THEATITORNEY GENERAL 

OF TEXAS 

WI& WILSON 

A~TORNEYGENERAI. March 20, 1957 

Hon. Robert S. Calvert Opinion No. WW-52 

Comptroller of Public Accounts 

Capitol station Re: Whether or not a sales tax should 

Austin, Texas be paid on the transfer of the 

motor vehicles from the Dresser 

Industries, Inc., to the Lease Plan, 

Inc., and a use tax on the transfer 

of the motor vehicles from the 

Lease Plan, Inc., to the Dresser 

Dear Mr. Calvert: Industries, Inc. 

You request the opinion of this office upon the questions contained in your letter of February 27, 1957, as follows: 

“We are enclosing a letter we received from Mr. 

R. J. Banks, attorney for Dresser Industries, Incorporated, 

Dallas, Texas1 also copies of two agreements, one covering 

the transfer of motor vehicles sold by Dresser Industries, 

Inc., a Delaware corporation, to Lease Pike, Incorporated. 

The other agreement refers to the lease of the+motor 

v.ehicles by.the Lease Plan, Inc., to Dresser Industries, 

Inc; 

“The agreements refer to a financing arrangement 

between the two corporations, and Mri Banks stated in his 

letter that he was of the opinion that the sale and use tax 

levied in Article 7@47K, Section 2-a should not be paid OP 

the transfers. 

“You will please edvls,e us whether or not in your 

opinion a sales tax should .be paid on the transfer of the 

motor vehicles from the Dresser Industries, Inc., to the 

Lease’ Plan, Inc., and a use tax on the transfer of the 

motor vehicles from the Lease Plan, Inc., to the Dresser 

Industries, Inc.” 

Your questions reframed are: 

1. Is the Sales Tax imposed by Section 1 of Article 7047k, 

V~ernon’s Civil Statutes, upon retail sales of motor vehicles sold in 

this State due by virtue of the contract of sale and purchase made 

between Dresser .Industries, Inc., as the Seller and Lease Plan, Inc., 

as the Purchaser, said contract of sale and purchase being dated 

February 15, 1957, a copy of which is submitted with your request. 
Bon. Robert S. Celvert, pege 2 (WW-52) 

‘;.. ‘2, Is. {the Use .Tax impixed. bye Section 2: tif. Artirle 7tMn, 

V.C.S., on vehicles purchesed et retail sale outside this State and 

brought into tliis S~tate bi. ‘use upon the :pubiti highwa)rs :thtieof by n 

firm 0s cor~tation~,d~ictled xir :~:doirig ;bu’tiEin&s:.in ’s t&Is St&w, .lnK viru:e 

bf the.. rdntoett:.of: ~h&ie .sr.rZ ~urc&se bbetweeii te&e. Stan;. .~nc..,:i &d 

Dre,ssar IndpstrfGs;. I&.;. aSd ‘~,the i&se, &g&emu& bbt&ee~ti:.Lease PLnn, 

flic;,~ as::Ilensozr.,&nd :Drissek. Inddstr&es. .&sci~, .irszP;es”seei: :shid. led& ( 

being :~rted:~Eh~sfSelutrjr-~.1~;::. l957r,, a copy of .-prhic~~sesLbinitUd::,\liit;; your 

i~llest;~’ , ,.,:“., : ~” .:, ‘,: ..‘I.. ” ,‘.‘Y~ :::’ ..,:.:.. “‘. ..‘,. I::; 

We answer your qnestions in the foregoing order. Section l(e) 

of Article 7047k, V.C.S., levies e tax of 1.1% of the total consideration 

paid to the Seller by the Buyer of motor vehicles sold in this Stete, 

with some conditions not material here. 

We must determine if the contract of sale and purchese of 

February 15, 1957, between Dresser Industries, Inc., designated in the 

contrect as the Seller, and Lesse Plan, Inc., designated in the contract 

es the Purchaser, constitutes e sale of motor vehicles within the purview of the statute, and therefore taxable. An exarninatioa of the 

entire contrect is therefore necessary. It is a6 follows: 

“This egraament ‘entered into this 15th day of 

February, 1957, by and between DRESSER INDUSTRIES, 

INC., e Deleware corporation,: which, with Lts successors 

and as~igas, Le~hereinafter termed the”SELLBR’~ and 

LEASE PLAN, INC., a New York Corporation, which, 

with Us successors end assigns, is hereinafter termed 

=PURCBASER’, 

WITNESSETH: 

‘1. In consideration of the sum of $4,522.699.99 

qd the covsnan~ and premises herein recited, the 

SELLER and its undersigned subsidiary companies herewith agree to sell, end the PURCBASER herewith agrees 

to purchese, all of the equlpmept described in that certain proposed Equipment Lease ‘Agreement, a cozy of 

which is attached hereto and mark&i Exhibit “A , which 

exhibit ,is made B part hereof for all purposea. 

