                     THEATITORNEY      GENERAL
                              OF TEXAS

 WI&     WILSON
A~TORNEYGENERAI.                     March 20,        1957


  Hon. Robert S. Calvert                     Opinion No. WW-52
  Comptroller of Public Accounts
  Capitol station                            Re:     Whether or not a sales tax should
  Austin, Texas                                      be paid on the transfer of the
                                                     motor vehicles from the Dresser
                                                     Industries, Inc., to the Lease Plan,
                                                     Inc., and a use tax on the transfer
                                                     of the motor vehicles from the
                                                     Lease Plan, Inc., to the Dresser
  Dear Mr.   Calvert:                                Industries, Inc.

             You request the opinion of this office upon the questions            con-
  tained in your letter of February 27, 1957, as follows:

              “We are enclosing a letter we received from Mr.
       R. J. Banks, attorney for Dresser Industries, Incorporated,
       Dallas, Texas1 also copies of two agreements, one covering
       the transfer of motor vehicles sold by Dresser Industries,
       Inc., a Delaware corporation, to Lease Pike, Incorporated.
       The other agreement refers to the lease of the+motor
       v.ehicles by.the Lease Plan, Inc., to Dresser Industries,
       Inc;

              “The agreements refer to a financing arrangement
       between   the two corporations, and Mri Banks stated in his
       letter that he was of the opinion that the sale and use tax
       levied in Article 7@47K, Section 2-a should not be paid OP
       the transfers.

             “You will please edvls,e us whether or not in your
       opinion a sales tax should .be paid on the transfer of the
       motor vehicles from the Dresser Industries, Inc., to the
       Lease’ Plan, Inc., and a use tax on the transfer of the
       motor vehicles from the Lease Plan, Inc., to the Dresser
       Industries, Inc.”

                 Your questions   reframed    are:

             1. Is the Sales Tax imposed by Section 1 of Article 7047k,
  V~ernon’s Civil Statutes, upon retail sales of motor vehicles sold in
  this State due by virtue of the contract of sale and purchase made
  between Dresser .Industries, Inc., as the Seller and Lease Plan, Inc.,
  as the Purchaser, said contract of sale and purchase being dated
  February 15, 1957, a copy of which is submitted with your request.
Bon. Robert S. Celvert,       pege 2 (WW-52)



           ‘;.. ‘2, Is. {the Use .Tax impixed. byeSection 2: tif. Artirle 7tMn,
V.C.S., on vehicles purchesed et retail sale outside this State and
brought into tliis S~tate bi. ‘use upon the :pubiti highwa)rs :thtieof by n
firm 0s cor~tation~,d~ictled             xir :~:doirig;bu’tiEin&s’
                                                                 :.in
                                                                   s t&Is St&w, .lnKviru:e
bf the..rdntoett:.of: ~h&ie.sr.rZ ~urc&se bbetweeii te&e.               Stan;. .~nc..,:i&d
Dre,ssar IndpstrfGs;. I&.;. aSd ‘~,the i&se, &g&emu& bbt&ee~ti:.Lease PLnn,
flic;,~ as::Ilensozr.,&nd :Drissek. Inddstr&es. .&sci~,.irszP;es”seei: :shid. led& (
                                   l957r,, a copy of .-prhic~~sesLbinitUd::,\liit;; your
being :~rted:~Eh~sfSelutrjr-~.1~;::.
i~llest;~’         , ,.,:“.,   : ~” .:, ‘,: ..‘I.. ” ,‘.‘Y~ :::’ ..,:.:.. “‘. ..‘
                                                                                ,.I ::;

           We answer your qnestions in the foregoing order.    Section l(e)
of Article 7047k, V.C.S., levies e tax of 1.1% of the total consideration
paid to the Seller by the Buyer of motor vehicles sold in this Stete,
with some conditions not material here.

