Honorable    George H. Sheppard
Comptrollers   of Public  Accounts
Austin,   Texas
                     Opinion No. O-1713
                     Rk:   (a) Is it-necessary       that TexasGulf
                                Sulphur Company, a domestic           cor-
                                poration,    keep a stock certifl-
                                cate book, stock transfer          ledger
                                and other permanent records           with-
                                In the state     of Texas even though
                                it has a stock transfer         agent in
                                New York?
                           (b) Are such ,records required to re-
                                flect   all stock transfers        by the
                                corporation     or only such transfers
                                as occur within      the state and are.
                                taxable    under Art. XV, H.B. No. 8,
                                Acts, Regular Session,         47th Leg.?
                           (cl  Will   such  stock   transfers     in Texas
                                on the records     of the company be
                                taxable    under said Act, even
                                though all other acts,         agreements,
                                etc.   necessary   to effect     the sale
                                or transfer     of stock certificates
                                of such corporation,        occur beyond
                                the limits     of the state of Texas?

Dear Sir:

             Your letter    of June 17, 1941 submits for        our   opinion
the   following   question,    which we quote therefrom:

            "The Texas Gulf Sulphur Company is chartered                .
      under the laws of Texas and 1s domiciled           in Harris
      Count   Texas.    This corporation's      stock   (no par
      value Y is listed   on the New York Stock Exchange.
      There are no stock transfer       records    kept in Texas
      as the stock transfer     agent is in New York.

             "Section  6 of Article~XV   of House Bill      No. 8
      of the Regular Session      of the Forty-seventh      Leg-
      islature    reads in part:
            'I*   * *every   person   * * *engaged   in whole    or
                                      ^
Hon.    George   R. Sheppard~, page     2          . o-3713



       in part in making or negotiating            of sales,    agree-
       ments to sell,      deliveries     or transfers    of shares
       or certificates       taxable   under this Article,       or
       conducting      or transactlngrrage               business,
       shall    keep or cause to be kept at some accessible
       place within      the State of Texas, a just and true
       book of account,       in such form as may be prescribed
       by the Comptroller,        wherein shall be-plainly         and
       legibly    recorded    in separate     columns,   the date of
       making every; sale,       agreement to sell,     delivery’or
       transfer    of such shares or certificates,           the name
       and number of shares thereof,           the face value,      the
       name of the seller        or transferrer,     the name of the
       purchaser     or transferee,     * * *I

              “Please   tell  me whether or not it will      be
       necessary    that Texas Gulf Sulphur Company keep
       stock transfer      and other records within  the State
       of Texas and whether or not these records        shall   in-
       clude all transfers      of stock by the corporation.

              “If the law requires     that these records  shall
       include    all transfers  of stock by the corporation,
       and no other act necessary       to effect said transfer
       Is done In Texas, will      such transfers  be subject    to
       the tax?

             “I am enclosing   a copy of a letter from Mr.
       John M. Corbett    of Bay City, Texas, with reference
       to this matter .‘I

              The Texas Gulf Sulphur Company will           not be required
 to make, keep or maintain       In Texas any records          of its stock
 transfers     under that portion     of Section     6, Article     XV, House
Bill    No. 8, Regular Session,      Forty-seventh       Legislature,    quoted
 in your letter,      because  same refers     either    to’persons    or cor-
 porations     engaged in buying,     selling,    delivering     or transfer-
 ring stock,     for themselves,    as principals,       or as brokers     or
 agents for others.        That portion     of Section     6 of the cited
‘Act which is pertinent       and applicable      to the Texas Gulf
 Sulphur Company and other corporations            whose stock is traf-
 flcked    in, reads as follows:

              “Every association,        company, or corporation,
       or business     conducted   by a trustee     or trustees
       shall keep or cause to be kept at some accessible
       place within     the State of Texas a stock certlfi-
       cate book and a just and true book of account,
       transfer    ledger   or register,     In such form as may be
       prescribed     by the Comptroller      wherein shall be
Hon.     George     H. Sheppard,     page   3          . O-3713



       plainly      and legibly    recorded     in separate     columns the
       date of making every transfer             of stock or other cer-
       tificates       included   within    this Article,     the name
       and the number of shares thereof,               the serial    number
       of each surrendered         certificate,      the name of the
       parties      surrendering     such certificate,       the serial
       number of the certificate            issued   in exchange there-
       for;the       number of shares covered          by said certifi-
       cate,     the name of the party to whom said certlfi-
       cate was issued         and the face value of the stamps at-
       tached in payment of the tax on the transfer                  of the
       Xificate.           * * +
              "Y * *

              ff*   *   *   .  It shall     also retaLn and keep all
       surrendered        or canceled       shares or certificates           and
       all memoranda relating             to the sale or transfer            of
       any thereof.          All such books of account,             transfer
       led&ers,       registers,      and certificate       books,     shall be
       retained       and kept as aforesaid           for a period      of at
       least    two (2) years subsequent              to the date of the
       last entry made therein              as herein required;         and all
       such surrendered           or canceled      shares or certificates
       and memoranda relating             to the sale or transfer            of
       certificates         taxable    under this Article,          shall    be
       retained      and kept for a period            of at least      two (2)
       years from the date of the delivery                  thereof.       For.
       the purpose        of ascertaining        whether the tax im=ed
       m.his       Article       has been paId, all such books of
       account,      transfer      ledgers,     registers,     certificate
       books,     surrendered        or canceled      shares or certificates
       and memoranda relating             to the sale or transfer            there-
       of,   shall at all times between the hours of ten
       o'clock      in the forenoon         and three o'clock.in          the
       afternoon,        except Saturdays,         Sundays,   and legal       hol-
       idays,    be open to exam.ination by,the              Comptroller        or
       his duly authorized            representative."       (Emphasis supplied),

