.   1




                THE     ATTOEZNEYGENERAI;
                           OF TEXAS
                            AUSTIN.   TEXAS     78711

                             February3, 1977




        The Honorable Oscar B. McInnis            Opinion No. H-938
        Criminal District Attorney
        Hidalgo County                            Re: Ad valorem taxation
        Edinburg, Texas                           of sugar cane, raw sugar
                                                  and similar products
                                                  held by an agricultural
                                                  marketing association.

        Dear Mr. McInnis:

             You have requested our opinion whether Hidalgo County
        may lawfully collect ad valorem taxes on sugar cane, raw
        sugar, molasses and/or bagasse held by a cooperative
        marketing association. Article 8, section 19 of the Texas
        Constitution provides:

                     Farm products in the hands         of the
                  producer, and family supplies         for home
                  and farm use, are exempt from         all taxation
                  until otherwise directed by a         two-thirds
                  vote of all the members elect         to both
                  houses of the Legislature.

        The Legislature has not, by a two-thirds vote, authorized
        any tax upon the commodities at issue here. Thus, the items
        about which you inquire are exempt from ad valorem taxation
        if they are "farm products in the hands of the producer."

             This office has previously concluded that farm products
        held by a cooperative marketing association pursuant to a
        standard cooperative marketing agreement are exempt from
        payment of ad valorem taxes. Attorney General Opinions
        M-632 (1970); O-5404 (1943). This view is supported by
        the decision of the Supreme Court of Texas in Texas Certified




                                      p. 3864
The Honorable Oscar B. McInnis - page 2 (H-938)



Cottonseed Breeders' Ass'n v. Aldridge, 61 S.W.2d 79 (Tex.
1933)) and we belleve it tobe correct.

     The items about which you inquire are, therefore,
exempt from taxation if they are "farm products." You have
described in some detail the process by which sugar cane is
harvested and reduced to juice and bagasse, with the juice
then boiled and condensed until sugar crystals are formed
and separated from the liquid by centrifugal force. The
sugar crystal in this form is known as raw sugar, and is
stored in bulk in a warehouse until it is shipped to a sugar
refinery. The remaining juice is boiled until it turns into
molasses.

     We believe that the products described above are "farm
products" within the meaning of article 8, section 19, and
are, therefore, exempt from ad valorem taxation. A similar
question was addressed by the First Circuit Court of
Appeals in Sancho v. Bowie, 93 F.2d 323 (1st Cir. 1937),
cert. denied.     KS. 569 (1938). At issue in Sancho was
the me-of      a Puerto Rican law exempting "growingcrops
and products of the land" from taxation. We find the
reasoning of the court in Sancho to be persuasive:

          No one would contend that sugar cane when
          cut is not an agricultural product and a
          product of the land. We do not think,
          therefore, that it can be successfully
          contended that raw sugar when extracted
          from the cane, which must be done as
          soon as practical after being cut to
          preserve the juice from deteriorating,.
          is not also an agricultural product and
          a product of the land. The juice of the
          sugar cane is clearly a product of the
          land and in the process of extraction
          and separation into raw sugar is not
          mixed with any other ingredient. By
          a well-known process the juice of the
          cane, after boiling and purifying,
          contains raw sugar in crystal form
          and molasses.  It is then placed in a
          centrifugal and the molasses is thrown
          off, leaving the raw sugar. The change
          of the sugar content of the cane into the
          crystal form of raw sugar is necessary to



                        p. 3865
 The Honorable Oscar B. McInnis - page 3      (H-938)



             prepare the product for market, and is
             not such a change as to render the result
             any less a product of the land . . . .
             Id. at 326.

 A similar conclusion was reached by the United States
 Supreme Court in American Sugar Refining Co. v. Louisiana,
 179 U.S. 89 (1900). The Court declared, TefGed    sugar . . .
 is the natural and ultimate product of the cane, and the
 various steps taken to perfect such product are but incident
 to the original growth." -Id. at 92.

      It is our opinion, therefore, that the sugar cane, raw
 sugar, molasses and/or bagasse you describe are "farm
 products in the hands of the producer," and are exempt
 from ad valorem taxation.

                        SUMMARY

             Sugar cane, raw sugar, molasses and/or
             bagasse held by a cooperative marketing
             association are farm products in the hands
             of the producer and are, therefore, exempt
             from ad valorem taxation by article 8,
             section 19 of the Texas Constitution.




                                    Attorney General of Texas

 APPROVED:



%LLbdLLM
  DAVID EM. KENDALL, First Assistax

  Jg&:,&&$y,,

  Opinion Commit&e

  jwb
                                  p. 3866
