Pa-s-L%
~*ToRxEs GEYERA,
           :    .


 fionomble George E. Sheppsrd
 Oomptroller of Public Accounts
 Auatip.,Texas
                         Opinion Ro. O-3594
                         Rer Constructlon   of Art. XV, House
                              Bill Ro. 8, Acts, Regular Ses-
                              sion, Forty-seventh Legislature,
                              levyinS an excise stamp tax up-
                              on stock transfers.

  Deer Sir:
            Your letter of l5cy 24, 1941, submits for our
  opinion certain inquiries reOardlng the incidence and
  application of the excise stamp tax levied upon stock
  transfers by Art. XV, House Dill Wo. 8, Acts, Regular
  Session, Forty-seventh Legislature. To this end, you
  attach a list of questions and copy of s letter of date
  May 19, 1341, addressed to you by Snitbdeal.& Lefko-
  wltz, attorneys of Dallas, Texss. To a.voldcon:uslon
  end promote clarity, if possible, each of such ques-
  tions will be stated in connection with our discussion
  and conclusion thereon.

                Your first question is as follovsr
               “Does the tax apply to au origfnal issue
         of.stock, that is, the Issuance by a corpora-
         tion of shares of stock to the persons who sub-
       * SC rlbed therefor?”

            Section 1 of Art. XV, House’Bill No. 8, Acts,
  Regular Session, Forty-seventh Legislature, levies the
. following tax:
               ‘There is hereby imposed and levi.eda tax
         as hereinafter provfded on all solos, agreeuents
         to sell,  or memormXla of sales, an3 all deliver-
         ies or transfers of shares, or certificates of
                    .
                    .
                        ,



:   BOn. George H. Shsppard, Page 2



        stock, or certi?icstes for rights to stock, or
        certificates of doposit representing an inter-
        eat in orrtpresenting oortifioates made tax-
        abla under this Section in any donestlc or for-
        eiSn associetim, co.vpany,or oorgorotion, or
        certificates of intsrest in any business con-
        ducttXlby trtisteeor trustees xade aftsr the
        effective d&e hereof, whothar nsde upon or
        shown by the books oftho association, oo3Fany,
        corporction, 01 trustee, or byeny assignnest
        in blank or by any dolivery of sny papers or
        agrsenent or rremorandu%or other evidence of
        aals of trsnsfsr or crdor for or agree36nt to
        buy, r!hethsrintnrr,edi.ateor.final, and whethr
        investinS the holdar with the benoficial~intsr-
        est in or legal titLe to mch stock or otier
        certificnte taxabl.ehereunder, or %ith the
        possession or use thereof for any Furpose, or
        to seoure the future pyxent of noney or the
        future transfer of any such stock, or certifi-
        cete, on esch hundred dollars of f'aoevalus
        of frsotion thereof, three (3) cents, except
        in cases where the shnres or certificates are
        issued without.designsted monstsry value, in
        which caee the tax aLeI. be at the rate of
        three (3) cents for each and every shars. It
        shall be the duty of the ,~ersonor persons
        making or effectuating the sale or trensfer to
        procure, affix, and cancel ths stamps and pay
        the tax provided by this Article. * * 8 *
             1% find ncthing in the quoted 1anguaS.sto inal--
    catg a legislativs Intent to tax an orig.inolisauo of
    stock, authorizsd,under the corporction*s chsrtor and
    issued pursuant to subscription contracts. The inten-
    tion is manifest, rather, to place this excieo tax burden
    upon the persm, Pirx or corporation tnekin~or sffact-
    uati.?P,
           a taxable se16 or tra.lsferof outstandIn& sharos
    or certificntos of stock rather thnn u~cn the corporation
    whose stock is trafficked in. This mm     interpretation
    has bsen placed unm similar t3X 13Vi3S of the states of
    New York ant? Fennsylvanie: 3p the adninistrctive dopart-
    monts charged cith the enforcesent of such measures, end
                                                                 ..-
                                                                       m-2