“2. The SELLER hereby represents and warrants 

that all of said equipment 18, and at the time of ,the trentsfer of tUle will be, la good date of repair and operating 

conditicm$ that SELLER and Ua subsidiuy companies have 

clear tltie therbto, ,ssd that rll of such equipment 1s free 

end clear of all itons and encumbrances whatsoever. 

*The SELLER and Its subsidiary companies do hereby 

sell, assign end &nwsfer to the PURCHASER all of their 
Hon. Robert’ S. Celvert, page 3 (WW-52) 

right, title and interest in end to said equipment end 

warrant that the seme is free end clear of all liens 

,end encumbrances whatsoever end egree to warrant 

end defend the same against all end every, person or 

persons whofnsoever. 

“The SELLER end Lts subeidibry companies 

will ekecute duch bills of sale, certiflcetes of title 

or other lnstturrlents of convey&ice which may bo 

legally necessery to confirm the ‘foregoing sales end 

transfers of unencumbered title to the PURCBMER. 

the pa$es hereto thet in addition to the purchese 

It is understood end agreed by end between 

price hereinefter referLed do, one of the considerations 

for SELLER entsring tdto this agreement to sell the 

equipment, hereinabove referred to, to PURCHASER 

is the agreement ,of PURCHASER, es evidenced by said 

Exhibit A “, to leese sdid equipment to SELLER in 

accordance with the terms end cpnditions of said 

Exhibit “A*. 

-4. The purchase price of $4,522,699.99 for the 

equipment now described in Exhibit UA” shell be 

peyeble in cash by the PURCHASER to the SELLER upon 

the execution of the Equipment Lease Agreement es set 

forth in Exhibit “A”. 

“‘Each of the undersigned companies, except SELLER 

end PURCHASER, do hereby euthoriae PURCHASER and 

MANUFACTURERS TRUST COMPANY, 55 Broad Street, 

New York City, New York, to pay the purchase price 

for such equipment to DRESSER INDUSTRIES, INC., end 

do further euthorise DRESSER INDUSTRIES, INC., tb 

receive end receipt for sit moneys received in connection 

with the sale of such equipment, ,end such companies do 

further agree to hold PURCI-IASER end MANUFACTURERS 

TRUST COMPANY harmless from any end all claims, 

demands, or right to receive payment fortthe sale of any 

such equipment. ,. 

. . 

“IN WITNESS WHEREOF, the parties hereto hsve 

affixed their signatures on the day, month end year hsreinebove sat forth et Deltas, Texas. 

We do not know if all or only e pert of the equipment 

covered by the aforesaid contract consists of motor vehicles. We 

assume that e substantive portion of it does. This opinion & confined, in answering your first questlou, only to motor vehicles covered 

by the contract, low&d wlthln this State es of the date of the contract 
Hon. Robert S. Calvert, page 4 (WW-5.2) 

and which have not been tahen out of the State and. resold prior to the 

date of the contract. The statute defines. “sale” or “sales” and “retail 

sale” or “retail sales” as follows: 

“The term ‘sale’ or ‘sales’ as herein used shall 

include instalment and credit sales, and the exchange 

of ‘property. as well as the sale thereof for money, 

every closed transaction constltutlng a sale. . . 

. 

“The term ‘retail sale’ or ‘retail sales’ as 

herein used shall include all sales of motor vehicles 

except those whereby the purchaser acquires a motor 

vehicle for the exclusive purpose of resale and not 

for use.* 

We think the contract construed in its entirety imports a 

“sale. . . for money” and is a “closed transaction” and 1s a sale for 

use and not for resale, all features .of a taxable .sale under the statute. I! 

You are therefore respectfully advised that as to all motor 

vehicles located in Texas, where they have remained without a resale 

outside the State, that are covered by the contract, the tax imposed by 

Section l(a) ?f Article 7047h, V.C.S., is due. 

