Hon. George Ii. Sheppard ~OpinianHo. o-?L4!j Comptroller of elletizPublic Aocounts ore:, @ether cost of lag caxbom black E

ahou d be Austin, Texas alas-sad as paok$ng expense In **arr$olng at**  **market va&ute**  for Dear Sir1 tax purposea.

Your letter of September 17, 1946 requests our oplnion on the above quest Ion.

From the faots given,, it appears that Continental Carbon Companyproduoes and manufaoturea *Class B” carbon black as defined in Oubd$risioa 46 of Article 7047, V.4.C.S. Such statute levies a.tax of 5.2$ ,*of the **value** of all such carbon black produced or manufactured vhere the market value is in excess of four (W.) cents per pound;” The statute defines market value as the average sales price ‘less the cost of packing, freightis and oartagrs?’

The statute further staterr

“The term ‘carbon blaok’ as herein used includes all black pigment produced In whole or in part from natural gas, oaslng-head gas or residue gas by the impinging of a flame upon a channel disk or plate, and the tax here-, in imposed shall reach all products produoeni in such manner.I’ Your letter encloses a **dlagxam** showing the various steps used by Continental Carben CompanyZa the production and sale of its product. M?Gnfe$ame Qa t~heburner house, the impinging

burning natural gas deposits black upon a moving The black Is soraped off arator ;or removal of foreign E is put through an air sepsubs anuas and then Is driven through a %lcro-pulver%Br to insure fineness.

At this point, acoording to the information furnished, the black is in a fY.ne, pewdery form, ailnllar to ordinary soot and now has all the hyelcal characteristics aec9ssary for commercial use. About,F$ or the pmduot &s actually sold in this form. However, it cannot be shlppb3d in bulk but must be carefully packed In neosasarily bulky paokages., :It has been discovered that by agltatl.mg this product :%na rotating, horizontalHon. George II. Sheppard, page 2 (O-7145)

drum, it would be converted into pellets. In this form, the black can be shipped Fnbulk in covered hopper cars, and, because of its density, in smaller sized bags. The change effected by pelletizing is simply to change the shape of the black for economy and convenience in shipping and ultimate use. Nochemical change takes place. About 95%of the product is shipped in this manner. _,,_ ,,,4~

“

. If ,:t.he~exp,ense‘of pelletlzlng is a “cost of packing”, ,then,~%&sr::the. termsof the statute, it is properly deductibl-e fromthe salesprloe in determining the market value of the carbon black for taxpurposes. Wethink such deduction is proper. Instate v’

. Parsons,. 27:S.W..1102 (MO.) the court quoted from Keith v. State, 8 So. 353 (Ala.), as )ollowsr

,.:,~ .%he ~,terma

to paokl, ~‘i.nits, ordinary significationi ,,especially w.henused in reference to car- : riage, means to place ,together and prepare for + taansportat ion.

.. iu ,.:., The pelle&i.ng ,op~eration::app,&rs clearly to be part of the preparation for transportation. It :is not a part of the manufacturing process. A study of the tax statute convinces us that it was the intention of the Legislature to base this production tax on the market value of the finished product to be determinediby sales ‘price less packing and shipping cosc
. We th~inkthe psoduct,ion or manufacture of the finished product, suitablezfor commercial us,e,..is complete immediately prior to the pelletizing ,.pr,ocess. ”

. :..’ .Th,e‘above question is accordingly answered in the affirmative. APPROVED.:O’CT

10,’ 1.9%6

.’ Yours very truly ATTORIWY

GENERAL

OFTEXAS /s/ ‘.Grover Sellers; ~~~ ’ ATTPRREY

GE@ER&‘OFTEXAS

.~. By /s/ J. Arthur Sandlln APPROVED:

OPII$I,& CO~MBITTEE J. Arthur Sandlin, Assistant BY: ,jiVG~;

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