     Hon. George H. Sheypard, Page 3


                                                   Co., 106
     by the courts. See PZOPLP V. DUFFY-XcIX?.;:R-3Y
     N.Y. Supplenent; 878; affirmed, Court of Appeals, 86 M.z.1129,
               This ooaclusl& ‘as to,..thenor-taxability of
      original issue stock does not.,extend to and embrace
      treasury stock, so-called,,which has been cnce cutstand-
      ing in the heads of the ,;ubiic and has been purchased
      by the corporation for resale. Such&ock is liot origi-
     ,nal lsspe stock and 5s. taxable?
              Your second question’is stated as follows:
              “Does theetax apply to the transfer of
         stock oa the books of the corporation or of its
         transfer agsnt where no other part of the trana-
         action.Is taxable?      ~..~.
               ~PXEPLE .EO..i: A Raw Yo%k resident sells
         stock to another X-enYork.resident, the sale
         beiq, Initiated and consumnsted in %wi York,
         The purchaser sends the stock for transfer to
         the orfico of the corporation or its transfer
         agent in Taxas.
              ~~XAXFL3.~~0.2: A ‘sale in Texss betvmm
         Texas residents was completed before the Act
         went into errect, but the certil’ioetewas not
         presentsd for transfer until aftsr it went fin-
         to erreot."
              All or the portion 'of gonr second question QX-
     cept nexaznpleRo. -2” is specifically mmvared in our
     opinion 110. O-3713, directed to ycu, and we respectfully
     refer you to same.
              our answor to %xmple    ?:o. 2” of your sscoDd
     question is that e s~J.a In Texas betman Texss residents
     0r shares or certiflc:tss of. stock, executed prior to
     the efl’ectivedate of the stook transfer tax aot mder
     coesidsration here, would not be taxa’slsthoraundar,
     because, to do so would be to .*zivethe statute a rot-
     reactive and, therefore, unconstitutional effect. Flov;-
     ever no such constitutional objocti% lies to tha tax-
,.   atlon of a transfor, in Texas, of such shares or certi-
     ficates upon tho bcoks of tho corpmation or by its
               .                                                      ‘:.
                                                                       :-   or33


    0
.
            Hon. George R. Sheppard, Peg8 4


            transfer agent, subsequent to the effeotiva date of said
            Aot; and, since such transfer is one of the Independent
            transactions which is made taxable, reZerdless of the
            perfor?ance or execution in Texas of the other naned acts,
            transactions, egreenents or contracts, we think It patent
            that the Le&islaturs lntonded to tax such transfers as
            occurred after the pzissagoof the Act.
                        Your third question reads as follot;sr

                        When tco or more .stepsin the sale and
                   transfar of stock take place in Texas, is it
                   the $rtentlon of the statute that only ens tax
                   shall be oolleotea on the transaction, ragerd-
                   less of the number of steps in the transaction
                   and the lenngthor time elapsing be&eon the
                   sxoouticn of the agreement and the transfer of
                   the stock on the books of the corporation?
                        uEXA’LFLD:A and B are both Texas residents.
                   They sign an agreement whereby A agrees to sell
                   to B 100 shares of stock; the rsxt day the sale
                   is consunmated; the stock is dalivored to B; and
                   B has it tracsferred on the books of the issufi~
                   corporation in Dallas. Is a separate tax im-
                   posed on the agreement to sell, the sale, the
                   delivery and the.transfor, or Is the transaction
                   vielvedas a whole and only one tax imposed?”
                      v:e believe you will find that thin question has
            bson adequately and affirmatively ansvioredin our opin-
            ion No. O-3713, aadresood to you, and \TO,therefore, refer
            yoa _.
                 to same wlthout,furthor dieoussi~n hers.

                        By Subdivision (a) of your fourth question you
            desire to know if the following transaction is taxabla:
                    “ia) A, a resident of Dallas, carries on
             . the following conversation by telstype c-ithB,                      .
               a resfdont of New York:
                         “At ‘Dow are you quoting XYZ stock?’
                     c c “~3: ‘mrket   112 bid 113 as:~3d.’

        ,
                 .




    .
             Hon. &or&a       Ii. Sheppard, Pace 5



                             'Will tska
                         ~A'A:~           100 shares at ll%3/4.*
                         *BB~ 'Sorry 113 best.'
                         f "-, ('0 K v8 &uy 100 eheres at 113.
                         :wA'~t,
                            ~~~.Please oonfim realttlng direct with
                               trahclfer~Gtructiona.~
                                 .,____,___--
                                         I----
                          *B imediately sends A by mail the follow-
                     ing oonfirms~tion:

                                          w3, IriO.
                                          New York
                                                        Order accepted
                                                        my 24, 1941
                     “‘A
                     Dallas, Texas
                          "'1% take pleaouro in accepting your order        i
                     and horeby SZLL to you today:                         f'
                     "l?o. of shares         Security          price
                            100           xs'z Corporatim    (jll30.00
            ,'
                     *Vote:   In this transaction we do not act as
                              your broker, but as deal& for our of9
                              acoount. This bill 5.8payable upon re-
                              oeipt.'
                          *At the sa%e tine A liksniso confirms tha
                     purchase and sands the following oonfiimation
                     to B by wirer
                                          “‘A
                                          Dallas, Taxas
                                                                            .   l
                                                      Date Hay 24, 1941

                     N*B, Inc.
                     New York, I?.Y.
                          acT!eas principala, confirm PUNXASE      FRO:8
!
        9
I                                  :
  .
      ..