            It is apparent  from the underlined        portions    of this
statute   that only such stock transfer       records    are required      to
be kept by the Texas Gulf Sulphur Company as pertain               to tax-
able transactions,     under the above-cited       stock transfer     tax
act.    This language of the statute      negatives     any Intention      on
the part of the Legislature       to require   the making and keeping
of the described    records  with reference      to sales     or transfers
of shares or certificates      or stock which are not taxable           under
the Act.     These records  are only required       to be kept for a
period   of two (2) years and are merely to assist            the Comp-
troller   In the effective    enforcement    of the Act.
Hon.     George     H. Sheppard,        page   4            O-3713


            But this cannot be said of other pertinent     provl-
SiOns'of    the Constitution   of Texas and statutes  thereunder.
Article    10, Section   3, Constitution of Texas, provides,     in
part,   as  follows:

               'Sec.   3. Every railroad          or other corpora-
        tion,   organized    or doing business          in ~thls State
        under the laws or authority            thereof,    shall  have
        and maintain a public         office    or place in this
        State for the transaction            of its business,     where
        transfers    of stock shall        be made and where shall
        be kept for inspection         by the stockholders        of
        such corporations,       books,      in which shall be re-
        corded the amount of capital            stock subscribed,
        the names of the owners of the stock the amounts
        owned by them respectively,            the amount of stock
        Paid, and by whom, the transfer             of said stock,
        with the date of the transfer,             the amount of
        its assets    and liabilities,         and the names and
        places    of residence    of its officers.         * * * * *'.~
                Article    1358, Revised        Civil   Statutes,    reads   as fol-
lows:

                "Each corporation     or joint  stock company of
        every description,       whether organized     and acting
        under a special      charter   or general    law of this
        State,    shall keep ,its principal     office   withIn the
        State."

                Article    1328, Revised        Civil   Statutes,   in connection
with     the    duties    of   directors,      provides   as follows:

               "They shall   cause a record   to be kept of all
        stock subscribed     and transferred,   and all business
        transactions.      Their books and records   shall at all
        reasonable    times be open to the inspection     of any
        stockholder."

                Article    1334, Revised        Civil   Statutes,    reads   as fol-
lows :
                "The stock of any corporation   created    under
        this title    shall  be deemed personal   estate,   and
        shall be transferable      only on the books of the .
        corporation     in such manner as the by-laws     may pre-
        scribe."

                The requirements   of the last  statute  quoted have
been     held    by the courts   to be mandatory;   10 TEXAS JURISPRU-
Hon.   George   H. Sheppard,     page   5            o-3713


DENCE 814.      We think the constitutional         and the other statu-
tory provisions,      quoted above,       should be similarly    regarded
because    of the use therein       of the mandatory term 'shall."
Hence, we are constrained         to hold that the Texas Gulf Sulphur
Company, in failing       or refusing      to make,~keep and maintain
in Texas the stock transfer          records    and other records    contem-
plated   by the above constitutional           and statutory  provisions,
is violating     the plain   letter     of said provis-ions   and the
public   policy   of the State,      as declared    by the Constitution.

             By this conclusion     we do not mean to say that the
Texas Gulf Sulphur Company may not continue                 to maintain    a
stock transfer      agent and stock transfer         records    in the state
of New York or elsewhere        beyond the limits         of Texas.     Wee
merely intend to say that such extra state agents and records
must be considered       cumulative   and additional         to the records
requFred by the Constitution         and statutes       to be made and kept
at all times in Texas.        The latter     records     are controlling
and mandatory,      required  by law to be kept for the protection
and benefit     of stock holders;     the‘extra-territorial          records,
if any, are permissive       and are kept,      in the discretion        of the
corporation,      merely for the convenience        of those buying and
selling    stocks   in other states.

             Moreover,     we find nothing      in the language of these
controlling      constitutional      and statutory      provisions    to in-
dicate     an intention     on the part of the Legislature           to limit
the keeping      in Texas of stock transfer         records     to such sales,
transfers     or transactions       as occur in Texas and are taxable
under Article      XV, House Bill      No. 8, Regular Session,         Forty-
seventh Legislature,         as in the case of section          6 of said Act,
hereInabove     dlscussed.       All sales or transfers         of shares or
certificates      of stock,     whether intrastate       or extrastate,     must
be recorded      on the transfer      records    of the corportation       and
not merely such records          of sales,    transactions      and transfers
as are taxable       under said Act.       This is the plain       intendment
and purpose      of such provisions.

