c_ - 

AUUTIN ILTEXAR 

WILL WILSON 

September 1~4, 1959 

Honorable Robert S. Calvert Opinion No. WW-700 

Comptroller of Public Accounts 

Capitol Station Re: Applicability~ of Texas 

Austin, Texas Stock Transfer Tax imposed bye Article 70&7m, 

V.C.S., to certain 

Dear Mr. Calvert: stock transactions. 

You have requested our opinion regarding the 

applicability of the Texas Stock Transfer Tax to the following transaction: 

"Customer A, residing in Dallas, Texas, places 

an order with a member of the New York Stock 

Exchange, for 100 shares Texas Utilities Company, 

Capital Stock (a Texas corporation). The order 

is duly executed on the New York Stock Exchange 

in New York. Payment is made by Customer A to 

the NYSE member in Dallas and the stock is registered in the name of Customer A who is a resident of Texas and it is delivered~ to him. Is 

Texas Tax due or is it not? 

"Would the ruling be the same if the NYSE member 

was domiciled in Texas? Would the ruling he the 

same if the NYSE member was a branch office (in 

Texas) of an out-of-state firm?" 

Article 7047m imposes a tax upon all sales, agreements to s,ell and all deliveries or transfers involving a 

change of title, either legal or equitable, to chares, certificates of stock, certificates for rights to stock or 

certificates of deposit representing certificates or interests therein in any domestic or foreign association, company, 

corporation or trustee-conducted business. The act, of 

course, has no extra-territorial effect. Attorney, General's 

Opinion No. O-3713 points out that the tax accrues if (1) 

the contract of sale is made in Texas or (2) if it is 

executed in Texas or (3) if delivery of the enumerated 

shares or certificates is made within the State. 

Whether or not the tax accrues under the fact situation described depends on the position occupied by, the New 

York Stock Exchange member. Under the ordinary New York 
Honorable Robert S. Calvert, Page 2 Opinion No. WW-700 

Stock Exchange rule, sales of stock are required to be made 

on the floor of the Exchange; execution of the sale and 

delivery of the shares is likewise required to be made in 

New York by and between representatives of the seller's 

broker and the purchaser's broker. In such cases, it is 

apparent that the N.Y.S.E. member acts as broker or agent 

for the purchaser; consequently, none of the incidents 

described in the above referred to opinion occur in the 

State of Texas and the tax does not accrue. 

In certain instances N.Y.S.E. members are permitted to make sales of a listed stock off the floor of the 

Exchange. In such situations the member may not be acting 

as a broker, but as a dealer for its own account. Consequently, you are advised that if the N.Y.S.E. member in the 

instant fact situation purchased the stock for its own 

account and re-sold it to Customer A, the transaction is 

taxable, since the sale and delivery occurred in Texas. In 

this connection, it makes no difference whether the N.Y. 

S.E. is domiciled in Texas or is a branch office of an outof-state firm. 

You have also asked us whether or not we agree 

with the conclusions drawn in a brief submitted with your 

request. From the foregoing discussion it is apparent 

that we agree with that portion of the brief dealing with 

New York Stock Exchange transactions, The brief also sets 

forth the following transaction: 

II . . .For example, A, a resident of Beaumont, 

Texas, might personally present to your Texas 

Transfer Agent for record transfer a certificate issued to B with a record post office 

address of Beaumont, Texas, duly endorsed by 

B with his signature guaranteed by a Beaumont 

bank. The probability would appear to be that 

a gift or sale occurred between A and B, without the intervention of a broker, in Beaumont, 

Texas which would require payment of a tax. 

If in fact no sale, agreement to sell or memorandum of sale between the parties was made in 

Texas but A and B had met in California, for 

example, where they had agreed upon the trade 

and delivery of endorsed certificate had been 

made, then no tax would accrue although the 

transferee brought the endorsed certificate 

back to Texas with him and presented it to a 

Texas transfer agent to transfer the stock 

into his own name. Conversely, your New York 

transfer agent might receive by mail from the 
Honorable Robert S. Calvert, Page 3 (Opinion No. WW-700) 

State of Washington, for example, a certificate issued to X with recorded mailing 

address of Washington state with request to 

make transfer to Y with a recorded Washington state address in which case all the 

probabilities would appear to be that the 

transfer resulted from a gift or sale consumated in Washington state free from the 

tax. The true fact might have been that X 

and Y met in Texas where they agreed upon 

a purchase and sale of the shares and 

delivery of the certificate was made, resulting in a taxable transaction." 

These conclusions are based upon and involve application of 

the principles set forth above, and are also correctly drawn. 

A complete discussion of the principles set forth 

herein is found in Attorney General's Opinion No. o-3713. 

Based on this opinion, Opinion No. O-3594 discusses the 

taxability of several different types of transactions. 

These opinions are submitted herewith for your consideration. 

It should be noted that these opinions have been qualified 

by, Attorney General's Opinion No. ww-58 a copy of which is 

also attached hereto. 

SUMMARY 

The taxability of a transaction 

between a resident of Dallas and a New 

York Stock Exchange member in Dallas, 

whereby the Dallas resident purchases 

stock in a Texas corporation, depends on 

the position occupied by the N.Y.S.E. 

member. If the member acts as broker or 

agent for the purchaser, then under New 

York Stock Exchange rules, the agreement 

to sell, the sale, and delivery of th,e 

shares is made by and between representatives of the seller and the purchaser 

in the state of New York; consequently, -- -- 

no tax accrues. However, if the N.Y.S.E. 

member purchases the stock for its own 

account, and then sells it to the Dallas 

resident, the transaction is taxable, 

since the sale and delivery to the 
Honorable Robert S. Calvert, Page 4 (Opinion No. WW-700) 

resident are made within the State of 

Texas. 

Very truly yours, 

WILL WILSON 

Attorney General 

BY VL 

J.@c N. Price 

Assistant 

JNP:bct 

APPROVED: 

OPINION COMMITTEE: 

Geo. P. Blackburn, Chairman 

William E. Allen 

C. Dean Davis 

Jay D. Howell 

B. H. Timmins, Jr. 

REVIEWED FOR THE ATTORNEY GENERAL 

By: W. V. Geppert