Ron,.boorge       H. Sheppard, Page 6

           YOU of tho follotvingseourities:
              *tNo, bf shares
                     100

           **Mall street name to us New York exchange for
           #lUO.OO attached hereto. t
                Upon recolpt OS A’S check, B mails tho
           stock oertificstes to A, who reoeivos them in
           Dallas.I1
         As more Sully pointed out In our opinion MO,
o-3713, Seotion 1 of Article XV, Xouae Bill No. 8, Acts,
Regular Session, Forty-sevanth Legislature, levies and
imposes an excise stamp tax upon one, but only one, of
the following transactions:
                I, An executory contraot m agreement to
                   sell shares or oertifioates of stock,
                   whether oral or evidenced by the "bill
                   or memorandum of sale* required by
                   Section 1 of the Act, or,
                2. An executed contraot of salo of share9
                   or certificate of stock, whether oral
                   or evidenced by the “bill or memorandum
                   of sale” required by Seotion 1 of the
                   Aot, or,
                3. A deliverjrof shares nor oertifioates of
                   stook, or
                A. A transfer of shares or certificates OS
                   stook upon the offioinl ;boaks and r ec-
                   ordo of the corporation.
         It was further pointed out that under fundaaent-
al prinoiples of law end comity the exoise stomp tax in
question has no extra-territ rial oncr?>kog gnd go iax
jigu&gcErue IS 9&1beJo&
                     0; We tff$“~~m%?%?t~e
         ransgirs                            SF”,“;“”Gi””
the othgr hand, if only one & such acts or tr&~ctiona
tranopiras v:ithln the state the t3x accrues 8vGn though
all of the others ocour outside the state. Cut if all
             *.
.




    Hon. George H. Sheppard, Page   7

    of such taxable transactions or acts occur within the
    stote OS Texas, the exoise tax will not cumulate but
    will reat upon only one of such taxabla transactions
    or sots,
              Contraots SOr the sale of stock are Governed
    by the Sam8 legal principles as other ,contraots. As        .
    with other contraots the ninds of tb buyer, ana seller
    must neet as to the price of tha stock, the terms of de-
    livery and ths pagnent. The oSfar of tho ssllar is not
    binding upon hln unless aooepted by the other party.
    The absolute aoceptance ofan offer without conditions,
    results in an exaoutory contract with a mutuality of
    obligations and ramedi8s. Wsre an offer is acoepted
    by a party it Is not necessary for tho person mekiw
    thaoffsr to aooept the acceptance. EIutualprvnises to
    sell and purchase stool:ax6 a suffioiant consideration
    to support theagroemnent. ‘An exeoutory contract or ssle
    become   azeoutod by a timely and the proper tsnder of
    the stookr The validity of a oontraot for the sale of
    stock is governed bytho laws of tti E tate in v:hichthe
    contract is made (SGQ ganarally, volu*m 3, TXUPSON OH
    CORPOPATIOXS, Third Edition, Seotions ,905, 4l06, 4~6,
    4l.21 and 4126b
        :
             Is any one of the Sour taxable aventa or trans-
    aotions tia3edin the Act and above, present under this
    speoial Saotual s ituation IV-a and these general prin-
    oiplos of lavf,so as to accrue a tax?
             The offer to purchase stock was made by a ras-
    ident or Texas, (IfAn)but suo h OSSer 1~s aOOepted in New
    York by a resident thereor (MBe).and conSirmed by mail.
    The nubsequont confirmntion OS the purohane by nA’tby
    Pyire,although probably nacossary according to Wages Of
    the trade, was unnocass3ry under the lnufof contraots to
    complete a binding and sbsolute a~roomnt or contract to
    8d.l~  In fact, it was not*hingmore than an aoceptance
    oS an aoceptenoe whioh is not nacosnary to orsate mutu-
    ality of obligatlm a0
             Therefora, prior to the delivory of the stock
    to purchaser ItAnand receipt OS the purchase money thora-
    for by seller oB1’,only an axscutory agroozant or oon-
    traot to 3811 thendesignated stiras axistad, Such
              .
4



    .




             Eon. George H. Sheppard, Psge S

                                                          . ..

             eX8cutorp   RgPe8.33lJt,~hOxmP~T,~VFaS   Rn 5b5Oluta   Contraot
             ana not a sale on condition or an option contract. It
             was a bigding contract with nutuclity of obligstlon and           .
             was clearly the %&rtmxent to selln which was mado tax-
             able under the hot, if it ocourrea in Texas.
                      donerally speaking;tho’placa of making a con-
             traot, 1noludihS an exeoutory oontraot to sell 8 took,
             is aetertiinedaoccrding to the parties1 intention; as
             a rule, it Is oonsldWed to be the place where the offer
             is aocepted, or where thenlast act nsooosery to a msot-
             log of the ninds or to ooaplete the contraot 1s pa-
             f023nea.

