Honorable Joe Resweber       Opinion No. C-764
County Attorney
Harris County                Re:   Whether Motor Vehicle
Houston, Texas                     Retail Sales and Use
                                   Tax ia due and payable
                                   on the transfer of vehi-
                                   cles from a wholly-owned
                                   subsidiary corporation to
Dear Mr. Resweber:                 its parent corporation.
       By letter of August 30, 1966, you request an opinion
of this office on the following question:
              "Is the Motor Vehicle Retail Sales
         and Use Tax due when a wholly-owned sub-
         bLlti.hl'!,
                 %n3zwYaiLon transfers title to
         a motor vehicle to a parent corporation,
         when there is no merger and both corpo-
         rations continue doing business?"
       The fact statement accompanying your opinion request
states, among other information, the following:
               I8     Certificates of Title to six-
          teen (i6j automobiles, together with the
          possession of said automobiles, were trans-
          ferred from Starfire Petroleum Marketing
          Comwv,   a wholly-owned subsidiary of
          Signal Oil and Gas Company, to Signal Oil
          Company, It further appears that the
          accountin records of Starfire indicate
          that $32,869.98 is owed by Signal to
          Starfire for the transfer of said auto-
          mobiles. The accounting records of
          Signaj;indicate the same indebtedness.
          . . .
       Article 6.01, Title 122A, Taxation-General, Vernon's
Civil Statutes, provides for the imposition of a tax upon
the transfer of automobiles as follows:
               "(1) There is hereby levied a tax
          upon every retail sale of every motor
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         vehicle sold in this State, such tax to
         be equal to two per cent (2s) of the total
         consideration paid or to be paid for said
         motor vehicle.
              "(2) There is hereby levied a use tax
         upon every motor vehicle purchased at retail
         sale outside this State and brought into this
         State for use upon the public highways by any
         person, firm or corporation who is a resident
         of this State or who is domiciled or doing
         business in this State. The tax imposed by
         this subsection shall be equal to two per cent
         (22) of the total consideration paid or to be
         paid for said vehicle at said retail sale.
         The tax shall be the obligation of and be paid
         by the person, firm or corporation operating
         said motor vehicle upon the public highways
         of this State.
               "(3) There is hereby levied a use tax
          in the sum of Fifteen Dollars ($15) upon any
          person making application for the initial
          certificate of title on a motor vehicle which
          was previously registered in his.name in any
          other State or foreign country. It is the
          purpose of this subsection to impose a use tax
          upon motor vehicles brought into this State by
          new residents of this State.

               "(4) There is hereby levied a tax in the
          sum of Five Dollars ($5) upon any transaction
          involving the even exchange of two (2) motor
          vehicles which tax shall be paid by each party
          to the transaction.
               "(5) There is hereby levied a tax in the
          sum of Ten Dollars ($10) upon any person who
          makes a gift of a motor vehicle to another
          person which tax shall be paid by the donee.
               "The taxes levied by or under this Chapter
          shall be in addition to any and all license
          fees and taxes levied by or under any other
          law of this State."
       The terms "sale" and "retail sale" are defined in
Article 6.03, Title 122A, Taxation-General, V.C.S. as follows:
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Honorable Joe Resweber, Page 3 (C-764)


              "(A) Sale. The term 'sale' aa herein
         used shall include installment and credit
         sales, and the exchange of property as well
         as the salethereoffo? money, ever- closed
         transaction constituting a sale.
                                       ----kEES-
         action whereby the possession of property is
         transferred but the seller retains title as
         security for the payment of the price shall
         be deemed a sale.
               "(B) Retail Sale. The term 'retail sale'
          as herein used shall include all sales of motor
          vehicles except those whereby the purchaser
          acquires a motor vehicle for the exclusive
          purpose of resale and not for use." (Emphasis
          added.)
       From the facts stated above, the corporations involved
in the transfer of the vehicles are separate entities. Inter-
national Order of Twelve Knights and Daughters of Tabor v.
Florida, 91 S.W.2d 404 (Tex. Civ. App. 193b, no writ hiat .1,
       The contention that sales between an affiliated company
and its parent company, wherein it is claimed that such trans-
actions are in fact not sales. have been before the courts manv
times. One of the most recent cases is the case of Washington"
Sav-Mor Oil Co. v. State Tax Commission, 364 P.2d 440, (Wash.
Sup.Ct. lgbl); the Court said:
               "No authority is cited sustaining the
          position that the court should 'lift the
          corporate veil' in a case of this kind. Our
          research reveals that the courts which have
          considered the question in like cases have
          consistently refused to do so. These cases
          are all set forth in an annotation entitled
          'Sale by wholly owned subsidiary to parent
          corporation, or vice versa, as within retail
          sales tax, or similar statute', appearing in
          64 A.L.R.2d 769. This volume was published in
          1959, and our research has revealed no subse-
          quent cages dealing with the subject."
       The writer of that annotation says:
               'Since a wholly owned subsidiary is
          generally incorporated or acquired by the
          parent corporation for the purpose of ad-
          vantageously carrying on some phase of the
          parent corporation's activities or business,
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Honorable Joe Resweber, Page 4 (C-764)


          the courts have been reluctant to disregard
          the separate legal entities of the parties
          merely to grant relief from sales, or similar,
          taxes at the expense of the State or its sub-
          division. Thus the contention that because
          the wholly owned subsidiary and the parent
          corporation are so closely integrated. sales
          by the one to the other does not constitute
          'sales' within the meaning of the sales tax,
          or similar statute has been rejected by the
          c0urts.I'
       The Court called attention to the leading case in
matters of this nature, name1    Superior Oil Co. v. Depart-
ment of Finance, 36 N.E.26 35t', Sup.Ct. Illinois (1941).
       The Court continued, in the Washington case,
               "The appellant asks us.to disregard its
          separate existence, not in order to prevent
          fraud or injustice, but in order to Rain an
          advantage. This we cannot do. The legisla-
          ture has not seen fit to exclude transactions
          between affiliated corporations, and we find
          in the facts of this case nothing which would
          justify the judicial engrafting of such an
          exclusion upon the statute."
       We find no facts present in the situation presented
that would justify excluding the sales mentioned from the
clear provisions of the statute, and, therefore, answer your
question in the affirmative.


                        SUMMARY

               The Motor Vehicle Retail Sales and
          Use Tax is due and payable on the transfer
          of motor vehicles from a wholly-owned




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            subsidiary corporation to its parent
            corporation, there being no merger of
            such corporations and both corporations
            continue in business.
                                     Yours very truly,
                                     WAGGONER CARR
                                     Attorw      era1 of Texas



                                        Assistant
GCC/fb:lr
APPROVED:
OPINION COMMITTEE
W. V. Geppert, Chairman
Pat Bailey
John Fainter
James McCoy
Mario Obledo
APPROVED FOR THE ATTORNEY GENERAL
BY: T. B. Wright




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