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        Honorable George H. Sheppard
        Comptroller   of Public Accounts
        Austin,  Texas              Opinion         Wo, P-253

                                      Re:    The a plicability   of
                                             the 1,# sales tax to
                                             a sale by a new car
                                             dealer  to a used car
                                             dealer.
        Dear Mr. Sheppard:

                     You have requested      the opinion   of   this   Depart-
        ment based    upon the following      fact situation:

                   "A manufacturer    of motor vehicles
             sells  a motor vehicle    to an authorized
             new car dealer.     After the sale is made
             the authorized   new car dealer   sells    the
             car to a used car d~ealer, operating       in
             some other Dart of the State of Texas,
             and the used car d~ealer resells     thjs    I
             car to an individual     who is required    to
             pay a 1% sales   tax."

                     Your first   question    is:

                    "Will it be necessary       for this used
              car dealer   to register     the car and pay a
              1% sales tax before      offering    the car for
              sale or d~oes this used car dealer have
              the same right to sell        a new unregistered
              car as a first    sale,   even though he does
              not hold a contract      with any manufacturer
              to sell   new cars?"

                   The pertinent parts of Chapter 184, Article
        VI, Acts of the 47th Legislature,   1941 (codified as
        Article  7047k, Vernon's Civil Statutes)  follows:

                   "Sec.    1.   (a) There fs hereby levied
              a tax upon every retail     sale of every
              motor vehicle    sold in this State,   such
              tax to be equal to one (1) per cent of
Hon. Geo.    H. Sheppard,     Page 2     (V-253)



      the total     consideration,    paid or to be
      paid to the seller        by the buyer, whSch
      consideration      shall   include    the amount
      paid or to be paid for said motor ve-
     ,hicle   and all accessories        attached
      thereto   at the time of the sale,          whether
      such consideration        be in the n~ature of
      cash, credit,      or exchange of other pro-
      pe rty , or a combination       of these.
             I, D .   s

             “Sec.   3 (a) The term ‘sale         or
      ‘sales’    as herein used shall         Include   in-
      stallment     and credit    sales,     and the ex-
      change of property,        as well as the sale
      thereof    for money, every closed          transactfon
      constituting     a sale.     The transaction        whereby
      the possession      of property      is transferred
      but, the seller     retains    title    as security
      for the payment of the price shall be deem-
      ed a sale.

      tail   ‘%~, The term ‘retail     sale’ or sre-
                 ’ as herein used~ shall     include
      all sales of motor vehicles      except those
      whereby the purchaser    acquires    a motor ve-
      hicle  for the exclusive   purpose of resale
      and not for use.



              YZec.   5.    The taxes levied        in thfs
      Article     shall   be collected       by the Assessor
      and Collector       of taxes of the county fn
      which any such motor vehicle             is first     reg-
      istered     or first     transferred     after   such a
      sale;    the Tax Collector         shall   refuse to ac-
      cept for reqistration           or for transfer       any
      motor vehicle        until   the tax thereon is paid.
      . . . I,

              It will  be noted that Section       5 supra,  re-
quires    the 1% sales tax to be collected         by the Tax
Collector     of the County in which the motor vehfcle          is
first   registered    or first    transferred   after  such sale,
Therefore    the statutes     which qovern the registration
of the motor vehicle       must be considered      in oarrf materia
with the statute      imposing the sales      tax.
Hon. Geo.    H. Sheppard,      Page 3     (V-253)



           The "Certificate    of Title Act",  codified   as
Article  1436-1, Vernon's    Penal Code, (Acts 46th Legis-
lature,  1939, p0 602) has been construed     by the Supreme
Court of Texas in the case of Motor Investment        Co. v,
Knox City,  174 S-W, (2d) 482, which involved      a fact sit-
uation somewhat similar     to the one above stated,

             The pertinent       parts   of   the   Court's   opinion   are
here   quoted:

               "Ford Motor Company manufactured            an
       automobile       and sold it in ~due course to
       Boling-Duggan,        a partnership,     a dealer    in
       Dallas,      and delivered     the manufacturerss
       certificate       along with the automobile,         On
       March 7, 1940, Boling-Duggan            sold the ve-
       hicle    to R. M. Hedrick,       taking, a chattel
       mortgage lien for $770 of the sale price,
       Boling-Duggan        delivered   the manufacturer's
       certificate       to its vendee Hedrick at the
       time of the sale,         but did not note thereon
       the above lien0          Hedrick purchased the auto-
       mobile for the purpose of converting              it into
       a fire     truck and reselling        it to a consumer.
       After having so converted           it, Hedrick,     on
       the 30th day of April,          1940, for a valuable
       consideration        sold and delivered      the automo-
       bile    to the City of Knox City.           At that time
       said automobile         had not been previously        reg-
       istered      with nor licensed      by the State Hfgh-
       way Department of the State of Texas,               D e 0

               "The Certificate      of Title   Act, Article
       1436-1, VernonPs Penal Codes was enacted by
       the Legislature       of this State in 1939 to less-
       en Andy prevent      the theft    of motor vehicles,
       and the importation        into this State of and
       traffic     in stolen    motor vehicles,     and the
       sale of encumbered motor vehicles            without dis-
       closure    of existing     liens,     The pertinent
       provisions     of the Act are as follows:

              "'Sec.   4.  The term 'Owner' includes        any
       person,    firm, association,       or corporation   other
       than manufacturer,        importer,   distributor,   or
       dealer    claiming  title    to, or having a right to
       operate    pursuant to a lien on a motor vehicle
       after the first     sale as herein defined,        a 0 o
Hon. Geo.   H. Sheppard,                       Page 4   (V-253)



            "'Sec.     7. The term 'First        Sale'
     means the bargain,       sale,    transfer    or
     delivery      within this State with intent
     to pass an interest        therein,     other than
     a lien of a motor vehicle           which has not
     been previously      registered      or licensed
     in this State.