                   17 O.Y;S, 613, saotion 356)
                   11 dmrioan Jur. 394, Ssotion 211,

             Under facts substantially identical to the Instant oasa,
             but involving an aGresxent to sell stock batmen a citi-
             zen of l?ewYork and a oitizen of Pennsylvania, tha court
             held that the %greamnt   to sell” ~'108 mde in Nam York,
             preliminary to the sending of the certificate to Pemsyl-
             vanla; O%ANE, Jr,, ET AL var STATS OF NEW YOPX, 16 1JpS
             (26) 320; affirmed, Court of Appeals, 28 hi (2d) 905.
                      Therefore, ~778hold that tb Wagraemant to sell”
             in the present case was executed in New Y rk and there-           L-
             fore not taxable under the Texss Act. Bit in addition
             to an “agroamnt to 8a1111,the instant faotual situation
             includes an executed %alX?” of sharas or certificatss of
             stook and a ndeliveryy1of shares orcartlficatcs, tno of
             the taxabla transactions or acts nactsdin the statute.
             Therafore, we mst next detorninc who,th$r or not either
             or both of such transactions oo.ourredvfithin the state
             of Texss so ss to bs abject to this tax measure,
                      As detormlning the place whera an executed con-
             tract of sale is tiado,as distioguishcd from au execirtory
             oontract or agreaznt to soLI.,shove discussod, w state
             the following rule from 11 Ansrican JUT, 395, Section
             1131
                         Welivory of the property is generally,
                          ..

                              ..
        ..
Hon. George H. Sheppard, pa&0 9


    though not necessarily, the aot by which on’
    executory contraot bsoomss an exaoutea oon-
    ,traot. Therefore, In suoh case, the place of
    delivery is generally tho place where the ex-
    eouted oontraot is deemed to have bean nade. v           .
          In deteiminin& the place of delivery of proper-
ty (anb stock has bson held to ba proprty) we quote
from the leading case of ALRXAXDXR vs. EZINDPmmJ~R,   221
8..W. 942, whereIn the Commission of Appeals said:

          “It Is an ostablishad rule of lam thst,
    when proparty Is delivered to a carrier by the
    vendor as direct&d by the vendee, or where tha.
    contraot Is aileat as to the place of delivery,
    delivery to the carrier oparatos as delivery
    to the vendee end passas title to him.”

          This rule finds support in the statement of the
general rule and authorities cited at 37 Tex. Jur. 37A,,
SeCtIOn 166;’ADKCZS-POLE CO. vs. JOEN BAPSLFY &,CO,, 297
6. w. 757.
          Under the.fasts before us, delivery of the stock
OartIfIoate was nade by tho seller nBVtby depositing same
in the United States Ifails in New York forwarding to the
purchaser **A” In Texas,-after receipt of ths purchase
money In New York. V!ethink undor the above prinoipleo
and Specific authorities (17 C.J.S. LO3), as wall as un-
der the express direction of the purohsser in Texss, the
United states mails, In this Instance, was constituted
the oSant of the purchaser,-*lhrrand therefore dalivcry
of the osrtificatas by the seller, 8tBqt,Into the 1Jeils
ln New York wan tantamount to delivery of such sharos..or    V
oertlfiontes in Msw YorL. Hence, ths delivery of such
shares which convertad the exacutory agreeaant or con-
tract of sale into an axeoutod contra0t of sale, trans-
pirad extrastate. Thsreforo, neither t ha “delivery” of
suoh oertifiosta nor the “Sale” which it CcmphtSd,   was
a tnxabla trsnsaotion In Texas*
          The only other remaining tsxoble act or trans-
aotion enunorated in the statute isti??atransfor~~of
such shams or certificates of stock upon the books of
           .-



                :
-’       .

     .
              Hon. Qaorgs R. Sheppard, Page 10


              the corporation, 80 as to pass legal title fro3 the
              seller or transferrer to the vondee or transferrce. It
              doeo not appear fm31 the fsctsstatea   u:laer your fourth
              question vfhethsror not the shares involved   were the      . :
         ..   shares or certificates of a domestic or foreign corpor-
              ation, or v!h6thsror not such shares or Certificates
              were transferred within the state or Texas, and h6nce
              we a0 not pa68 upon the question of nhetinsr or not a
              taxable *transfer* is ~pressnt. :

                         You next desire to know if.the transaction 68;
              acrib&    under parr question Co. IV-b Is taxable. E3
              quots :
                        n(b) This situation is identical.vith the
                  one outlinsd above except aa to the method of
                  paynont for, sna delivery of, stock. In this
                  situation, A(S last message to B reads as fol-
                  lows :
                                                .
                        -A: ;“,s;t buy 100 shar6s at 113. Please
                                      Deliver street name to Chase
                            Nationa; D6v1Pork for our account
                            against payment,’
                       *B’confirms the sale exactly as in the first
                  illustration ana A confirm  his purchase  as in
                  the first illustration except -that instead of
                  saying    ...
                         WWail atr6et name to us ‘ITemYork Exchange
                           for $1130.00 attached hareto,’
                   “A’S confimation   soys:

