Honorable Robert S. Calvert                 Opinion No. M- 1223
Comptroller of Public Accounts
State +ance  Building                       Re:   Taxing of motor vehicles
Austin, Texas 78711                               owned and leased by ori-
                                                  ginal manufacturer pursuant
                                                  to Article 6.01(7), as added
                                                  by H. B. 730, Acts 62nd Leg.,
Dear Mr.   Calvert:           :                   R.S.,   1971.

       Article 6.01. Taxation-General,    V. C. S. (H. B; 730, Acts, 62nd
Leg., R. S., 1971, p. 1193 at 1196) imposes a tax on the retail sale or rent
of a motor vehicle.  Section 7 of Article 6.61 contains the following provision:

                “Any motor vehicle leased in this State and owned
       by the original manufacturer must be registered in this
       State and taxed in accordance with the provisions of this
       Article. ”

You have asked -- How are such vehicles to be taxed?

        The tax is to be imposed on the gross rental receipts from the lease.
The statute imposes the tax on every retail sale, and then defines retail
sales to include’ rentals.  The provision of Section 7 quoted above, is a clear
manifestation of legislative intent to tax transactions involving vehicles owned
by the manufacturer.     There has been no sale and no purchase in that instance;
therefore, the tax falls on the gross rental receipts even though there has
been no purchase for rental purposes.      That is the only way the tax can be im-
posed on manufacturers “in accordance with the provisions of this Article. ”
Other statutory constructions could present grave constitutional questions of
unequal treatment of competitors in the rental business.     The overall purpose
of the statute is to “provide for the taxing of receipts from the renting of motor
vehicles. ‘1 (Caption, H. B. 730. ) .Where the legislative intent to tax is clear
and where the thing to be taxed is clear (receipts from the renting), a legis-
lative edict that any motor vehicle “owned by the manufacturer must be . . .




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Honorable Robert S. Calvert,   page 2       (M-1223)



taxed in accordance with the provisions of this Article” means that gross
receipts of the manufacturer are to be taxed.

         We are not unmindful of the general rule that statutes imposing a
tax are strictly construed against the taxing authority; however, this rule
of strict construction must not be given an application that will defeat the
intention of the legislature, and it should never be extended beyond its
rightful concept so as to produce unfair or arbitrary results.   Calvert v.
Coke, 458 S. W. 2d 913. 915 (Tex. Sup. 1970). In the present instance the
legislative intent is manifest:

                “Any motor vehicle leased in this State and owned
       by the original manufacturer must be registered in this
       State and taxed in accordance with the provisions of this
       Article;”

furthermore, any construction of the statute that failed to impose the tax
on leasing by an original manufacturer would produce the arbitrary and un-
fair result of taxing some in the leasing business but not others. The latter
result would be constitutionally suspect.

        The basic thrust of Article 6.01 is to impose a tax of four percent on
receipts from the renting of motor vehicles.     The first sentence of Article
6.01 as amended by H. B. 730. supra, levies a four percent tax on every
retail sale. H. B. 730 amends the definition of retail sale in Article 6. 03
to include within its ambit, “rentals the gross receipts from which are sub-
ject to the tax imposed by this Chapter. ‘I While it might have been better
draftmanship to have placed a comma after the word “rentals. ” lack of a
comma does not change the meaning of the definition.      If the definition be
construed as including within the term “retail sale” only those particular
rentals produced by a vehicle previously purchased for rental purposes,
every rental is not covered and an arbitrary and unfair result ensues because
such a construction leaves no basis for taxing a transaction producing rental
income from a vehicle in the hands of the original manufacturer.       This would
be contrary to the expressed intent of the legislature to tax rental transactions
involving vehicles in the hands of the original manufacturer.     Where the in-
tent of the legislature is clear it must be given effect because the intention
of the legislature in enacting a law is the law itself.  City of Mason v. West
Texas Utilities Co., 237 S. W. 2d 273, 278 (Tex. Sup. 1971);
 473 S. W. 2d 314, 317 (Tex. Civ.App. 1971. error ref. ).



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         Article 6.01 is not as clearly drawn as it might have been. Its
various provisions are somewhat confused. Much of the confusion is caused
by the placement of the second and third sentences of Article 6.01, and the
definitions of amended Article 6.03. Section (E), “Rental or Renting, ” and
Section (F), “Lease or Leasing. ” The first three sentences of the statute
state:

                ‘I(1) There is hereby levied a tax upon every re-
       tail sale of every motor vehicle sold in this State, such
       tax to be equal to four percent (4%) of the total considera-
       tion paid or to be paid for said motor vehicle.   In the
       case of a motor vehicle purchased to be rented or held
       for rental, the tax is levied on the gross rental receipts
       of the renting of such motor vehicle at the same rate as
       that tax levied in Article 20.02 of this title. Provided,
       however, that where the period for rental is intended to
       be, for more than 31 days, such rental is deemed to be a
       lease as defined in this Article and the purchaser-lessor
       must pay the tax on the total consideration paid or to be
       paid for said motor vehicle. ”

         The second and third sentences provide for different tax bases where
vehicles are in the hands of a purchaser and are used to produce rental income.
If the period of rental is 31 days or less one basis is used; if the rental period
is more than 31 days another basis is used. The definitions of amended Ar-
ticle 6.03 define the former as “Rental or Renting” (Section (E)) and the latter
as “Lease or Leasing” (Section (F)).     The distinction has no meaning to the
original manufacturer for the original manufacturer has not purchased the
vehicle rented. The original manufacturer is taxed on the gross receipts of
all rentals whether they be from transactions statutorily defined as renting6
or leasings.   The term’rentals as used in the definition of retail sale in Section
(B) of Article 6. 03 is generic; any other conclusion subverts legislative intent.
All retail sales, by definition, include all rentals; therefore, all rentals are
included, whether from agreements to rent covering 31 days, or less, or more.
The specific definition of “rental” contained in 6. 03(E) has significance only
in relationship to the differing tax treatments given transactions in the hands
of a purchaser of a vehicle.    The dual use of the word “rental” in Chapter six
of the general tax statutes is very similar to the dual use of the word “producer”
in Chapter three. See, Mobil Oil Corporation v. Calvert, 451 S. W. 2d 889,




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891-892 (Tex. Sup. 1970). In both Chapter three and Chapter six, the
context of the statutes makes it clear that the word in question was used
differently than in the specific definition. This is in accord with the open-
ing sentence of Article 6.03:

              “The following words shall have the following
       meaning unless a different meaning clearly appears
       from the context. ”

                               SUMMARY

               Any transaction by an original manufacturer
       agreeing to give exclusive use of a motor vehicle to
       another for any period of time and for a consideration
       is to be taxed on the basis of the gross receipts from
       the transaction.




APPROVED:
OPINION COMMITTEE

Kerns Taylor, Chairman
W. E. Allen, Co-Chairman

Bob Davis
Ben Harrison
Sig Aronson
Bill Campbell

SAMUEL D. MCDANIEL
Staff Legal Assistant




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Honorable Robert S. Calvert,   page 5     (M-1223)



ALFRED WALKER
Executive Assistant

NOLA WHITE
First Assistant




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