                       THEATTORNEYGENERAL
                                OF T‘EXAS
                                 AUSTIN   ~LTEXA~

   WILL       WILSON
A-I-I-G-         GENEIIAL       July 8, 1960


           Honorable Robert S. Calvert          Opinion No. !dN-876
           Comptroller of Public Accounts
           Capitol Station                      Re:   When a "first sale"
           Austin, Texas                              of gasoline within
                                                      contemplation of the
                                                      Motor Fuel Tax Law
                                                      occurs under a con-
                                                      slgnment for the pur-
           Dear Mr. Calvert:                          pose of sale.
                You request our opinion as to whether the taxable "first
           sale" of motor fuel occurs upon delivery of the fuel into the
           storage tanks of a retail dealer or upon withdrawal by him of
           the fuel from such storage tanks under terms of a form of
           contract submitted with your request.
                The kind of transaction under consideration is within the
           scope of Articles. 9.01, 9.02 and 9.03 of what Is commonly
           known as the Motor Fuel Tax Law (Ch. 9, H.B. 111 56th Leg.,
           3rd C.S., 1959, same being Ch. 9 of Title 122A 'Taxatlon-
           General" of the Revised Civil Statutes of Texas).
                The pertinent portions of the above statutes are:
                       "'First sale' shall mean, except as
                     otherwise provided herein, the first sale
                     or distribution in this State of motor
                     fuel, produced, refined, compounded, imported
                     into, of;otherwise acquired in said State;
                     . . . .   Art. g.Ol(lO).
                       "'Distribution' shall mean and Include
                     any transaction other than a sale, in which
                     ownership or title to motor fuel, . . .
                     passes from one person to another." Art.
                     9.01(5).
                       "'Distributor' shall mean and Include every
                     person who refines, distills, manufactures,
                     produces, ,or compounds motor fuel or blending
                     materials In this State:,.. .or in any other
                     manner acquires or possesses said products,
                     for the purpose of making a first sale, distri-
                     bution zr use of said products ,ln this State;
                     . . . .   Art. 9.01(h).
Honorable Robert S. Calvert, Page 2   Opinion No.   ww-876

           "'Dealer' shall mean and includeevery
         person other than a distributor who engages
         in the business in this State of distributing
         or selling motor fuel within this State." Art.
         9.01(7).
           "Art. 9.03 Reports (1) Every distributor
         who shall be required to collect the tax levied
         by this Chapter upon the first sale or dlstri-
         bution of motor fuel In this State, . .shall
             .remit.   .the amount of such tax required
         Eo'be collecied. . .and at the same time, such
         distributor shall make anddeliver to the Comp-
         troller. . .a report. . . .'
     The contract under consideration in its controlling portions
provides that the Distributor (called Seller in the contract)
may make deliveries of gasoline into the underground tanks of a
retail seller (called Dealer in the contract),
                .at such time, day or night, as ma
         be convenient for Seller, and shall Fi--+L
                                              ave
         rights of ingress to and egress from said
         place of business and unrestricted access to
         Dealer's tanks for the purpose of making such
         deliveries and for the purpose of gauging
         tanks, reading pump meters and inspecting all
         equipment used in connection with the storage
         and dispensing of gasoline. Dealer hereby
         authorizes Seller to do any and all things
         necessary and proper to preserve Its gasoline,
         including, without limitation, locking the
         fill-pipe caps leading to the tanks and re-
         taining custody of all keys thereto. Seller
         authorizes Dealer to withdraw such gasoline
         from the tanks solely by means of the computer
         pumps located at Dealer's place of business.
         Title to such gasoline shall remain vested in
         Seller until and unless the same shall be pur-
         chased by Dealer. Gasoline shall be deemed to
         be purchased and title thereto shall pass from
         Seller to Dealer as the gasoline passes through
         and Is recorded on the meters of the computer
         pumps.
           "2, Gasoline delivered and stored by Seller
         hereunder shall be in the custody but not the
         possession of Dealer and Dealer shall exercise
         ordinary care in protecting the same from loss,
         damage or destruction. Dealer shall Immediately
Honorable Robert S. Calvert, Page   3   Opinion No.   ww-876

        notify Seller of any defective condition
        of the pumps, meters, tanks, pipe lines,
        locks attached by Seller or any other
        condition which may affect the safety of
        Sellerls gasoline. Dealer agrees thatxe
        shall withdraw gasoline from the tanks only
        by means of the computer pumps and shall
        keep locked all computer pumps when neither
        he nor any of his employees is present on
        the premises. The quantity of,gasoline N-
        chased by Dealer shall be determined from a
        reading of the meters on the computer pumps
        and all gasoline withdrawn from the tanks
        whether by Dealer or third parties shall be
        deemed to have been dellvered'to and pur-
        chased by Dealer. Dealer agrees that he
        will not tsmoer with the meters on such
        pumps and wliI not permit third parties to
        do so. Dealer shall maintain daily a detailed
        record of all gasoline purchased by him, such
        record to be made aval1abl.efor inspection by
        Seller at any time and shall render a full
        accounting to Seller at such times and in such
        manner as Seller may require for all gasoline
           purchased   Dealer shall pay Seller on
        igrnandfor gasoline purchased at the price
        set forth in. . . .
          “3.      .Upon termination of this agreement,
        Dealer'shall promptly pay Seller for all gaso-
        line purchased from Seller for which payment
        has not theretofore been made. In addition,
        Dealer w,    at the time of such termination,
                  for cash the gasoline stored by Seller
                     place of business. If Dealer does
             urchase such gasoline, Seller shall have
        the right, without notice and without recourse
        to legal proceedings, to remove said gasoline
        from the tanks and Dealer agrees that he will
        not interfere with such removal." (Under-
        scoring added)
     Other statements in the contract refer to Dealer"as custodian
of gasoline so delivered and stored," to his "custodial liability,"
and to his "anticipated purchases of such gasoline."
     We can discern nothing,In the contract contrary to the
above provisions, which would alter the legal status of the
Dealer In relation to the gasoline delivered into his tanks,
nor the occurrence uponwhich the motor fuel tax becomes due.
Honorable Robert S. Calvert, Page 4   Opinion No. WW-876