                         “‘Deliver in str6et name to Chase Xation-
                           al Em:: for our amount against paynont. *
                        *A then sands the purchase price to the
                   Chase National Dank, h’swYork City, and upon
                   recaipt thareof the bank .aailst.h3 stock to A.=
                       The alteration in the &&~sr of the &livery of
              the stock ?nn payment therafor frcu that followed under
  Don. George ti;Sheppard, Page 11

  the facts appearing in subdivision (a) of your fourth
  question does sot require or justify a diffarent c01?-
  elusion. The se!??lagal principles discussed in con-
  nection w8ith your question IFo.IV-a will apply to this
  question, because the only change In the facts is that
  the Chase IEtional Pax& of KXY York is substituted for
* the Unitd    States Xails as tho agent purchassr of ~'A'l,
  to first recairs the certificates of stoc?:frm seller,
  *Y, in l&n7York. Therefore, the nagresmsnt to sell,=
  the Qale" and ths "delivery" of the shsrea or certifi-
  0,;~~9,~;fstock all occurred extrastate so as to be non-
             For reasons steted under the foregoing ques-
  tion, v:: do not pass upon ths taxability of a subsequent
  transfer of such sharas unon the basks of the corpora-
  tion,  bscause ths facts are not furnished us in this
  regard.
           By subdivisicn (c) of your fourth qusstion you
  aesire to kr10!7 if the following transaction is taxable:
            n(c) This oituation in IdmtiCal with the           .*
      two illustrations given above except es to the
      methoa of payment for, and delivery of, stock.
      1x1 this situation, k's last message reads:
            a* 0 K we buy 100 shares at 1.13. Please
             confira. ship street name by draft Dal-
             las iirtional.'

            @B confirm the salo sxsctlp as in the
       first an8 secoud illustrstions, and A coufirxs
       his purchsee as in the first illustration, ex-
       cept that ht3aa   of sayi2g

            e*lJailstreet caze to us, New York Ex-      :
             change for $1130.00 attachsd hereto,*
       *Asa confirmation says:
            "'Ship in street nme by draft on us
             through Dallas National Denk.'
            "R then ottaches ,tho'stockcortificete to
       hi3 draft on A, who pays tha draft and recsivao
       ths stock when ths draft.13 presentsd for pay-
       nellt,"
            .
.q       ‘.

              .




                      Bon. Qeorgd Ii. Sheppard, Page 12
     i
                  .
                               fn this instance the ohange in the methoa of
                      payment for and aSm0rjr  of the shares or CartifiC3t68
                      of stock 0~11s for a different application of ths legal
                      principlss discusse8, and, in our conclusion, results
                      in the taxability of such transaction. It is true that,
                      as in ths cases of subdivisions (a) and (b) oi your
                      fourth question, the na&re8czentto sell” 1728 consm-
                      mate& extrastote SO a8 not to be taxable; but undsr  the
                  ~‘. given method of payzent and delivsry which cozplotea tha
                      contract of sala, such “sale” of the sheres or certifi-
                      cates of stock, as well as the Wcelivery*fthereof.oc-
                      ourred lvlthinthe stato of TSXa8, SO as to zake one or
                      the other,.but not both, of such transactions taxablo.
                                Under subdivisions (a) and (b), tha Texas pur-
                      ohaser, “A”, had, in contex?lation of la-w,an eCent in
                      New York in the United States ?+!ails and in the Chase
                      National Bank, renpootivoly, to receive such shares for
     ..               hla In 178-N York; but under tho facts of subdivisfoll(o),
                      no New York agent of ffA1vis present .toracaive the stock
     ,                and pass title thereto in that state, but, on the contra-
                      ry, title to the stock does not pas8 until after tha
                      receipt of the chrtificates by the Dallas National Dank
                      and tha honorinS, by ‘IA”,of the draft thereto attached.
                      In other wordsI .tha Dall.asNstior,alBank is the agent
                      of llB*c,the hen York seller, ratherthan of “An, ths Texas      .
                      purchaser, and theraforo .a taxable %alel* or “delivery”
                      of the sheres or certificates occurred in this State.

                                    Your fifth question \vith its subdivisions (a),
                       0) I   and   (C) iS qlotea as fO11OW8:

                                W~pposa that in the situations outlined
                          in Question IV the transaotion was initiated
                          by B, v?homade an offer by taletyrs to sail tbs
                          stock to A, so that the teletype cocversation
                          a0loa to the point or the instructions for ds-
                          livery and payment was as follows:
                                    *B: We offer you 100 shsres IX   stock at
                                        113.’
                                    HA: ‘Y!illtake 160 shares at 112-3/A.*
                                    "B: 'sorry   113 best.'
Hon. Goorge R. Sheppard, Page 13


           ad;    ‘0   X w   buy 100      shares     at    113.1

         “(a) With this zodification, and assuclius
    that othamf.se the transaction vms identical
    with that stated in (a) of o,uestionIv, wculd
    the transaction be taxable?
         n(b) With this mcdificaticu, ard asstizisg
    that @themlse the transaction,was identisal
    with that stated in (b) of ;uestion IV, wuld    l

    the transaction be taxable?
         “(c) Q!iththis modification, an3 assusiry
    that otherwise the transaction was identical
    With   thct    8tOt6a    iII   (C)   Of   QUieStfOZI    m,     RJUld
    the traneaotion be taxable?*