                "'        . . .

            "'Sec.  9.    The term 'Mew Car' means
     a motor vehicle      which has never been the
     subject    of a first-sale.
                ./r. .I
                          .       .        .




            't7Sec.' 19. The term 'Dealer'   means
     any person purchasing    motor vehicles   for
     resale    at retail to owners.

                "'        . . .

            "'Sec.    27.   Before selling      or dispos-
     ing of any motor vehicle          required   to be
     registered      or licensed     in this State on any
     highway or public        place within this State,
     except with dealer's         metal or cardboard      li-
     cense number thereto         attached    as now provid-
     ed by law, the owner shall make application
     to the designated        agent in the county of his
     domicile      upon form to be prescribed        by the
     Department for a certificate           of title   for
     such motor vehicle.

                "1.           .       .'

            "Section    27 of the Act is the section
     which requires      the procurement   of a certif-
     icate   of title    as a condition   precedent    to
     the right to transfer       a motor vehicle.      By
     the ternis of that section       such certificate
     of title     is required  for motor vehicles       'ra-
     quired to be registered       or linensed     in this
     State,    on any highway or pubi%       plane within
     thisState'.       . . .

                 1( . . .



            .
Hon. Geo.     R. Sheppard,       Page 5       (V-253)



            "Moreover,         under said Section            27,
     it is only an 'owner? of a motor vehicle
     that is requirrd           to register         such vehicle
     and secure a certificate                of title       therefor
     before    selling      the same.         The tern towner,p
     as defined       in Section       4, excludesmanufac-
     tures and dealers,            and includes          only those
     claimin?     title      'after    the     first     sale.'       The
     Act divides       sales     of Automobiles           into two
     classes,     namely ?first           sale'     and 'subsequent
     sale.'     The term 'first            sales'means          a trans-
     fer of a vehicle           which has not previously
     been registered           (Sec.   71, as distinpuished
     from a 'subsequent            sale,'     meanin? a transfer
     after a vehicle           has been registered              or should,
     in law, have been registered                    (Sec. 8)"        Read-
     ing the Act as a whole, we think it clear
     that every transfer             of a motor vehicle,              re-
     gardless     of the number thereof,                from manufac-
     turer to dealer,           dealer to dealer,            and from
     dealer    to 'owner,s         as define-the                 Act,
     constitutes        a 'first      sale,s      and that it is
     not necessary         that the vehicle            he recs=ed
     and a certificate           of title        thereto     obtained
     as a condition         precedent        toTbe       valrdfty      of
     such 'first        sale,'"      IEmphasis         added)



            In view of the foregoing      construction    of the
law it is not necessary      for the used car dealer to reg-
ister  the new car and since the motor vehicle         was ac-
nuired by him for the "exclusive       purpose of resalev',      it
is exempt from the motor vehicle       retail   sales tax under
the provisions    of Section    3 (b), Article    71347k, supra.

              Your   second     question      is:

            Would~ it make any difference   i~f the car
      bought by the used car dealer    from the ori,ginnl
      nuthorived  nevl car dealer was a secondhand    car:"

           It is presumed that the secondhand motor vehicle
is a 'Used Car" as d~efined by Section  10, Article 1436-1,
Vernon's  Penal Code, as follows:

              "The term 'Used Cars means a motor ve-
      hicle    that has been the subject of a first
                                                                           ” .-




Hon. Geo.    H. Sheppard,       Page 6    (V-253)



      sale whether     within    this    State    or else-
      where."

            This sale constitutes          a "Subsequent         Sale as
defined  in Section   8, Article         1436-1,  Vernon's        Penal
Cod~e, as follows:

             "The term 'Subsequent      Sale'   means
      the bargain,    sale,   transfer,    or delivery
      within this State,      with intent     to pass
      an interest    therein,    other than a lien
      of a motor vehicle      which has been register-
      ed or licensed     within this State or when
      it has not been required        under law to be
      registered    or licensed     in this State."

           Nevertheless,      the "Used car" being acquired
by the used car dealer      for the "exclusive   purpose of
resale",  the transaction      is exempt from the pa,vment of
the l$ quoted retail     sales tax under the provisions     of
Section  3 (b) of Article      7047k, supra.

                                SUMMARY

             A new motor vehicle      acquired     from the
      manufacturer     by a car dealer,       who in turn
      sells   the vehicle    to a used car dealer,         need
      not be registered      under the provisions         of
      the "Certificate     of Title     Act",   Article    1436-1,
      Vernon's    Penal code, and is not subject           to the
      1% motor vehicle     retail    sales    tax, (Article
      ?047k, Vernon's     Civil   Statutes)     when acquired
      by the used car dealer       for the "exclusive        pur-
      pose of resale".      Motor Investment         Co. v. Knox
      City,   141 Tex. 530, 174 S.W. (2d) 482.             A
      "Used" car sold by a "New car" de-ler             to a
      "Used Car" dealer who acquires           it for the "ex-
      elusive    purpose of resale",        is exempt from the
      1% retail    motor vehicle     retail    sales tax.     Art-
      icle   7047k, Sec. 3 (b).

                                         Yours'very     truly,

Edd                               ATTORNEYGENERAL0

                                                 @qgy&J&
ATTORNEYGENERAL                   BY
                                                  C. K. Richards
CKR/lh:jrb                                             Assistant
