            .       .




                          THEA~TORNEYGENERAC
                                  OF, T-E&As

 BVILL     WIlLSON                  September 7,    1962
AlTGHNEY        GENERAL




         Honorable Jerry Dellana                   Opinion No. WW-1435
         County Attorney
         Travis County Courthouse                  Re:     Whether wholesaler6   of
         Austin, Texas                                     builders  supplies may accept
                                                           resale certificates   for pur-
                                                           chases of building materials,
                                                           in lieu of the sales tax,
                                                           from builders and developers,
                                                           who construct houses on land
                                                           owned by such developers,
                                                           such house6 to be sold after-
                                                           wards to the general public
                                                           as real estate upon which no
         Dear Mr. Dellana:                                 sales tax is colleated.
                You have asked the following             questions:
                               “Question 1: Are csrtdrin whole-
                          salers required to accept resale ce%-
                          tifiaates    from builders and developers
                          who purchase tangible personal property
                          and then make said tangible personal
                          property a part of the real property
                          that is sold to the general public,
                          or must they collect      the tax at the
                          time of sale?
                              “Question 2: Does tha definition
                          ‘Sale for Resale’,    Article   20.01 (S)
                          a8 quoted in part ‘Sale for Resale
                          shall mein a sale of tangible person-
                          al:. property to r+
                                            a    purchaser who Is
                          purchasing said     angible property for
                          the purpose of reselling      it in t;eiF-
                          ma1 aourtse of his business a
                          alude builders  and developeriY$”
                In your letter       you have set    out the following     facts:
                              “Builders and developers   of homes
                          in thls area are purchaelng tangible
                          personal property,   I, elo garbage dis-
                          poaerdl* built-in  8toveBp eto. from
                          wholesalers   and submitting certifi-
                          autos of resale of tangible personal
                                                            .   .




Honorable   Jerry   Dellana,   page 2                 Opinion No. WW-1435


            property.     In said certificate   of re-
            sale, they speclfically      state that it
            will be resold in their regular course
            of business;    their regular couree of
            business is sale of real estate.       They
            claim this exemption under Set, (N),
            Article   20.04, of Section 1, Chapter 20,
            Title 122A.
                “The wholesalers,   who sell these
            articles   to the bullders,and   developers
            are apprehensive in that Article 20.12,
            Violations   (B) may hold them guilty of
            a misdemeanor.       . . .I’
     Articles    20.01
                     to 20.17, inclusive,   Chapter 20, Title 122A,
Taxati’bn-General, V.C.S.,  constitute  the Texas Limited Sales, Ex-
cise and Use Tax Act.   All reference   to articles hereafter  dls-
cussed will be to the Limited Sales, Excise and Use Tax Act, un-
less otherwise shown.
     Article    20.02    reads In part as follows:
                “ThePe Is hereby Imposed on each
            separate sale at retail  of tangible
            personal property made within this
            State a limited sales tax at the rate
            of two per cent (2$) of the sale price
            of each Item or article  of tangible
            pereonal property when sold at retail
            in this State.
              .: “(A)    Method of Collection  and
            Rate of Limited Sale8 Tax. The tax
            hereby Imposed shall be collected      by
            the retailer     from the consumer.
                 II.‘, .
                “(C)   Limited    Sales    Tax Permit Ap-
            plication.
                         (1)   Every person desiring
                         to engage In or to conduct
                         business as a seller within
                         this State shall file with
                         the Comptroller an appllca-
                         tlon for a permit for each
                         place of business.
Honorable   Jerry Dellana,   page 3                 Opinion   NO. WW-1435


                “(D)  Limited Sales Permit Ii-
            suances.   After compliance with
            paragraph (C) of thb$ Ai?t&clie.by
            the applicant,   the Comptroller
            shall grant and Issue to each ap-
            plicant without charge a separate
            permit for each place of business
            within the State.    A permit shall
            not be assignable   and ahall be va-
            lid only for the person in whose
            name it Is Issued and for the trans-
            action of business at the place de-
            signated therein.    It shall at all
            times be conspicuously   displayed
            at the place for which Issued.