         This factual situation presents the Ccnvcrse of
that appearing in your fourth que:otion,ragerding the
executory agreont   or co&mot   to sell shsran or c6r-
.tlficatssof stock. Eare tha offer to ~911 is ncf3s by
*Sac,the NelvYork seller, aml the acceptance cf such of-
fer I8 nade by -An, the purchaser ih Texas. Thuus the
acceptance of an offer which completes the obligation
and mutuality of the contract or agrse.xenttakes place
in Texas rather than in FccnYork, so as to accrue the
excise stag> tax 02 one of the taxable trannactiors or
events mmtioned in the statute, i.e., an wagreezent
to sell.”                                              .
          We reach tl;incoaclusicn das-;itethe conten-
 tion'thot the tax .3.evyis upon the 8aie or egeement to
.sell rothsr thsn upon a purchase or e.gaemnt to -,ur-
 chase stock, ana under this hypothetical ca39, oc1y.a
 3uro!:930is invoived in Taxao.   It should be svar irspt
 in nind that tinetax levy under coaaidcratioa is, actu-
 ally and fun2ansntally, an excise tax upon tinsprivilege
 of transferring shares or cortificstes of stock. .Ths
 t8sm Y,Tansfer* is used hare in its broad and co.lprehen-
 61~3 sense to ma;1 IAe passing of the legal or eqdit-
 able title to ahxces or certificates cif stock frcz one
 person to another, by aal0 or gift, rathsr t&an tha
 nsrsm;ar asnnfng of the mre recording of such tranefsr
 upon the stock trmsfor records ofthe corpomtiun.        It
          .
Eon. George B. Shappard, 3eee 14


is true this tax levy Spaclfically lmpos8s the tax on
all w8a1eS~~,Negrsezsnts to S811", or "nenoronda of
StJ18S" 8ud all "dt3liVfJri8S"
                             Or "trMSf9rS"  of Sh&r8S
or CertifiCet86 Of stock, bat th8S8 ar6 P8rely StEipS
in th8 COxpl8ted tronsfar of shsres or certific3tss
from one stockholder to anothsr. Bents, 'the argwent
is not t8n8bl6~that this excise tax levy ie upon the
sole of .stockrnthor than Upon the uurchose of stcck.
Theterms v~ale*~and nagr28rP,Bnt:to ~l~%Drahend       a
pUrChaS8 cf stock as well as 8 sale, whether the con-
tract is executad or executory, because there cannot
be, contractUally, a sellor without a ~UrO!:aSerend
Vh8   Versa. Therefore, we say a taxable "agreement to
sell*'did occur in Texas, although the seller resided
in H~VJYork.
         Thla one taxable transaction or act being pre-
Sent,    It
         matt6rS UOt t$4t Under   ths  C~rCU.nStamXS      Of  th8
del.ivsryOf th8 Sharas or C8rtifiCatCS     and th8 payment
therefor, Md9r Subdivisions (a) and (b), the %alen and
"daliverge of such-shares or cartificzt6s occurred, as
Under TV-a and (b), in rJer York rather than Texas. On8
taxable transaction or act will suffica to accrua the
tax 8Ven tbough all other t,xabla transactions or evsnts
designated in the tax levy transpire extrastate, Hos-
BVBT, for the reasons stated in our discussion under
your question Iv-c, there is present, in connection with
th8 facts of the delivery of and ~ay:sentfor the stock
lUId8rsubdivision (0) Of your fifth qUeStiOn,        tYJ0 addi-
tions taxable transactions or events, na:nel.y,      an,executed
%ala* of the 6hsreS or certificates in Texas end a
*delivery* of Such certificatas in Texas.
         To fully state the important and essential faots
of yoUr next quastioa v8 quote Same from th8 attached
letter to you of date ?Zay19, 1941, frm  Smithdeal 6:
LsfkowLtz, attorneys of Dalias, Texas:
              "%8 lWpr6S6Et  SO?uB brokers T!hOare msmbars
        of the Dew York Exchange. They take offers to
        883.1at their s8Veral    OffiCcS in %;'.aS8nd tTanS-
        mlt bhem by wire to Mew York. If the offers ers
        8CCoptGd,   a report of the sale is teleGraphed to
        the Texas ofi'iceand a confirmation nailsd to
                .
Hon. George II.Sheppard, Page 15


    the CUStOZ8l’. If the stocks are sold and the
    custoner has possession of the certificatss,
    they are delivered to tha Texas office and for-
    warded by tha Tsxas OfSiccato th8 placa where
    the sale is raada. A receipt is given to the
    onstoxer for the certificates. The Texas of-
    fice does not aake au agreamnt with tha cus-
    toner to Sell the stocks. It impliedly agrees
    to trana?!ittha Offer. hi 9038 Oases the prise
    asked for the stocks can not b8 obtained, and
    the offor:is not accoptod. In sost instences
    the stocks am sold.
         $Houss Bill 8 undertakes to lsvy a tax on
    all ~3138, agreemnts to sell, or ffianorandaof
    Sales, and alldaliveries ortransfers of shares
    or c8rtlSicates of stock, whether intamediato
    or fir,al,