           We must determine if the contract of sale and purchese of
February 15, 1957, between Dresser Industries, Inc., designated in the
contrect as the Seller, and Lesse Plan, Inc., designated in the contract
es the Purchaser,   constitutes e sale of motor vehicles within the pur-
view of the statute, and therefore taxable.   An exarninatioa of the
entire contrect is therefore necessary.   It is a6 follows:

           “This egraament ‘entered into this 15th day of
     February, 1957, by and between DRESSER INDUSTRIES,
     INC., e Deleware corporation,: which, with Lts successors
     and as~igas, Le~hereinafter termed the”SELLBR’~      and
     LEASE PLAN, INC., a New York Corporation, which,
     with Us successors end assigns, is hereinafter termed
     =PURCBASER’,

                               WITNESSETH:

            ‘1.  In consideration of the sum of $4,522.699.99
     qd the covsnan~ and premises herein recited, the
     SELLER and its undersigned subsidiary companies here-
     with agree to sell, end the PURCBASER herewith agrees
     to purchese, all of the equlpmept described in that cer-
     tain proposed Equipment Lease ‘Agreement,    a cozy of
     which is attached hereto and mark&i Exhibit “A , which
     exhibit ,is made B part hereof for all purposea.

           “2.   The SELLER hereby represents and warrants
     that all of said equipment 18, and at the time of ,the trents-
     fer of tUle  will be, la good date of repair and operating
     conditicm$ that SELLER and Ua subsidiuy       companies have
     clear tltie therbto, ,ssd that rll of such equipment 1s free
     end clear of all itons and encumbrances whatsoever.

              *The SELLER and Its subsidiary companies do hereby
     sell,   assign end &nwsfer to the PURCHASER all of their
Hon. Robert’ S. Celvert,   page 3 (WW-52)



     right, title and interest in end to said equipment end
     warrant that the seme is free end clear of all liens
    ,end encumbrances whatsoever end egree to warrant
     end defend the same against all end every, person or
     persons whofnsoever.

           “The SELLER end Lts subeidibry companies
    will ekecute duch bills of sale, certiflcetes of title
    or other lnstturrlents of convey&ice which may bo
    legally necessery to confirm the ‘foregoing sales end
    transfers of unencumbered title to the PURCBMER.

               It is understood end agreed by end between
    the pa$es    hereto thet in addition to the purchese
    price hereinefter referLed do, one of the considerations
    for SELLER entsring tdto this agreement to sell the
    equipment, hereinabove referred to, to PURCHASER
    is the agreement ,of PURCHASER, es evidenced by said
    Exhibit A “, to leese sdid equipment to SELLER in
    accordance with the terms end cpnditions of said
    Exhibit “A*.

          -4.   The purchase price of $4,522,699.99 for the
    equipment now described in Exhibit UA” shell be
    peyeble in cash by the PURCHASER to the SELLER upon
    the execution of the Equipment Lease Agreement es set
    forth in Exhibit “A”.

          “‘Each of the undersigned companies, except SELLER
    end PURCHASER, do hereby euthoriae PURCHASER and
    MANUFACTURERS       TRUST COMPANY, 55 Broad Street,
    New York City, New York, to pay the purchase price
    for such equipment to DRESSER INDUSTRIES, INC., end
    do further euthorise DRESSER INDUSTRIES, INC., tb
    receive end receipt for sit moneys received in connection
    with the sale of such equipment, ,end such companies do
    further agree to hold PURCI-IASER end MANUFACTURERS
    TRUST COMPANY harmless from any end all claims,
    demands, or right to receive payment fortthe sale of any
    such equipment.                                           . . ,.
           “IN WITNESS WHEREOF, the parties hereto hsve
    affixed their signatures on the day, month end year hsre-
    inebove sat forth et Deltas, Texas.

           We do not know if all or only e pert of the equipment
covered by the aforesaid contract consists of motor vehicles.   We
assume that e substantive portion of it does.   This opinion & con-
fined, in answering your first questlou, only to motor vehicles covered
by the contract, low&d wlthln this State es of the date of the contract
Hon. Robert S. Calvert,   page 4 (WW-5.2)



and which have not been tahen out of the State and. resold prior to the
date of the contract.  The statute defines. “sale” or “sales” and “retail
sale” or “retail sales” as follows:

           “The term ‘sale’ or ‘sales’ as herein used shall
    include instalment and credit sales, and the exchange
    of ‘property. as well as the sale thereof for money,
    every closed transaction constltutlng a sale. . .
                          .
           “The term ‘retail sale’ or ‘retail sales’ 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.*

           We think the contract construed in its entirety imports a
“sale. . . for money” and is a “closed transaction” and 1s a sale for
use and not for resale, all features .of a taxable .sale under the statute.   I!

           You are therefore respectfully advised that as to all motor
vehicles located in Texas, where they have remained without a resale
outside the State, that are covered by the contract, the tax imposed by
Section l(a) ?f Article 7047h, V.C.S., is due.