                “(F)   Presumption of Taxability:
            Resale Certificate.      For the pur-
            pose of the proper admlnistratlon
            of this Chapter and to prevent eva-
            sion of the limited salea tax It
            shall be presumed thatall      gross
            receipts   are subject to the tax un-,
            tll the contrary 1s established.
            The burden of proving that a sale
            of tangible personal property is not
            a sale at retail     is upon the person
            who makes the sale unless he take8
            from the purchaser a certificate      to
            the effect    that the tangible pro-
            party ia purchased for the purpose
            of reselling,    leasing or renting it,
               “(0)    Effect of Resale Certlfi-
            oate.   The resale aertifloate       re-
            lievee the seller    from the burden of
            proof only If taken In g&d faith
            from a person who 1s engaged In ths
            business of selling,     leasing or rent-
              ng tangible personal     property      A
            resale certificate    may be nlvei by
            a purchaser, who at the tse         of pk-
            chasing the tangible personal pro-
            perty, Intends to 0411, leas8 or
            rent It In tho regular course of
            business or lo unable to ascertain
            at the tlma of purchase whether the
Honorable Jerry    Dellana,     page 4                       Opinion No. WW-1435


          tangible personal property will be
          resold,  leased or rented or ~111. be
          used for some other purpose.” *(Em-
          phaais added).
          sali( gHrty;;;a;;d             Contents   of Re-
                                     .
                      (1)      The certificate         shall:

                               kir  ~es~~~~da%   ii?
                               dress of the purchaser.
                              (b)   Indicate the num-
                              bar of the permit, if
                              any, isauad to the pur-
                              chaser.
                               (c)   Indicate the gener-
                               al   character of the tan-
                               gible personal property
                               sold, leased or rented by
                               the purchaser in the regu-
                               lar course of business.
                      ~(2) The certlfi’cate   shall be
                      substantially    in such form as
                      the Comptroller may prescribe.
              “(I)  Liability    of Purchaser Giving
          Reeale Certificate.      If a purchaser who
          give6 a resale certificate      makes any use
          of the tangible personal property other
          than retention,     demonstration or dls-
          play while holding It for sale, lease
          or rental In the regular course of
          business,  the use shall be taxable
          to the purchaser as of the time when
          tba tangible personal property la
          first no used, and the sales price
          of tha tangible perronal property to
          hz ahall be deemed the measure of the
              I)
             YJ)   Resale Certificate;      Commingled
          Fkw~ible Goods.     If a purchaser gives
          a resale oertlflcate    with respect to
          the purchase of funglble     goods and
Honorable   Jerry   Dellam,    page 5                 Opinion No. WW-1435


            thereafter  commingles these goods with
            other funglble goods not so purchased
            but of such slmllarlty    that the identity
            of the constituent   goods In the commlng-
            led mass cannot be determined, sales
            from the mass of commingled goods shall
            be deemed to be sales of goods covered
            by the resale certificate    until a quan-
            tity of sllch goods equal to the quan-
            tity of the goods so commingled has been
            sold.”
     Article   20.01 reads In part as follows:
               I,. . .

                “(S)   Sale for Reeale.   ‘Sale for
            Resale’ shall mean a sale of tangible
            personal property to any purchaser who
            Is purchasing said tangible personal
            property for the purpose of reselling
            It In the normal course of his busl-
            ness.    A sale for resale shall Include
            a sale of tangible   personal property
            to a purchaser for the sole purpose
            of that purchaser’s   renting or leas-
            ing said tangible personal property
            to another personr, but not If incl-
            dental to the renting or leasing of
            real estate a”
     Article   20.04     reads In part as follows:
               ,I. . .

               “(19) Sale for     Resale:   Leasing
            or Renting.
                         (1)   There are exempted
                         from the taxes Imposed
                         by this Chapter the re-
                         ceipts from all sales
                         for resale,  leasing or
                         renting.
                         (2) .Howevar, If a per-
                         son purchases tangible
                         personal property for the
                         purpose of leasing or rent+
Honorable Jerry   Dellana,   page 6               Opinion No. WW-1435