     We are of the opinion that the taxable "First sale"
occurs "as the gasoline passes through and is recorded on the
meters on the computer pumps"--that is, as the retail dealer
withdraws it from the storage tanks for sale to his own
customers.
     We do not believe that the delivery of the gasoline by
the party designated inthe contract as Seller into the under-
ground tanks of the retailer, under the terms of this contract,
is a "first sale ' "sale ' "distribution ' or "use" of the
aasoline under a&? of th; statutes here&above mentioned or
under the holding-of State v. City of El Paso, 135 Tex. 359,
143 S.W.2d 366 (1940).
     Prior to withdrawal by the retail dealer through his
comwuter wumws we believe he has custody of the gasoline with
the-legal-status of a bailee. Charles k. Stleff; Inc. v. City
of San Antonio, 130 Tex, 594, 111 S.W.2d 1086 (1938).
     "Any kind of personal propert may be the subject of
bailment. . *It* 6 Am.Jur. (Rev Ed3 , Bailments, sec. 62, p.
220.
     The applicable law we believe is well stated in the case of
Whitehouse Bros. v. S. H. Abbott & Son, 228 S.W. 599 (Clv.App.
 9211, wherein at page b01 the Court quoted from a Georgia case:
           "On the other hand, if the effect of the
         contract is that the property is delivered
         from the bailor to the bailee with the under-
         standing that the title is to remain in the
         bailor, and the bailee does not assume initial
         responsibility to pay the purchase price, it
         is ordinarily not a conditional sale, but Is
         a consignment although the bailee may have the
         option of purchasing the goods themselves by
         paying a stipulated price, or may have a right
         to sell them to other persons upon accounting
         to the bailor for a stipulated sum, and though
         the baileels compensation in the matter may
         depend upon such profit as he shall realize on
         the difference between the price at which the
         goods are consigned and the price at which they
         are sold, and though the bailee may be responsible
         to the bailor for the value of such goods as he
         may sell on a credit, whether he collects from
         the purchasers or not."
Both the Whitehouse case, and the case of Sturm v. Boker mentioned
in the next following paragraph, are cited with approval by the
Supreme Court in the Stieff case (supra).
Honorable Robert S. Calvert, Page   5    Opinion No.   ww-876

     The distinction applicable to the   form of contract under
consideration
. .-          as between a contract of   sale or return and a
bailment is clearly stated in Sturm v.   Boker, 150 U.S. 312
(1893) wherein, at page 329, the Court   said:
           "An option to purchase if he (the bailee)
         liked is essentially different from an option
         to return a purchase if he should not like.
         In one case the title will not pass until the
         option is determined; in the other the property
         passes at once, subject to the right to rescind
         and return."
     The law seems clear and settled that the exercise by a
bailee of his option to purchase goods held by him In that
capacity and to make himself the debtor for them does not alter
his first holding of the goods as a ballee. See also: 8 C.J.S.,
Ba3alments,sec. 3d-e, pp. 2x3-240, and sec. 42, p. 325; 6.
     (Rev Ed) Bailments, sec. 37,pp. 198-200;   The Law Govern-
Ing'Sales of hoods, Samuel Williston, Vol. 2, (Rev.Ed., 194o),
PP. 306-307.
     The party designated in the contract under consideration
as Seller, under the provisions of Art. 9.03 of the Motor Fuel
Tax Laws,Is the Distributor and required to collect and remit
the motor fuel tax and to make the reports required of a distri-
butor under this Article.

                       SUMMARY

          Under the contract in question the taxable
     "First sale" under the Motor Fuel Tax Law (Ch. 9,
     H.B. 11, 56th Leg., 3d C.S., 1959, same being
     Ch. 9 of Title 122A "Taxation-General" of the
     Revised Civil Statutes of Texas) occurs upon
     withdrawal of the gasoline from the storage tanks
     and as It passes through and is recorded on the
     meters on the computer pumps of the retail Dealer.
                          Yours very truly,
                          WILL WILSON



                          w
                          Attorney General of Texas



WEA:cm                    AHsistant
Honorable Robert S. Calvert, Page   6   Opinion No.   W-876

APPROVED:
OPINION COMMITTEE:
Gordon C. Cass, Chairman
J. Arthur Sandlin
Tom McFarling
B. H. Tlmmins, Jr.
REVIEWE.DFOR THE ATTORNEY GENERAL
By: Leonard Passmore
