'T~A~~~RNEYG~ERAI. 

OF TEXAS 

AUSTINU,- 

Honorable Geo. H. Sheppard 

Cotiptroller- of Public Accounts 

Austin, Texas 

Dear Sir: Opinion No. O-2081 

Re: Does.the corporation in Questton 

operate "stores" or "bona fide 

distributing polntti" within the 

meaning of the Texas Chain Store 

Tax Act? 

In requesting our opinion a$ to whether or nbt the 

establishments operated by the corporation Tn question-'are 

"stores" within the meaning. of the Texas Chain Store Tax Statute, 

you present the following facts: 

"A Urge corporation malntalns warehouses 

oif&r the State of Texas. The main office contacts concerns and sells merchandise to be 'called 

for at these different warehouses In the state, 

and this merchandise Is sold on a contracted 

pr~ice basis. If such purchaser wishes to putichase a thasand Items, the contract will read 

that such purchaser will receive a thousand 

items' at a given price. If he purchases over a 

thoiasand Items, he 1s to receive another price 

In a lower bracket, etc. The number of Items 

to be purchased ?s not determined when this contract is executed. 

"The purchaser who holds a contract with 

this corporation decides to make a purchase of 

merchandise, for which he has previously contracted, 

calls at these warehouses and loads such merchandise on trucks and signs an order slip for same. 

This' orders slip Is sent to the main offlce by the 

warehouseman and then purchaser Is charged wlth the 

merchandise. There are no cash sales made at 

these warehouses, as all sales are charged accoun:s, 

predetermined by contract and good credit rating. 

You isre apparently concerned with whether or not the 

Q;lcirehouses operated by the corporation come within the %xemptlofi 

contained in Sectlbn 5 of Article lllld, Vernon's Annotated Penal 

Code, which reads as follows: 
Honorable Geo. H. Sheppard, .page 2' O-2081 

'* + * * or any place or places of 

buslness,used as bona fide wholesale or retail 

dlstrlbutlng points by manufacturing concerns 

for dlstrlbutlon of products of their own manufacture only; + + + *'I 

The above quoted exemption was fully discussed by 

the Commlsslon of Ap 

P 

eals of Texas In the case of Hurt vs. 

Cooper, 110 S.W. (26 896. The court stated as follows, concerning the same: 

"Exemption No. 5, applying to manufacturing concerns distributing products. of 

their own manufatiture, has been particularly 

slngled out and attacked as being arbitrary. 

It ls well to conalder-'the exact language of 

that exemption. Itls as follows: I* * + or 

any place or places of business used as bona 

fide wholesale or retail distributing polnts 

by manufacturing concerhs for distribution of 

products of their own manufacture only. * * *I 

-~"IN section 7 of the act (Vernon's Ann. 

P. C. art. 11116) Is found a definition of 

“store" . It Is as follows: 'The term "store" 

as used In this Act shall be construed to mean 

and Include any store or stores or any mercantile establishment or establishments not 

specifically exempted within this Act which are 

owned, operated, maintained, or controlled by 

the same person, agent, receiver, trustee, firm, 

corporation, copartnershlp or association either 

domestic or foreign, in which goods, wares or 

merchandise of any kind are sold, at retail or 

wholesale.' 

"The statute having defined the word, we 

are not concerned with its usual meaning. Under 

that definition a mercantile establishment at 

whlch,goods, wares, or merchandise of any kind, 

except those exempted, are sold is a store and 

1s taxable as such, and this even though It may 

also be a dlstrlbuting polnt. Fox Case, supra. 

Conversely, a mercantile establishment at which 

no sales are made Is not a store, and therefore 

not taxable. The test'ls whether sales of goods, 

wares, or merchandise are made at the place. 

The lahguage of exemption 5 does not disclose a 

leglslatlve intent to exempt any mercantile establishment at which sales of such commodities 

are made. ****at 
Honorable Geo. H. Sheppard, page 3 0 -2081 

'* * * * It may be~that some manufacturing concerns~malntain bona fide distributing 

points at which no sales are Made, but-from 

which they merely distribute at wholesale to 

their stores or at retail to purchasers' from 

their sales agents. If s,o, such btisinesses 

would appear to be within the terms df this provision. Obviously they would not cbm& within 

the affirmative operation of the statute && we 

have construed It, and therefore no ~expNss exemption was required to relieve them-.fi"oti the 

burden of the tax. But, If the Legislature 

desired to make that matter certaSn by adding 

exemption 5, it did not thereby lmperll'the~ 

statute, but merely added a surpliis pMvisSdn. 

We need not, however, indulge in ang +.pectiliitlon on the subject of what bu9lness6s;~lYany, 

are Included within the terms of this so-called 

exemption. Sufficient is it; we think, to 

observe that, had the Leglslatui%liitefided to 

exempt businesses operated by marnifaettirlng concerns engaged in selling their prodiidts, it 

would have employed more apt and exact language 

than that found in this provision. ~H6ib Its 

intention been to exempt stares, why was the 

term 'bona fide' Inserted, and why--wMe they 

called distributing points? Why, ali6, was hot 

the word 'sale' used instead ijf the'ijord "dlstrlbutlon'? The least-that cali be said~7.s that 

the language is reasonably suiceptible of the 

construction which we have given It. + * * *" 

As stated by the court, the test Is whether sales of 

goods, wares, or merchandise are made at the place. Therefore, 

lf under the contract In question the sale of the merchandise Is 

made at the warehouse, such place of business then becomes a 

store which is taxable under the Texas Chain Store Tax Act. If 

on the other hand the sales.are made by the salesmen or agents 

of the corporation, and the warehouse is used as a bona fide 

dlbtributlng point and no sales ape made at the same, then such ' 

place of business would be exempt under the Texas Act. 

Under the facts submitted it Is obvlous that the salesman does not make the sale of the merchandise. The contract that 

the salesman signs with the dealer only sets the price of certain 

of the Merchandise. Under the contract the dealer Is hot bound 

to buy any of the merchandise. He may, however; purchase as nnzzh 

as he pleases.. The dealer Is not bound to buy any specific type 

of merchandise. Therefore, when he goes to the warehouse~and 

selects the types and quantity of merchandise he is purchasing, 
Honorable Geo. PI. Sheppard, page 4 O-2081 

that is where~the actual sale of the merchandise takes place 

despite the fact that the price Is predetermined. 

You are, therefore, advised that under the facts submitted the corporation would'be liable for a Chain Store-T&x, on 

the'warehouses Inquestion because sales of goods, wares, or 

merchandise are made at such places. 

Yours very truly 

ATTORNEY GENERAL OF TEXAS 

By s/Billy Goldberg 

Billy Goldberg 

Assistant 

BG:RS:wc 

APPROVED MAY 29, 1940 

s/Gerald C. Mann 

ATTORNgY GENERAL OF TEXAS 

Approved Opinion Committee By s/BWB Chairman