                      lng it to another person,
                      and if he later sells It
                      by means of an occasional
                      sale before he has collected
                      and paid to this State as
                      much tax on the rental or
                      lease charges as would have
                      been due and payable to
                      this State had he not pur-
                      chased the tangible person-
                      41 property for the pur-
                      pose of so renting and leas-
                      ing it, he shall, at the
                      time of his occasional   sale
                      of said tangible personal
                      property include In his re-
                      oelgts from taxable sales
                      the amount by ,whlch his
                      purchase price exceeded
                      the amount of rents collected
                      by him on said tangible per-
                      sonal property.
                      (3)    Where a lessor makes
                      a retail   sale of leased
                      tangible personal property
                      to a lessee of that tangi-
                      ble personal property un-
                      der an agreement whereby
                      certain rental paymanta
                      are credited @gainst the
                      purchase prlce,of    the tan-
                      gible personal property,
                      he need not collect    or pay
                      any tax on the sale price
                      to the extent that he has
                      collected   and paid on such
                      rental payments a”
     ~Artlole 20.12   reads In part as follows:
                      Penalty
                           for Engaging in
          BUA!!S      as Seller
                              Without Permlt.
          A perron who engages In business
          a8 a retailer In this State wlth-
          out a permit or permits or after
          a permit has been suspended, and
          each officer of any corporation
          which so engages In business,   1s
Honorable   Jerry   Dellana,   page 7              Opinion No. WW-1435


            guilty of a misdemeanor,   and such
            person shall upon conviction   be
            fined not more than Five Hundred
            Dollars ($500) for each c’onvlc-
            tlori. Each day of such operation
            shall constitute  a separate of-
            fense.
                “(B)   Penalty for Improper Use
            of Resale Certlflaate.    Any person
            who gives a resale certificate    to
            the seller   for property which he
            knows, at the time of purchase, la
            purchased for the purpose of use
            rather than for the purpose of re-
            sale, lease or rental by him in
            the regular course of business Is
            guilty of a misdemeanor, and such
            person shall upon conviction   be
            fined not more than Five Hundred
            Dollars ($500) for each conviction.


                n(D) Penalty for other Vlola-
            tlons 0 Any violation   of this Chap-
            ter, except as otherwkee provided,
            is a misdemeanor, and any person
            shall, when found guilty of such
            violation,   be fined not more than
            Five Hundred Dollars ($500) for
            each violation.   ”
       The limited sales tax is Imposed on each separate sale at
retail   In Texas of tangible personal property.      Xhe tax Is lm-
  osed on the consumer and collected    by the retailer.    Art. 20.02
PA).    Where the purchaser of tangible personal property Intends
to resell    or lease the same as tangible peraonal property,    he
may give a resale certificate    to the retailer   In lieu of paying
the tax.     With respect to the purchase of tangible personal pro-
perty, which the purchaser Intends to lease, note this language
from Art. 20.01 (S):
               M
                 0 e 0 A sale for resale shall
            Include a sale of ,tangible person-
            al property to a purehaser for
            the sole purpose of t,hat purchaser’s
            renting or leasingsaid    tangible
            personal property to,another    perso&
    Honorable   Jerry    Dellana,    page 8                 Opinion No. Ww-1435


