HonorableJoe Resweber Opinion No. C-764

CountyAttorney Harris County Re: Whether Motor Vehicle Houston, Texas Retail Sales andUse Tax ia due and payable on the transfer of vehicles from a wholly-owned subsidiary corporation to Dear Mr. Resweber: its parent corporation.

By letter of August 30, 1966, you request an opinion of this office on the followingquestion:

"Is the Motor Vehicle Retail Sales and Use Tax duewhen a wholly-owned subbLlti.hl'!,

%n3zwYaiLon transfers title to a motor vehicle to a parent corporation, when there is no merger and both corporations continuedoing business?"
The fact statementaccompanyingyour opinion request states, among other information,the following:

I8 Certificatesof Title to sixteen (i6j automobiles, togetherwith the possessionof said automobiles, were transferred from Starfire PetroleumMarketing Comwv, a wholly-owned subsidiaryof Signal Oil and Gas Company, to Signal Oil Company, It further appears that the accountin

8 records of Starfire indicate that $32, 69.98 is owed by Signal to Starfire for the transfer of said automobiles. The accounting records of Signaj;indicatethe same indebtedness.

. . . Article 6.01, Title 122A,Taxation-General,Vernon's Civil Statutes,provides for the imposition of a tax upon the transfer of automobilesas follows:

"(1) There is hereby levied a tax upon every retail sale of everymotor

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vehicle sold in this State, such tax to be equal to two per cent (2s) of the total considerationpaid or to be paid for said motor vehicle. "(2) There is hereby levied a use tax upon everymotor vehicle purchased at retail sale outside this State and brought into this State for use upon the publichighwaysby any person, firm or corporationwho is a resident of this State or who is domiciled or doing business in this State. The tax imposedby this subsection shall be equal to two per cent (22)of the total considerationpaid or to be paid for said vehicle at said retail sale. The tax shallbe the obligation of and be paid by the person, firm or corporationoperating saidmotor vehicle upon the public highways of this State. "(3) There is hereby levied a use tax in the sum of Fifteen Dollars ($15) upon any personmaking application for the initial certificateof title on a motor vehiclewhich was previously registered in his. name in any other State or foreign country. It is the purpose of this subsection to impose a use tax upon motor vehicles brought into this State by new residents of this State. "(4) There is hereby levied a tax in the sum of Five Dollars ($5) upon any transaction involving the even exchange of two (2) motor vehicleswhich tax shallbe paid by each party to the transaction. "(5) There is hereby levied a tax in the sum of Ten Dollars ($10)upon any person who makes a gift of a motor vehicle to another person which tax shallbe paid by the donee. "The taxes leviedby or under this Chapter shallbe in addition to any and all license fees and taxes leviedby or under any other law of this State." The terms "sale"and "retail sale" are defined in Article 6.03, Title 122A,Taxation-General,V.C.S. as follows: -3674-Honorable JoeResweber, Page 3 (C-764)

"(A) Sale. The term 'sale'aa herein used shall include installmentand credit sales, and the exchange of property as well as the salethereoffo? money, ever- closed----kEEStransactionconstitutinga sale. action whereby the possession of property is transferredbut the seller retains title as security for the payment of the price shall be deemed a sale. "(B) Retail Sale. The term 'retailsale' as herein used shall include all sales of motor vehicles except thosewhereby the purchaser acquires a motor vehicle for the exclusive purpose of resale and not for use." (Emphasis added.)
From the facts stated above, the corporations involved in the transfer of the vehicles are separate entities. International Order of Twelve Knights and Daughters of Tabor v. Florida, 91 S.W.2d 404 (Tex. Civ. App. 193b, no writ hi t a .1, The contention that sales between an affiliated company and its parent company,wherein it is claimed that such transactions are in fact not sales.have been before the courtsmanv times. One of themost recent cases is the case of Washington" Sav-MorOil Co. v. State Tax Commission, 364 P.2d 440, (Wash. Sup.Ct. lgbl); the Court said:

"No authority is cited sustaining the position that the court should 'liftthe corporateveil' in a case of this kind. Our research reveals that the courtswhich have considered the question in like cases have consistently refused to do so. These cases are all set forth in an annotation entitled 'Saleby wholly owned subsidiary to parent corporation,or vice versa, as within retail sales tax, or similar statute',appearing in 64 A.L.R.2d 769. This volume was published in 1959, and our research has revealedno subsequent cages dealingwith the subject."
The writer of that annotation says:

'Since a wholly owned subsidiary is generally incorporated or acquiredby the parent corporation for the purpose of advantageously carrying on some phase of the parent corporation's activities or business,

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the courts have been reluctant to disregard the separate legal entitiesof theparties merely to grant relief from sales, or similar, taxes at the expenseof the State or its subdivision. Thus the contention thatbecause the wholly owned subsidiaryand the parent corporationare so closely integrated. sales by the one to the other does not constitute 'sales'within themeaning of the sales tax, or similar statutehas been rejectedby the c0urts.I'
The Court called attention to the leading case in matters of this nature, name1 ment of Finance, 36 N.E.26 35 t' Superior Oil Co. v. Depart-

,Sup.Ct. Illinois (1941)

. The Court continued, in theWashington case,

"Theappellantasks us.to disregard its separate existence,not in order to prevent fraud or injustice,but in order to Rain an advantage. This we cannot do. The legislature has not seen fit to exclude transactions between affiliated corporations,and we find in the facts of this case nothing which would justify the judicialengraftingof such an exclusion upon the statute."
We find no factspresent in the situationpresented thatwould justify excluding the salesmentioned from the clear provisions of the statute,and, therefore,answer your question in the affirmative.

SUMMARY

The MotorVehicle Retail Sales and Use Tax is due and payable on the transfer of motor vehicles from a wholly-owned

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subsidiarycorporation to its parent corporation,therebeing no merger of such corporationsand both corporations continue in business.
Yours very truly,
WAGGONER CARR Attorw era1 of Texas

Assistant GCC/fb:lr
APPROVED:
OPINION COMMITTEE W. V. Geppert, Chairman Pat Bailey John Fainter James McCoy Mario Obledo
APPROVED FOR THE ATTORNEY GENERAL BY: T. B. Wright

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