        '. "Our position is, with respect to stocks
   , of.tireign corForatiors, that mithsr the tsle-
     QSsns sent by the Texas office to the E8w York
     office tranmitting the offer to sell, nor the
     telegram from the 1%~ York office to the T8Xa8
     office advising that a sala has bscn aade, nor
     the corfimationofthe sale sailed to the cua-
     toXer fro3 out of the state, nor the raceipt
     for the certificstos in Cas8S inwhich they am
     delivered by th8 customer to the Texas office;
     nor Xezoranda made on the books of ths Texas
     OffiC8, i8 taxable Unfiar the 1aIlGuagaOf the
     statute, and that if the language should bo
  . oonstrued 8s taxing such tolegra36, raceipts,
     confiraatlons,,ard nemoranda, the ststute will '_
     be invalid. In support of our position we cite
     the case of J. X. Lee, Coapirollsr of tha
     Stete of Flcrida, vs. J. P. Bickell, 292 U. S.
                    ,
    415.

           v***."

         Unlike the factual ststomnts presented for our
cpnsideration by your fourth Andy fifth questions, the
above Sects prassnc an 1nsl;anceVWrre shams or CSrtifi-
cetes of stock are sold or tmnsferred, not boteeen cit-
           b.   .Y”
           i
                                                                   ..,8iE


 *   Hon. George HI Sheppard, Paage16


     hns    of Texas and New York, aoting as prinoipals, in
      tholr own behalf, but rather where tho sale or transfer
      1s effected through tho medium of ‘buying brokers and
     sellinS brokers, who m3et on the flcor of the Exchznge
      $n New York and Cousummate, not only the exeo.~.torgagree-            .
     ment or oontraot to sell but likewise the executed oon-
      tract of sale and the delivery of the shares or certifi-
     .03t6u,                                   .
                             .
              A faatual eituati’onidentical to the above wes
     before the Supreme Court of the United States in the case
     of LEi3 vs. BICKCLL, 7% L. $d. 1337, 292 U.S. 135, an&
     the court held, under a tax statute of Florida substnn-
     tlally identical, upon this point, to the ABt before us,
     that the scheme of said statute 173s to tax the transfer
     of ahareo by stamps affLxe& to those writinga only whfhiah,
      in a praotioal 6ense, are the repository of the agree-
     ment or ths lnstrwnents or vehicles for the Ghan&e of
     .tltle, end not to tax mere ooplss of memoranda ancillary
      to transactions ocnsummated outside the state, and henoe
*-    the-excise stook transfer tax would not be oollectible
      by the tnx authorltlee of FlOrlGa,
             Hov!ever,this decision doss not foreclose the
     question of the acorual of the tax under the Texas stat-
     ute, if the shares or oertificstes of stock purohased
     nnder the Pacts outlined, are transferred In the state
     of Texas, upon the official stock transfer books and
     records of the corporations involvod or by their tra;ls-
     fer agent in this state, if any. Neither the decision
     adverted to nor the facts ststed, supra, involve such
     transfer, ‘butwe hold that if such transfer occurred in
     Texas it 1s taxable, despite the fact thet each and
     every other taxeble aot or transaction named in the stat-
     ute occurred in the ststs of NW York.
             The next question subnittod by you, through tba
     above mentioned Icttor, is quotsd t!mrofro~ as folloss:
                Waction 6 of Article ?IVprovld6sthst
            every psrson, firm, company, nssoci~*ion, oor-
            poration, or business conducted by a trustea
            or trustees, engaged in whole or in part in
            the making,or negothting of OalSS, aGrae::ents
.   .




        Eon...
             Gooree H. Sheppard, Pace 17


            to sell, dalivaries or transfers of shares or
            certificates taxable under .thisArticle, or con-
            Uuoting or.transacting a brokorags business,
            shall keep or cause to be kapt at some socassl-
            ble place wlthiu the State cf Texas, s just
            and true book of account, in such form as may
    ’       be prescribed by the Conptrollar, etc.
             .. ‘We should like to know whathor you con-
            strue this 1onCuaSa as applying to a parson
            who telephones or telegraphs an order to sell
            his own stock to a Uaw York broker and forwards
            the stock by mall or express to such Maw York
            broker,  Such person bould be engaged in part
            ia tho making or negotiating of sales and da-
            liveries or tranqfsrs of shares or 0ert:ficstes
            of stock.
                 RVe should also like to know whsthar you
            oonstrue Section 6 as requirip* the StGok B-
            ohanga broker,,who has a local office in Texa,s
            and who narely~trsnsinita,of!‘srsto sail to an
            out of the ststa offioa and, when the Offer is
            aoceptad.,rscoivos a telesran from the out of
            the state office reporting the sale, and in
            .oasas 3.nwhioh tha cartlfio~tss ar3 in possas-
            slon of the Texas customar gives him a reoeipt
            for such oartifiostas and foryrerdsthan to ths
            out of the state offioe for dalivery, must kaop
            books, on a form prasoribad by the comptroller,
            showing such transactions.
                 n*****
                                         \
                 This question has triophases;

