Hon. Geo. H. Sheppard               Opinion No. V-616
Comptroller of Public Accounts
Austin, Texas                       Re:   Market value of carbon
                                          black for computing the
                                          occupation tax due on
                                          the production thereof
                                          under facts submitted.

Dear Mr. Sheppard :

         Your letter requesting our opinion relative to the above-
captioned matter reads as follows:

         “1 am attaching hereto:

         “A. Copy of contract between Crown Carbon Co.,
    a corporation of the State of Delaware, and the Canada
    Carbon Black Co. Ltd., a corporation organized under
    the laws of the Dominion of Canada.

         “B. Copy of Contract between Continental Carbon
    Co., a corporation of the State of Delaware, and the
    Witco Chemical Co., a corporation of the State of Illi-
    nois ~

        “C. Copy of contract between the Panhandle Car-
    bon Co. Inc., a Delaware Corporation, and Wisbnick-
    Tumpeer, Inc. an Illinois Corporation.

         “D. Copy of contract between Continental Carbon
    Co., a corporation of the State of Delaware, and Witco
    Chemical Co., a corporation of the State of Illinois

    for your study in answering the following questiens -

         “Is the manufacturer or praducer of carbon black
    authorized to deduct the commissions or fees as de-
    scribed in the foregoing contracts from the sales price
    of carbon black before computing the tax levied under
    Section 46 of Article 7047 R.C.S.

          “For your further study in answer to the above
    question, I am enclosingmemoranda     showin the per-
    centages of stock ownership in these various corpora-
    tions.
Hon. Geo. H. Sheppard, Page 2 (v-616)



           “I do not have a copy of the contracts between pro-
     ducers and Carbon Black Expert Inc. of New York, a Del-
     aware Corporation, organized for engaging solely in ex-
     port trade as defined by an Act of Congress, approved
     April 10, 1918, commonly known as the ‘Webb Act’. The
     stockholders of Carbon Black Export Inc. are the pro-
     ducers who sell their black far export to this associa-
     tion. The Centinental Carben Cempany is a producer
     arid a steckkelder ewning 8bput 7% of the stock in the
     Carbon Black Export Inc.

          “Since the Carban Black Export Inc. purchases the
     black from the @reducers at substantially the same price
     as it receives from its customers, each manth, a ckarpe
     is made by the Carban Black Export Inc. to its prducers
     for a Ire-rata test of its operations. Hence, the price
     received by the Continental Carbon Company is greater
     than that received from sales in the damestic market be-
     cause ef the above charge in addition to expert packaging
     costs and freight to seaboard.

          “The facts in the last two paragraphs are furnisked
     this Department by Mr. Seligman of the Continental Car-
     bon Cempariy.

          “Would the amsunt paid Carbon Black Expert Inc. by
     Cantinental Garbon Company be deductible from the sales
     value before computing the tax en export sales.”

            The following is a c.py rf the memorandum    enclosed with
yeur letter:

                      “PANHANDLE      CARKIN    CO.

      “In 1942 when current sales contract was made with Wish-
       nick-Tumpeer new Witcr Chemical and uatil September
       1947 the stock of Panhandle was owned by

          -5,s - Phillips Petroleum Campany
          “!w% - R. I. Wishnick as trustee under the Pa&an&?
                 Carbon Co. Securities Trust. Of this 5p% A.I.
                 Wishnick had a beneficial interest in tke trust
                 sf 747, or 377. lf the stack.

      “In September,    1947 - Philli~ps seld out to Wishnick and
       the present   stsck is held by ft. I. Wishnick, Trustee for
       100%.
Hon. Geo. H. Sheppard, Page 3 (v-616)



                      CONTINENTAL       CARBON

    “Since organization in 1937, stock of Continental has been
     held by

         “30% - Shamrock Oil & Gas Corp.
         “20% - Continental Oil Co.
         “50’$, or less by R. I. Wishnick as trustee under the
                Continental Carbon Company Securities Trust.

         “At present the holdings are

         -50% by Shamrock & Continental Oil
         “ai% by U. S. Schwartz family
         “41+% by R. I. Wishnick as Trustee”


         At our request you have secured and furnished us a copy
of the contract between the producers and Carbon Black Export,
Inc.

         The term “market value” as used in the carbon black pro-
duction tax act is defined in Article 7047(46), V.C.S. as follows:

         “The market value of a particular type or grade
    of carbon black shall be the average sales price of
    that type or grade of all bona fide sales made during
    the month on which the tax is being paid less the cost
    of packing, freight, and cartage. If no carbon black of
    the particular type or grade has been sold during the
    month for which the tax is being paid then the actual
    market value of the same shall be the average sales
    price of that type or grade of all bona fide sales dur-
    ing the last preceding month in which a bona fide sale
    of that particular type or grade of carbon black was
    made, less packing, freight, and cartage.”

          It will be noted that the market value of each particular
type or grade of carbon black is the.average sales price of that
type or grade of all bona fide sales made during the month less
the cost of packing, frei,ght and cartage. The cost of making-es
is not to be deducted from the sales price in arriving at the mar-
ket value. Although the term “all bona fide sales” is not express-
ly limited to the sales made by each separate producer of carbon
black, it is our opinion that it was the legislative intent to SO limit
it. A reading of the entire act and construing it as a whole clearly
reflects such intent. The tax is due and payable on the 25th of
each succeeding month, and is to be reported to the Comptroller
on forms prescribed by the Comptroller; and the tax is to be com-
puted by the producer.
                                                              -    -




Hon. Geo. H. Sheppard, Page 4 (V-616)



            We have examined the submitted copies of the contracts.
It appears that in two of the contracts the “seller” is expressly made
the agent of the producer ,and receives a percentage of the sales
price for his services in making the sales. Although from certain
provisions contained in the other contracts, it appears that an actual
sale is made by the producers to the other contracting parties, a
reading of the entire contracts and construing them from their four
corners makes it clear to us that a sale is not made under such con-
tract, in that neither the title or possession of any carbon black ever
passes from the producers to the other contracting parties. The sales
are made as agent of the producer. A “sale” is an agreement by
which one of two contracting parties, called the “seller,” gives the
thing, and passes title to it for a certain price in current money. See
Skirvin v. O’Brien, 95 S.W. 696. Both of your questions are therefore
answered in the negative.


                             SUMMARY

           The amount paid to an agent of the producer of car-
      bon black for making sales should not be deducted from
      the sales price in determining the market value of such
      carbon black in computing the tax levied under Article
      7047, V.C.S.


                                          Yours very truly,

                                  ATTORNEYGENERAL@FTEXAS




                                           W. V. Geppart
                                             Assistant
WVG/JCP


                                 APPROVED




                                           EY GENERAL
