            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
