                       September 7,   1955

Hon. Robert S. Calvert         Opinion No. S-173
Comptroller of Public Accounts
Austin, Texas                  Re: Application of the Chain
                                    Store Tax Act, Article
                                    lllld, Vernon's Penal Code,
                                    to canneriesunder certain
Dear Mr. Calvert:                   circumstances.
          You have requested the opinion of this office upon
four questions, which are as follows:
          "1. A canning plant obtains raw materials,
     processes such materials and places~them in
     cans, being a processing and preserving manu-
     facturer. The wording in the statute provides
     an exemption fee for manufacturers dlstributfng
     their own manufactured products. Would a can-
     ning plant or processing plant be considered a
     'manufacturer'?
          "2. A canning plant does not sell its
     canned goods either at retail or wholesale
     levels in the usual sense of the word, but are
     dependent upon others to distribute the pro-
     ducts that they have processed. Food brokers
     represent the canner in all principal markets
     and it is the food broker that actually arranges
     the sale of the processed food to some distrlbu-
     tor,,usually a wholesale grocer. Would the
     place in question be liable for payment of either
     store tax or exemption tax?
          “3 . A canning plant actually distributes
     its own manufactured or processed canned goods
     not through a wholesale or retail store but
     through sales made by a salesman or agent of the
     plant, with shipments being made from the plant
     or from a separate warehouse used for storage
     only, ;!:uldeither a store license or exemption
     license be required?
          “4.  A manufacturing plant holds a store
     license. A warehouse located in a vicinity some
     distance from the plant is maintained for
                                             -   --




Hon. Robert S. Calvert, page 2 (S-173)


     storage of his own manufactured products ex-
     elusively and from which no sales are made.
     Trucks operated by the
                        -, manufacturer
                                --       usually
                                       ..-
     load first at the plant, caL1 on tne trade,
     make deliveries, and then pick-upadditional
     merchandise from the warehouse established
     aa a convenience to the trucks in its area.
     Trucks owned by the manufacturer are the only
     ones permitted to pick up merchandise from
     the warehouse and all sales are made from
     the trucks after calling on the trade. Would
     the manufacturer be liable for payment of
     exemption tax on the warehouse as a distri-
     buting point?"
          All four questions concern a clause found in Sec-
tion 5 of Article lllld,,Vernon's Penal Code, or the Chain
Store Tax Act, which clause is as follows:
          "Provided that the term 'store, stores,
     mercantile establishment, and mercantile estab-
     lishments,' wherever used in this Act shall
     not include: . . . any place or placesof busi-
     ness used as bona fide wholesale or retail dis-
     tributing points by manufacturing concerns for
     distribution of products of their own manu-
     facture only; . . . .'
          Your first question is answered in the affirmative.
The word 'manufacturer" being undefined by the Act, it is to
be given its commonly accepted meaning, which undoubtedly in-
cludes canning plants. Reference to Webster's New Inter-
national Dictionary, Second Edition, will confirm this view.
          The answers to the remaining three questions are
governed by the decision of the Supreme Court of Texas in the
case of Hurt v. Cooper, 130 Tex. 433, 110 S.W.2nd 896 (1937),
in which it was held that stores ODerated bv a manufacturer
for the sale of its own products are not exempted from the
requirement of store licenses and payment of license fees if
such stores fall within the definition of the word "store"
which is found in Section 7~ of Article lllld.
          The court recognized that although the practical
effect of its decision probably rendered the entire clause
surplusage, there could nevertheless be places of business
operated aq mere distributing points wherein no sales were
made which w ,uld come within the exemption, and added that
such distributing points would not have come within the pro-
visions requiring a store license, since they are not stores,
even without the exemption.
Hon. Robert S. Calvert, page 3.(S-173)


          Subsequent to the decision in Hurt v. Cooper, supra,
in 1951, the Legislature provided by the addition of Sub-
section (c) to Section 5 of Article lllld that "all those
establishments," with one exception, exempted from the store
license requirement by Section 5 shall be required to pay an
exemption fee. The effect, therefore, is to tax a type of
establishment as an exempt class of store, which establish-
ment was not a store in the firat place by virtue of the
definition in Section 7.  Regardless of this seeming incon-
sistency, the Legislature has seen fit to impose a tax which
it chooses to designate an exemption fee upon certain enumer-
ated places of business which it certainly has the power to
tax if it so desires.
          Therefore, applying the law as it is pronounced
in Hurt v. Cooper, supra, we proceed to the three remaining
questions.
          Under the facts presupposed in Question No. 2, the
canning plant does not constitute a store since no sales are
made therein and is not liable to pay a store license fee.
It will or will not be required to pay the exemption fee,
depending upon whether or not a distributing point is located
at the plant. If a warehouse or other storage facilities are
maintained on the plant premises for the cannery's products
pending sale and from which the orders placed by the food
brokers are filled, then the exemption fee is applicable to
such facilities as a distributing point. We know of nothing
to prevent at the same location the existence of a manu-
facturing plant and a distributing point.
          Question No. 3 is answered in the same way. The
separate warehouse would certainly be subject to the exemp-
tion fee as would any facilities used for storage at the plant
if the canned goods are stored at either place pending sale.
          The answer to Question No. 4 is that the warehouse,
from the facts you have stated, would certainly constitute
a distributing point and would be subject to the exemption
fee but not the store tax, no sales having been made therein.
                         SUMMARY
                A canning plant is a manufacturer
           in the common acceptation of that term
           as used in Section 5 of Article lllld,
           Vernon's Penal Code, or the Chain Store
           Tax Act.
Hon. Robert S. Calvert, page 4 (S-173)


                 Under the facts submitted, a
            canning plant is not required to pay
            a store license tax where no sales
            are made at the plant. The liability
            for an exemption fee depends upon
            whether a distributing point is located
            at the plant. If it is a distributing
            point for the canning plant's pro-
            ducts the exemption fee applies. A
            warehouse which constitutes a distri-
            buting point is subject to the exemp-
            tion fee.
APPROVED:                      Yours very truly,

L. P. Lollar                   JOHN BEN SREPPHiD
Taxation Diviaion              Attorney General _

John Atchison
Reviewer
                               Rdyston S. Lanning     /
J. A. Amis, Jr.                Assistant
Reviewer
Robert S. Trotti
First Assistant
John Ben Shepperd
Attorney General