                 (1.) records to hs kept by persons, firus
                     or corporations makinq or   negotiatiq


                     selas, agreecants to ~011, deliveries
                     or transfers of shares cr certificates
                     of stock in thoir own bahalf, as prin-
                     .oipols,and,
                 [2) pa3!sons,finas or corporations con-
        .          .*

                          ..
                 duotin& or traiISaOtingd brokerege
                 business.
          Scotion 6     of   the Aot,   insofar   a8 pcrtimnt,
roe:Ca as folloM:

         %wy    pmson, firz, cozpang, associe-
    ti.oa,'ocr?orationor busineso oonductod by a
    truAtU3 OT tl%5keS,  O&p~&i in vihol8or in
    Dart in the CekinG or ne~otistinn of sales.
    ii@mmmts   to soli, doli%?rics cr trmsfcri
    of shnres cr certificate
    Art:clo. or conductirutor Giii
    tic-   - -~ ~~~~~
    at soxe ecc&iblo     $.aoe nithi&th&3tetsm~f
    Terse, a just nnd'true book of ecoount, in
    suoh foivnas nsy be prescribed by the cozp-
    trollar, wherein shall be plainly azldlegibly
    recorded la ixipornie oolums. the dote of
    mk:nG every Glo, aFtri~G:m3tVto   ncll, dcllvory
    or trmofor of such atcreo cr%rtifiGtesc
    Xi70 n&a and-3ZhGKi&sr of ZG3tharoof.
    tho face value, the caxe of the seller or'
    trennferrsr, the naxo of the :u.r~hzceror
    transfureo, the fmo,valu0 g the adhcslve
    ~te-n^psaffixed and tfie idOntlfglng im-der oi!
    tne bi'l.lororanduz      of sslc ucod z.a;ro-
    vidod.for hsrain. This book ehal.1 slso hqrs
    rocordod thorsin mob sopsrcta jxarchzseof
    stock transfer stasqs, ohovringtho dtite,tho
    amoust and.froa whoa suzchased.*8 (32phasis
    supplied),
          It is a?pnrcnt thet the first sortion of the
above SQCtiCn  a#iOs    to Q ;CP3OLl Who tG',fii)hO?leU or
tcle~ra~hs an xdbr to sol1 !~isom stock to a Na-.v        York
brakar &Id forxsrds the stock by smI.1or exg-rossto such
Eew York bmkcr.    '..a
                      do not ?a.:3 ~20::the question of
vikothrr mob ~crson is subject     t-: t!m lxx, bnonwo sew
                  :nd sufficis9t fscts are not bcfo~o us,
is not raqu.z"ut.cd
!:omovor, iho statutory duty to !:zeprecords iS i2:osqd
u:on evary porso~, firci,oorporstioc, atc. *en~:!~edin
~2010 or 12 gart in the ?&&:r, or no~at~etin~       of se~oa,
aCri-67xntato sell, deliveries or trzsfera of shzres
Hon. George H. Sheppard, PO@   19


or ‘oertificatosw, regnrdleos of whether or mt such pcr-
                   itself lieble for the tzx:. Eov:e
son is himelf or __I-                              yc3r
                                                      8
only such rsoords axe required to be ke$t es reflect
texeble tramactions and if, under the hypothetical case
given, such transaotions exe not tcxablo (rhich we do
not pass upon beceur,esufflcie.?tfacts are not given
regardis transfers, etc.) no recor& of such trans-
actions will be required to be kept. This la ;?atentfro2
the undersoored portions of Section 6, L~0ioatir.Sthat
the only records required  to be kept 6ro those pertinent
to taxable transactions, rather than any and al.1records
involving stock tremferb.~

         Uith reference to thet phase of your last ques-
tion regardinS the requirozent, under Section 6 of the
Act, thst persona ox aorporstions “conducting or trens-
aoting a brokerage business” shall keep the described
reaords, v;c are of tho opinion that, under the facts     *
Btated, so taxabla transsotion or &at trampFret in Texas,
and hence the local office of the Stock Xxchanze Broker
rill not be rcquirod to keep A record of such trazmection.
Xowe~cr, no statement a:!?oorswith refarenca to the
transfer of such shams or certiflcstes of stook u,?on
the stock transfer  books or by a transfer agent but if such
does transpire in Texas, tz‘owish to point out that the
local office of said broker vii11 be rscjuircdto keep   *    ’
the full and co.-9leterecords of the entire tremaotion,
required by the statute.
         Trusting the foregoing fully cnsviersyour s?any
inquiries, we are
                               Yours very truly
                               A:Tc?;:Y GzJi$&L OF ‘I’-=&




PQXIob                                         Assistant

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