'T~A~~~RNEYG~ERAI.

OF TEXAS
AUSTINU,-

Honorable Geo. H. Sheppard Cotiptroller-

of PublicAccounts 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 establishmentsoperatedby the corporation Tn question-'are "stores"within the meaning. of the Texas Chain Store Tax Statute, you present the following facts:

"A Urge corporationmalntalns warehouses oif&r the State of Texas. The main office contacts concerns and sellsmerchandise to be 'called for at these differentwarehouses In the state, and this merchandise Is sold on a contracted pr~ice basis. If such purchaserwishes to putichase a thasand Items, the contractwill read that such purchaserwill receive a thousand items' at a given price. If he purchases over a thoiasandItems,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 purchaserwho holds a contractwith this corporationdecides 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 offlceby 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, predeterminedby contract and good credit rating.

You isre

apparently concernedwith whether or not the Q;lcirehouses

operatedby 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, .page2' O-2081

'* + * * or any place or places of buslness,used as bona fidewholesale or retail dlstrlbutlngpoints by manufacturing concerns for dlstrlbutlon of products of their own manufacture only; + + + *'I

The above quoted exemptionwas fully discussed by the Commlsslon of ApPeals of Texas In the case ofHurt vs. Cooper, 110 S.W. (26 896. The court stated as follows, concerning the same:

"ExemptionNo. 5, applying to manufacturing concerns distributingproducts. of their own manufatiture, has been particularly slngled out and attacked as being arbitrary. It lswell to conalder-'the exact language of that exemption. Itls as follows: I* * + or any place or places of businessused as bona fidewholesale or retail distributing polnts by manufacturing concerhs for distribution of products of their own manufacture only. * * *I

-~"INsection 7 of the act (Vernon'sAnn. P. C. art. 11116) Is found a definition of “store"

. It Is as follows: 'Theterm "store"
as used In this Act shallbe construed to mean and Includeany store or stores or any mercantile establishment or establishmentsnot specifically exemptedwithin this Act which are owned, operated,maintained, or controlledby the same person, agent, receiver, trustee, firm, corporation,copartnershlp or association either domestic or foreign, inwhich goods, wares or merchandise of any kind are sold, at retail or wholesale.'

"The statute having defined the word, we are not concernedwith itsusual meaning. Under that definition a mercantile establishmentat whlch,goods, wares, or merchandise of any kind, except those exempted, are sold is a storeand 1s taxable as such, and this even though It may also be a dlstrlbutingpolnt. Fox Case, supra. Conversely, a mercantile establishmentat which
no sales are made Is not a store, and therefore not taxable. The test'lswhether 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. ****atHonorable Geo. H. Sheppard, page 3 0-2081

'* * * * It may be~that some manufacturing concerns~malntainbona fide distributing points at which no sales are Made, but-from which theymerely 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 theywould not cbm&within the affirmative operation of the statute && we have construed It, and therefore no ~expNss exemptionwas 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 merelyadded a surpliis pMvisSdn. We need not, however, indulge in ang +.pectiliitlon on the subject ofwhat bu9lness6s;~lYany,
are Includedwithin the terms of this so-called exemption. Sufficient is it; we think, to observe that, had the Leglslatui%liitefided to exemptbusinesses operatedby marnifaettirlngconcerns engaged in selling their prodiidts,it would have employedmore apt and exact language than that found in this provision. ~H6ib Its intentionbeen to exempt stares,why was the term 'bonafide' Inserted,and why--wMe they called distributingpoints? Why, ali6, was hot the word 'sale'used instead ijfthe'ijord"dlstrlbutlon'? The least-that cali be said~7.s

that the language is reasonably suiceptible of the constructionwhich we have given It. + * * *"

As statedby the court, the test Iswhether sales of goods, wares, or merchandise are made at the place. Therefore, lfunder the contract In question the sale of the merchandise Is made at the warehouse, such place of business then becomes a storewhich is taxableunder the Texas Chain Store Tax Act. If
on the other hand the sales.aremade by the salesmen or agents of the corporation,and the warehouse is used as a bona fide dlbtributlngpoint and no sales ape made at the same, then such ' place of businesswould be exemptunder 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 signswith 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 thatunder the facts submitted the corporationwould'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/BillyGoldberg Billy Goldberg Assistant

BG:RS:wc

APPROVED MAY 29, 1940 s/Gerald C. Mann ATTORNgY GENERAL OF TEXAS
Approved Opinion CommitteeBy s/BWB Chairman