            'T~A~~~RNEYG~ERAI.
                        OF   TEXAS

                       AUSTINU,-




Honorable Geo. H. Sheppard
Cotiptroller-
            of Public Accounts
Austin, Texas
Dear Sir:                        Opinion No. O-2081
                                 Re: Does.the corporation in Questton
                                      operate "stores" or "bona fide
                                      distributing polntti"within the
                                      meaning of the Texas Chain Store
                                      Tax Act?
           In requesting our opinion a$ to whether or nbt the
establishments operated by the corporation Tn question-'are
"stores" within the meaning.of the Texas Chain Store Tax Statute,
you present the following facts:
           "A Urge corporation malntalns warehouses
    oif&rthe State of Texas. The main office con-
    tacts concerns and sells merchandise to be 'called
    for at these different warehouses In the state,
    and this merchandise Is sold on a contracted
    pr~icebasis. If such purchaser wishes to puti-
    chase a thasand Items, the contract will read
    that such purchaser will receive a thousand
    items'at a given price. If he purchases over a
    thoiasandItems, he 1s to receive another price
    In a lower bracket, etc.   The number of Items
    to be purchased ?s not determined when this con-
    tract is executed.
           "The purchaser who holds a contract with
    this corporation decides to make a purchase of
    merchandise, for which he has previously contracted,
    calls at these warehouses and loads such merchan-
    dise on trucks and signs an order slip for same.
    This'ordersslip Is sent to the main offlce by the
    warehouseman and thenpurchaser Is charged wlth the
    merchandise. There are no cash sales made at
    these warehouses, as all sales are charged accoun:s,
    predetermined by contract and good credit rating.
           You isreapparently concerned with whether or not the
Q;lcirehouses
           operated by the corporation come within the %xemptlofi
contained in Sectlbn 5 of Article lllld, Vernon's Annotated Penal
Code, which reads as follows:
Honorable Geo. H. Sheppard, .page 2'      O-2081


           '* + * * or any place or places of
    buslness,used as bona fide wholesale or retail
    dlstrlbutlng points by manufacturing concerns
    for dlstrlbutlon of products of their own man-
    ufacture only; + + + *'I
           The above quoted exemption was fully discussed by
the Commlsslon of Ap eals of Texas In the case of Hurt vs.
Cooper, 110 S.W. (26P 896. The court stated as follows, con-
cerning the same:
           "Exemption No. 5, applying to manu-
    facturing concerns distributing products.of
    their own manufatiture,has been particularly
    slngled out and attacked as being arbitrary.
    It ls well to conalder-'theexact language of
    that exemption. Itls as follows: I* * + or
    any place or places of business used as bona
    fide wholesale or retail distributing polnts
    by manufacturing concerhs for distribution of
    products of their own manufacture only. * * *I
          -~"INsection 7 of the act (Vernon's Ann.
    P. C. art. 11116) Is found a definition of
    “store" .  It Is as follows: 'The term "store"
    as used In this Act shall be construed to mean
    and Include any store or stores or any mer-
    cantile establishment or establishments not
    specifically exempted within this Act which are
    owned, operated, maintained, or controlled by
    the same person, agent, receiver, trustee, firm,
    corporation, copartnershlp or association either
    domestic or foreign, in which goods, wares or
    merchandise of any kind are sold, at retail or
    wholesale.'
           "The statute having defined the word, we
    are not concerned with its usual meaning. Under
    that definition a mercantile establishment at
    whlch,goods, wares, or merchandise of any kind,
    except those exempted, are sold is a store and
    1s taxable as such, and this even though It may
    also be a dlstrlbuting polnt. Fox Case, supra.
    Conversely, a mercantile establishment at which
    no sales are made Is not a store, and therefore
    not taxable. The test'ls whether sales of goods,
    wares, or merchandise are made at the place.
    The lahguage of exemption 5 does not disclose a
    leglslatlve intent to exempt any mercantile es-
    tablishment at which sales of such commodities
    are made. ****at
Honorable Geo. H. Sheppard, page 3         0 -2081




           '* * * * It may be~that some manufactur-
   ing concerns~malntain bona fide distributing
   points at which no sales are Made, but-from
   which they merely distribute at wholesale to
   their stores or at retail to purchasers'from
   their sales agents.   If s,o,such btisinesses
   would appear to be within the terms df this pro-
   vision. Obviously they would not cbm& within
   the affirmative operation of the statute && we
   have construed It, and therefore no ~expNss ex-
   emption was required to relieve them-.fi"oti
                                              the
   burden of the tax. But, If the Legislature
   desired to make that matter certaSn by adding
   exemption 5, it did not thereby lmperll'the~
   statute, but merely added a surpliispMvisSdn.
   We need not, however, indulge in ang +.pectilii-
   tlon on the subject of what bu9lness6s;~lYany,
   are Included within the terms of this so-called
   exemption. Sufficient is it; we think, to
   observe that, had the Leglslatui%liitefidedto
   exempt businesses operated by marnifaettirlngcon-
   cerns engaged in selling their prodiidts,it
   would have employed more apt and exact language
   than that found in this provision. ~H6ibIts
   intention been to exempt stares, why was the
   term 'bona fide' Inserted, and why--wMe they
   called distributing points? Why, ali6, was hot
   the word 'sale' used instead ijfthe'ijord"dls-
   trlbutlon'? The least-that calibe said~7.sthat
   the language is reasonably suiceptible of the
   construction which we have given It. + * * *"
           As stated by the court, the test Is whether sales of
goods, wares, or merchandise are made at the place. Therefore,
lf under the contract In question the sale of the merchandise Is
made at the warehouse, such place of business then becomes a
store which is taxable under the Texas Chain Store Tax Act. If
on the other hand the sales.are made by the salesmen or agents
of the corporation, and the warehouse is used as a bona fide
dlbtributlng point and no sales ape made at the same, then such      '
place of business would be exempt under the Texas Act.
           Under the facts submitted it Is obvlous that the sales-
man does not make the sale of the merchandise. The contract that
the salesman signs with the dealer only sets the price of certain
of the Merchandise. Under the contract the dealer Is hot bound
to buy any of the merchandise. He may, however; purchase as nnzzh
as he pleases.. The dealer Is not bound to buy any specific type
of merchandise. Therefore, when he goes to the warehouse~and
selects the types and quantity of merchandise he is purchasing,
Honorable Geo. PI.Sheppard, page 4        O-2081


that is where~the actual sale of the merchandise takes place
despite the fact that the price Is predetermined.
           You are, therefore, advised that under the facts sub-
mitted the corporation would'be liable for a Chain Store-T&x,on
the'warehouses Inquestion because sales of goods, wares, or
merchandise are made at such places.
                               Yours very truly
                            ATTORNEY GENERAL OF TEXAS

                               By s/Billy Goldberg
                                    Billy Goldberg
                                    Assistant
BG:RS:wc

APPROVED MAY 29, 1940
s/Gerald C. Mann
ATTORNgY GENERAL OF TEXAS
Approved Opinion Committee By s/BWB Chairman