           In answer to the second part of your question, you are advised
that the use tax imposed by Section 2 of Article’ 7047k, on purchases of
motor vehicles made outside the State and brought into this State for use
upon the public highways by a resident of this State or by firms or
corporation& domiciled, or doing business in this State would apply to any
of the motor vehicles covered by the contract or lease agreement pur:
chased outside the State, but brought into the State for use upon the
highways of this State.   The use tax may accrue under circumstances
such as covered by our Opinion No. V-1044,     a copy of which you have.
Therefore,  if Dresser Industries, Inc., should bring into the State
motor vehicles, covered by the contract, that were purchased outside
the State but brought into the State for use upon the highways of the
State, the use tax would be due by the one who operates said motor
vehicles upon the public highways of this State.   This 1s provided for
by the statute in this language:
           s
            n . . 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.”

          The’ statute contains the only exemption from the tax which
we are privileged to recognize’; that is where the purchase is made for
resale and not for use.   It is quite clear that the motor vehicles
involved hare are for use and not for resale.     We do not regard the
lease agreement as modifying or changing thenotherwise plain and
unambiguous language of the contract of sale and purchase.     No tax is
   -       .




Hon. Robert S. Calvert,     page 5 (WW-52.)



imposed under the statute upon the leasing of motor vehicles,          but
only upon sales.

            You are therefore advised in answer tomthe second part of,
your  question that the use, tax imposed by Section 2 of Article 7047h,
depends upon whether there ,ie involved motor vehicles purchased outside
the State but brought into the State for use upon the public highways.~
This, of course, ,is a question of fact which we are not authorlsed to
pass upon.

           This taxing statute (Article 7047k. ~Vernan*e Civfl Statutes)
must of’s necessity be c~onstrued in,~co.nne~ctionwith Article 1436-1,
Vernon’s Annotated Penal Code commonly referred to as the Certificate
of Title Act.  This Article of the Penal Code is divided .:lnto many
sections. and subsections and a detailed analysis ‘is not required for the
purpose of this Opinion.   Suffice, lt to say that it covers ~every step of
the way referable to the sale, mortgage,. etc., of motor vehicles.      The
Couet of Civil Appeals: in the case of Commercial Credit Corporation,
v. Harris, 227 S.W.2d 886 ~(no~wrlt history) expressed it as follows:

              “Since 1939, Article 1436-1, Vernon‘s Penal Code;
       which article is ‘divided into more than sixty-four
       sections and subsections, has been in effect in this State.
       The act is very complete in its detail and covers every
       step of the way referable to acquiring, owning, operjtlng,
       buying, selling, mortgaging and otherwise creating liens
       on motor vehicles.    All persons in this State are charayrble
       with notice of its provisions and’must ln ~thelr~dealings ,be
       governed thereby. . ..*

           The ‘case of Gr,iffin v. Moon, 288 S.W;2d 543 (no writ history)
holds that the provisions of Article 1436-1, Varnon’s Annotated Penal
Code, if not strictly observed, neither a~ sale nor a ‘mortgage is
accomplkhed   and the ,partles ~111 be left as the Court. f&ids them.

          The Supre~me Court in the case of Motor Investment CO. ‘v.
City of Hamlin, 142 Tex. 486, 179 S.W.2d 278, kaidZtl#*-rfaliowing:
              u
               . . . The obvious
       the whole field of sales
       vehicles.   It carries the
       or parts of Acts
       Act are hereby

                                    SUMRMBY

               The sslea tax imposed    by Section 1, of Article
               7647h. V.&S.,  accrues   upon ail ‘retail. sales of
               motor vehicles sold in   this State and the use
               tax imposed by Section    2 of Article 7047h, V.C.S.,
                                                             -   -




 Hon. Robert 6. Calvert,   page $ (WW-52)



           accrues’ ok all purchases    of motor vehicles
           made outaide this State, bit brought ‘into this
           State foi use upon the public highways by a
           resident of this State, or a firm or cbrpora-
           tton domiciled or doing business in tliis State
           and the ta% is imposed upon the user of the
           vehicle upon the highways of this State.   This
           tuing etatute should be construed in connection
           with Article 1436-1, Vernon’s Annotated Penal


                                    Yours     very truly,

                                    WILL WRhSON
                                    Attorney General



                                       BY   -&/“w
                                            L. P. Lo1    r
                                             Assistant

 LPL: C6

. APPROVED!   ,

 OPINION COMMfTTSE
 H. Grady Chandler, chrlrman




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