In answer to the second part of your question, you are advised 

that the use tax imposed by Section 2 of Article’ 7047k, on purchases of 

motor vehicles made outside the State and brought into this State for use 

upon the public highways by a resident of this State or by firms or 

corporation& domiciled, or doing business in this State would apply to any 

of the motor vehicles covered by the contract or lease agreement pur: 

chased outside the State, but brought into the State for use upon the 

highways of this State. The use tax may accrue under circumstances 

such as covered by our Opinion No. V-1044, a copy of which you have. 

Therefore, if Dresser Industries, Inc., should bring into the State 

motor vehicles, covered by the contract, that were purchased outside 

the State but brought into the State for use upon the highways of the 

State, the use tax would be due by the one who operates said motor 

vehicles upon the public highways of this State. This 1s provided for 

by the statute in this language: 

s 

n . . The tax shall be the obligation of and be paid 

by the person, firm, or corporation operating said motor 

vehicle upon the public highways of this State.” 

The’ statute contains the only exemption from the tax which 

we are privileged to recognize’; that is where the purchase is made for 

resale and not for use. It is quite clear that the motor vehicles 

involved hare are for use and not for resale. We do not regard the 

lease agreement as modifying or changing then otherwise plain and 

unambiguous language of the contract of sale and purchase. No tax is 
- . 

Hon. Robert S. Calvert, page 5 (WW-52.) 

imposed under the statute upon the leasing of motor vehicles, but 

only upon sales. 

You are therefore advised in answer tom the second part of, 

your question that the use, tax imposed by Section 2 of Article 7047h, 

depends upon whether there ,ie involved motor vehicles purchased outside 

the State but brought into the State for use upon the public highways.~ 

This, of course, ,is a question of fact which we are not authorlsed to 

pass upon. 

This taxing statute (Article 7047k. ~Vernan*e Civfl Statutes) 

must of’s necessity be c~onstrued in,~co.nne~ction with Article 1436-1, 

Vernon’s Annotated Penal Code commonly referred to as the Certificate 

of Title Act. This Article of the Penal Code is divided .:lnto many 

sections. and subsections and a detailed analysis ‘is not required for the 

purpose of this Opinion. Suffice, lt to say that it covers ~every step of 

the way referable to the sale, mortgage,. etc., of motor vehicles. The 

Couet of Civil Appeals: in the case of Commercial Credit Corporation, 

v. Harris, 227 S.W.2d 886 ~(no~wrlt history) expressed it as follows: 

“Since 1939, Article 1436-1, Vernon‘s Penal Code; 

which article is ‘divided into more than sixty-four 

sections and subsections, has been in effect in this State. 

The act is very complete in its detail and covers every 

step of the way referable to acquiring, owning, operjtlng, 

buying, selling, mortgaging and otherwise creating liens 

on motor vehicles. All persons in this State are charayrble 

with notice of its provisions and’must ln ~thelr~ dealings ,be 

governed thereby. . ..* 

The ‘case of Gr,iffin v. Moon, 288 S.W;2d 543 (no writ history) 

holds that the provisions of Article 1436-1, Varnon’s Annotated Penal 

Code, if not strictly observed, neither a~ sale nor a ‘mortgage is 

accomplkhed and the ,partles ~111 be left as the Court. f&ids them. 

The Supre~me Court in the case of Motor Investment CO. ‘v. 

City of Hamlin, 142 Tex. 486, 179 S.W.2d 278, kaidZtl#*-rfaliowing: 

u 

. . . The obvious 

the whole field of sales 

vehicles. It carries the 

or parts of Acts 

Act are hereby 

SUMRMBY 

The sslea tax imposed by Section 1, of Article 

7647h. V.&S., accrues upon ail ‘retail. sales of 

motor vehicles sold in this State and the use 

tax imposed by Section 2 of Article 7047h, V.C.S., 
- - 

Hon. Robert 6. Calvert, page $ (WW-52) 

accrues’ ok all purchases of motor vehicles 

made outaide this State, bit brought ‘into this 

State foi use upon the public highways by a 

resident of this State, or a firm or cbrporatton domiciled or doing business in tliis State 

and the ta% is imposed upon the user of the 

vehicle upon the highways of this State. This 

tuing etatute should be construed in connection 

with Article 1436-1, Vernon’s Annotated Penal 

Yours very truly, 

LPL: C6 

. APPROVED! , 

OPINION COMMfTTSE 

H. Grady Chandler, chrlrman 

WILL WRhSON 

Attorney General 

BY -&/“w 

L. P. Lo1 r 

Assistant 

.