Tex. 313, 318, 128 S.W.2d 115=1155          .   0' our4
said;
          0      we have no doubt th%t the aim-.
     ple fait’&    a delivery of gas la made In
     the city, by means of said pipe line, to a
     single customer, and to nobody else, was not
     Intended by the legislatureto be compre-
     hended by the term tdistrlbutlon’as used.
     This term as used does not mean the trans-
     fer of the poaseaaion of gas, by mean8 of the
     pipe line, to a sinnle wrah%ser where such


    ‘individualsor conoerns in the city. Any
    other oonstruatlonof the term vould, in out
    oplnlon, involve a departure from the legls-
    lative intent.”
          Under that decision the sale to one Industrial
customer within a city does not mean,that a pipe line
Eon. Robert S. Calvert, page 4   (V-1084)


company 3.8engaged in operatinga "gas vorks" for the lo-
cal sale and distributionof gas. It is our oplnlon that
while the United ffaSPipe Line Company is engaged in mak-
ing "local sales" in Dallas, it is not a *dlstalbutor*of
gas as that term was construed by the Court in the Utlli-
ties Ratural Gas case. The Pipe Line Company in senx
   the~Gas CorporationIs selling to a 'distributor'who
li.subject to the tax rather than to a consuming or ouatom-
     Thus the Pipe Line Company is selling and delivering
g& to only one industrial consuIper in Dallas (the Dallas
Paver and Light Ccuapany),and it is our conclusionthat It
is not liable for the occupationtax levied by Article 7060.
          With respect to the sales within Houston, it is
submitted that the Pipe Line Company is making sales and
deliveries to two Industrial consumers or customers. It
has been our opinion that persons engaged in the distr$.bu-
tion and sale of gas to tvo or more customers vithin the
corporate llmlts of cities and towns are operatinga 'gas
works" and are liable for the occupationtaxes levied by
Article 7060. It is therefore our concluslcnthat the
United Gas Pipe Line Company 3s liable for the tax in the
amount of 1.5125 per cent of gross receipts arFsing from
the sale of natural gas to all its consumers or customers
within Houston from December 31, 1949 the date the com-
pany began operatinga "gas workss wl&tn that city.
          It Is our understandingthat the United Gas
Pipe Line Company is a wholly owned subsidiary of the
United GasCorporation. We have, for purposes of this
opinion, assumed that the sales to the fazestap and PU-
ral service customerswithin Dallas and Houston vere
bona fide sales to the distributorand that the Pipe
Line Company is not, through a joint operation,dlrect-
ly engaged or financiallyinterestedin the actual dis-
tribution of gas to those customers.


         A pipe line company vhich sells to two
     ormore industrial consumerswithin a aity
    is operating a "gas works" and is liable for
    the occupationtax levied by Article 7060,
    V.C.S. A oompany whlah sells to only one in-
    dustrial consumer is not subject to the tax.
    .

I




        Hon. Robert S. Calvert, page 5 .(v-1084)


            Utilities Rat-UralGas Co. v. StEt:e,$3
                 31   126 s w 2 115 (1939)
            I",: Ho:: V-9g'+*&ddO-37;6.

        APPROVED:                         Yours very trrily,
        W. V. Geppert                       PRICE MRIRL
        Taxation DlvLaion
        Everett Hutchinson
        Executive Assistant
        Charles 13.Hathews
        First Assistant
        FL/mwbrm
