Hon. George Ii. Sheppard ~OpinianHo. o-?L4!j 

Comptroller of elletizPublic Aocounts 

ore:, @ether cost of 

lag caxbom black ahou E 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 Company produoes 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 Company Za the production 

and sale of its product. 

M?Gnfe$ame 

Qa t~he burner 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 :%n a rotating, horizontal 
Hon. George II. Sheppard, page 2 (O-7145) 

drum, it would be converted into pellets. In this form, the 

black can be shipped Fn bulk 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. 

No chemical 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. We think 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 ~,term a to paokl, ~‘i.n its, ordinary significationi ,,especially w.hen used in reference to car- 

: riage, means to place ,together and prepare for 

+ taansportat ion. .. i u 

,.: ., 

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 cos c . We 

th~ink the 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 OF TEXAS 

/s/‘.Grover Sellers; ~~~ ’ 

ATTPRREY GE@ER& ‘OF TEXAS . ~. By /s/ J. Arthur Sandlln 

APPROVED: OPII$I,& CO~MBITTEE 

J. Arthur Sandlin, Assistant 

BY: ,jiVG~; ,X!HAIRMti 

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