            The accrual   of a stock transfer    tax on stock trans-
fers,    made by the required   stock transfer    agent in Texas or
reflected     in the stock transfer   records  and other pertinent
records    of the Texas Gulf Sulphur Company required       to be kept
in Texas,    is indicated   by the following   language of Section
I of the Act:

            "There is hereby Imposed and levied           a tax as
     hereinafter     provided   on all sales,      agreements    to
     sell,   or memoranda of sales,       and all deliveries
   . or transfers     of shares,    or certificates      of stock,
     or certificates      for rights   to stock,     or certifi-
Hon.    George        H. Sheppard,    page 6              o-3713


       cates of deposit       representing     an interest        in or
       representing     certificates      made taxable      under this
       Section    in any domestic      or foreign      association,
       company, or corporation,          or certificates        of interest
       in any business      conducted     by truste,e     or trustees
       made after    the effective       date here,      * * *."
       (Empahsis Supplied).                            .~- _ _
            The tax levied     by this Act is an excise      tax upon
the privilege    of transferring      shares or certificates       of stock
by sale or gift,     and the duty to pay such 'tax is imposed upon
the seller,    or transferror     thereof.    This tax measure,       of
course,   can have no extra-territorial         operation,   under funda-
mental principles     of law and comity,      but a tax will      accrue
and become collectible       if any one of the following        four trans-
actions   or events occurs within        the state of Texas:

              (1)    An executory     contract     or agreement to
       sell   shares or certificates          of stock,   whether oral
       or evidenced       by the "bill    or.memorandum of sale"
       required     by Section    I of the Act.        (The phrase
       "memoranda of sales"        specifically      named in the tax
       levy,    to our minds, does not enumerate another              or
       fifth    transaction     to be taxed but merely refers           to
       the written      evidence   of "sales"     or "agreements      to
       sell,"    designated     in Section     I as taxable    trans-
       actions).

              (2)    An executed     contract   of sale of shares
       or certificates       of stock,    whether oral or evi-
       denced by the "bill         or memorandum of sale"       re-
       quired by Section        I of the Act,      Thi,s taxable
       transaction     refers    to an executed     contract    of
       sale of shares or certificates           (stock   delivered
       and purchase     money paid),      in contra-distinction
       to an executory       but absolute     and unconditional
       contract    to sell     such shares or certificates.

                (3)      A delivery   of'shares    or certicicates       of
       stock,     etc.

              (4)   A transfer     of     shares or certificates         of
       stock uponthe      official        books and records      of   the
       corporation.

            We think it is not the intention    of this                Act to levy
a burdensome and cumulative       tax on each and every                one of the
transactions     enumerated above and in Section   1 of                the Act as
taxable,     even though they all occur in Texas; but                  rather   the
intention     is manifest  to reach and tax only one of                  such trans-
Hon.   George   H. Sheppard,       page    7             O-3713


actions     or steps leading      to a complete    transfer     of such shares
or certificates        from one stockholder      to another.      For instance,
if the executory         contract  or agreement to sell        shares or
certificates      of stock is subject       to the tax because        it is ex-
ecuted in Texas,         then the subsequently      executed    sale,   delivery
or transfer      on the corporate      records   of such shares or cer"
tificates,      in successive     steps,   will  not be taxed.        Similarilg,
if the sale of such shares or certificates               occurs    in Texas,
so as to be taxable,          then the subsequent     delivery     or trans-
fer upon the records          of the corporation     of such shares or
certificates      will    not be taxable.

               On the other hand, if each and all of the taxable
 transactions       enumerated in the statute           and above,     transpire
 beyond the territorial            limits   of Texas,    except the transfer
 of such shares or certificates              upon the certificate         books,
 transfer      ledgers    or other proper official           records   of the Texas
 Gulf Sulphur Company, by it or by a uly constituted                       transfer
 agent,     and this latter        act or transa fan 2ion,is     caused and re-
 quired,     'under the mandatory constitutional              and statutary      pro-
 visions      above discussed,        to be done and recorded         in Texas,
 then such transfer          will    be subject    to the excise      stamp tax
 in question.         Stated      more concretely,      such required      trans-
 fer will      be taxable     even though the agreement or contract               to
 sell,    the executed       sale and the delivery         of such shares or
 certificates       was executed        and done upon the floor        of the New
 York Stock Exchange so as to be exempt from this tax under
.the principles        discussed      in our opinion     No. O-3594, directed
 to you.

             Trusting    the   foregoing       fully   answers    your   inquiries,
we are
                                                 Yours   very    truly

                                               ATTORNEY'GENERALOF TEXAS
PMN:ob:jrb:wc
                                                 By s/Pat   M. Neff,   Jr.
APPROVEDJULY 29, 1941                                          Assistant
s/Grover Sellers
FIRST ASSISTANT
ATTORNEYGENERAL

                              BWB CHAIRMAN
APPRCV?ZDOPINION COMMITTEEBY->-