                but not  if incidental to the rent-
                ing or leaelng of real estate.”
                ~phasle    addep.
    Thus, If a person uho operates a bed rental business wants to
    purohase  from the,manufacturer   or distributor  a bed, such per-
    son Is entitled   to give a resale certificate   for the purchase
    of the bed.    The State will receive its tax from the customer
    who renta the bed, which tax will be collected      by the operator
    of the bed rental service,    and remitted in his quarterly   tax
    returns.   Rut if the bed Is purchased by the operator of an
    apartment house, In order to furnish an apartment, which will
    be rented as real estate,    there will be no sales tax to collect
    from the tenant.    Hence, the operator of the apartment house
    is the ultimate   consumer of the bed so purchased, and must pay
    the sales tax to his supplier.
          lhe first     sentence    In Art.   20.01   (S) reads as follows:
                     “‘Sale for Resale’ shall mean
                a sale of tanalble oersonal oro-
                perty to any gurchaser who Is pur-
                chasing said tangible    personal pro-
                  art    for the purpose of~‘reselllng
                !w n the normal course of business.N
                i?fmphasia addeg.
           This clearly   contemplates     that the tangible      personal pro-
    perty purohaaed for the purpose of resale must be resold In the
    form of tangible personal property,            In order for the purchaser
    to be authorized to execute a resale certificate              and deliver     the
    same to his     supplier In lieu of paying the tax.             If a person
    purchases a garbage disposal        unit to Install       In a house which he
    owns, with the Intention         of afterwards sellln$       the house, such
    a peraon clearly    does not Intend to resell          “It   (the garbage dls-
    posal unit) to anyone.       He Intends to sell a house, whloh is real
    estate.    To hold that a person who Is In the business of con-
    structing   houses on his own land, with the Intention              of selling
.   such houses to the general public,          may claim the privilege         of us-
    ing a Sale for Resale Certificate          upon the purchase of a garbage
    dlspoeal   unit to be Installed      In such house, would be to hold
    that such person is not In the busMess of selling                 houses, but
    instead Is in the business of selling            lumber, nails,     bathtubs,
    plumbing fixtures,     shingles,    electrical     wiring, etc.
         Where a person purchases tangible  personal property In the
    form of? aonntruotion material to build or repair his own house,
    and such person performs his own construction.  work, he gets no
    axamption from the sales tax.   He is neither an exempt person,
       1




Honorable   Jerry   Dellana,   page 9              Opinion No. WW-1435


nor are the construction     materials exempt products,    for neither
Is listed  in Art. 20.04.     If a person owns his own land, and
contracts  with another to construct     a building thereon, such
contractor   becomes the ultimate consumer of the products so con-
sumed in construction,     If the contract is let as a lump sum
contract I) Attorney General’s Opinion No. ~~-1258.        If the con-
tract Is In the form of a split bid, the tax Is paid either by
the contractor   or the owner of the building,     depending on which
one of them furnishes the materlals~ to go into the building.
Art. 20.01 (T).     To hold that all these classes of persons must
pay the salee tax, but that a developer who builds houses on
his own land for resale may In effect       become exempt from the
tax by urje of a Sale for Resale Certificate      when he purchases
builder’s  supplies,   Bnd thereafter   collects  no tax at all from
his customer on the ground that,his      customer Is purchasing
real property and not tangible personal property,       is to reach
an absurd reault.
                “The court will never adopt a
            construction    that will make a sta-
            tute absurd or ridiculous,     or one
            that will lead to absurd conclu-.
            slons or consequencea,    if the lang-
            uage of the enactment is susceptible
            of any other meaning.,”     39 Tex. Jur.,
            Statutes,    Sec. 118, page 222.

     Paragraph (Q) of Art.      20.02 reads ,in part as follows:
                “Effect of Resale~Certlflcate,
            The resale certificate    rel%eve& the
            seller   from the burden of proof on-
            ly If taken in good faith from a-
            person who Is engaged In the business.
            of selling,   leasing orrenting    tant:
                1 personal property. ‘D 0 .‘(
                ptasis addedJ e
      The above quoted sentence from Par. (Q), Art, 20.02, shows
the legislative  Intent.   For a purchaser of tangible personal
property to be authorized under th,e Limited Sales, Excise and
Use Tax Act to we a Resale Certificate       In lieu of oavlnn the
tax at the time3 of his purohaeep he’must be “# 0 a &&ag;d 1;
the b usinesa of sellin  * leasing dfl renting tanglble.persona
                          In the busihess of selling     real estafe
IiF% 3 orm of lots with housea,aff13.xad thereto is not engaged
in the business of selling    tannible ,peraonal property,   And a
Demon engaged In eellinE both lumber at retail        and houses as
seal eata&-oould    we his    Resale Certificate    only for the ~
Honorable      Jerry   Dellana,   page 10              Opinion No. b-1435


lumber he sells        as personal   property,
       In both Arts. 20.01 (S) and 20.02 (5) reference     is made
to purchasers who Intend to sell or resell      “it” In the “normal
course of bualness” or “regular course of business.”         Such
second,,sale   or resale of “it” refers  to “tangible  personal pro-
g e r ty   lThere is no resale of tangible personal property,        or
 it” as such, In the situation    described  in your letter.      It
Is true that theae developers are engaged In a “normal course
of buelnese” and a “regualr course of business”,      but their
business is the sale of real estate,     not tangible personal pro-
perty.
         An Exemption Certificate        Is used only by an exempt legal
 entity or exem t organization,           which are listed     In Paragraph
 (F), Art. 20.0!.         Real estate developers are not listed         in this
 paragraph a Some products are exempt b name, such as food for
human consumption (not served a8 meals 7.              Some products are
 exempt> because of taxes which have already been Imposed there-
 on, such as cigarettes.           Some products, without naming them spe-
 cifically,      are exempt becauee of some circumstance which has al-
 ready occurred with respect to them, such as sales               of tangible
 personal property under contracts           executed prior to the effec-
 tive date of the Act; or occurs at the time of the sale, such
‘as an occasional        sale; or are destined to be used in a parti-
 cular manner In the fu,ture, such aa fuel for a locomotive                en-
 gine e Nowhere In the Act do we Elnd “builders1              Supplies”
 listed     as an exempt prdduct, a6 such,         The only time builders’
 eupplles aan fall within the Sale for Resale Exemption Is when
 the sale ia made to a wholesale or retail            buildera’ supply es-
 tablishment,      which truly Intends to resell        “it” In the form of
 tangible personal property In the “normal” OP “regular” course
 of business,      and ribt to one who Intends to consume or use It.
                   nn e 9 when the legislative       Inten&
                   ascertained,     or Is plainly manifest,              .
               :: Is binding upon the courts,        and must
               be given effect      if It Is legally    possible
               to do so.      To Ignore the legislative      ln-
               tent and give a statute a construction
               obviously contrary thereto,        or to refuse
               to enforce a statute according to the
               legislative     Intent, when ascertained,      Is
               said by the Supreme Court to be ‘an in-
               excusable breach of judicial        duty’ and
                ‘an unwarranted Interference       with the
               exercise    of lawful legislative     authorlty.l”
               39 Tex, Jur. 171-172, Statutes,         Set, go.
        .




Honorable   Jerry   Dellana,     page 11              Opinion No. WW-1435


      In answer to Question No. 1, we hold’. that wholesalers       of
builders’   supplies,   who sell to developers,   builders,   and lum-
ber companies who purchase tangible persona> property for the
purpose of Incorporating     such tangible personal property Into
real property owned by such developers,      builders,   and lumber
companies, such real property to be sold thereafter         to the gene-
ral public as real estate,      must collect  the sales tax from such
developers,   builders,   and lumber companies.
       We answer Question No, 2 by holding that Art. 20.01 (S),
 of the Limited Sales, Excise and Use Tax Act, which defines
 “Sale for Ressle”,  does not Include such developers,    builders,
 and lumber companies within the meaning of “any purchaser”,
 since that phraae only includes those who sell “It” In the
‘hormal course of his business”;   the word “It” referring    to
 tangible personal property and such developers   and builders      are
 not so engaged, but are engaged In the business of selling       real
 estate.
                           SUMMARY
             Wholesalers of builders’    supplies, who
      se&l to developers    and builders who purchase
      tarlglble personal property for the purpose of
      Incorporating    such tangible personal property
      into real property owned by such developers       and
      builders,    such real property~to   be sold there-
      after to the general public as real estate,
      muat collect    the sales tax from such developers
      and builders.
            Art. 20.01 (S), of the Limited Sales,
      Excise and Use Tax Act; which defines   “Sale
      for Resale”, does not include developers    and
      builders within the meaning of “any purchaser”,
      since that phrase only tincludes those who sell
      “It” in the “normal course of his business”;
      the word “‘It” referring to tangible personal
      ~~~p~~t~~~~~d~“~~t”~~~l~~~~e~~~~~~d~~~~~re
      ness of selling     real    estate.
                                        Yours .very truly,
                                        WILL WILSON
                                        Attorney General     of Texas
Ronorable   Jerry   Dellana,   page 12            Opinion No. UW-1435




                                         Riley Eugene Fletcher
                                         Afisletant


APPROVED:
OPINION COlvMIlvEE
W. V. Geppert, Chairman
Arthur %n~lln
J. C. Davis
IWIBiWEDFORTHEATTORNEYffBNl!RAL
BY: Leonard Pasemore
