Honorable Robert S. Calvert Opinion No. w-819 

Comptroller of Public Accounts 

Capitol Station Re: Applicability of the 

Austin 11, Texas Texas stock transfer 

;z ;C;. 16, H.B. 11, 

56th Leg 

codified’as Title ii2A, 

Taxation-General, R.C. 

S.) to joint tenancy 

arrangements under employees a stock purchase 

Dear Mr. Calvert: plan. 

Your request for our opinion upon the referenced 

subject reads as follows: 

“Article 16.01.; Title 122A, Taxation-General, 

Revised Civil Statutes of Texas, reads In part 

a6 follows~ 

“OThere is hereby imposed and levied’s tax 

as hereinafter provfded on all sales; 

agreements to sell; or memoranda of sales; 

and all deliveries or transfers of shares; 

or certlfieates of stock; or certificates 

for rights to stock; or certificates of 

deposit representing an interest in or 

representing certificates made taxable under this section in any domestic or foreign assoolatfon, companyP or corporation; 

or certificates of interest in any business conducted by trustee or trustees made 

after the effective date hereof, whether 

made upon or shown by the books of the association, company, corporation or trustee, 

or by any assignment in blank or by any 

delivery of any papers or agreement or 

memorandum or other evidence of sale or 

transfer or order for or agreement to buy, 

whether Intermediate or final, and whether 

investing the holder with the beneficial 

interest In or legal title to such stock 

or other certificate taxable hereuuder, or 

with the possession or use thereof for any 
Hon. Robert S. Calvert Page 2 Opinion No. w-819 

purpose, or to secure the future payment 

of money or the future transfer of any 

such stock, or certificate on each hundred 

dollars of face value or fraction thereof, 

3.3 cents except in cases where the shares 

or certificates are Issued without designated monetary value, in which case the 

tax shall be at the rate of 3.3 cents for 

each and every share,O--- 

"A question has arisen In connection with an 

Employee Stock Option Purchase Plan in cases 

where the employee directs that the shares of 

stock be issued in the name of himself and another as joint tenants. 

"In connection 

copy of letter 

with this request I am enclosing 

to me from Kemp, Smith, Brown, 

Goggln & White, Attorneys at Law, El Paso, 

Texas, Also, I am enclosing a Prospectus which 

sets out the terms of the Employee Stock Purchase Plan in question. 

"I will appreciate your opinion as to whether 

or not the stock transfer tax accrues on the 

following transactions: 

"(1) If the employeeus nauthorisations 

specifies that the shares of stock be 

issued in the name of the employee 

and another person as joint tenants, 

does this constitute a transfer requiring the affixing of stock transfer tax stamps to the authorization? 

“(2) If the purchase price of the stock is 

paid for with community funds and 

the stock, by virtue of the employee 

authorization, is issued to the employee and his or her spouse as joint 

tenants, should the stamps be affixed 

to this authorization; if so, on the 

whole amount of shares of corg on 

one-half the amount of shares? 

“(3) If the shares under the authorization 

are to be issued In the name of the 

employee and a person not his spouse, 

should the stamps be affixed to this 

authorization; if so, on the whole 
Hon. Robert S. Calvert Page 3 Opinion No. w-819 

amount of shares or on one-half the 

shares?" 

The following information is discernible from the 

prospectus: 

1. The Company has reserved 50,000 shares of unissued Common Stock for sale to employees 

through this plan. 

2. Participation in the plan is through authorization by the employee of a stated payroll 

deduction, to accumulate throughout the option 

period. 

3. The option price is determinable as a percentage of the over-sne-counter market average; 

however, should such option price on the exercisable date exceed the closing bid price, the 

Company will purchase for the employee, in lieu 

of the option exercise, the number of shares 

which his accumulated deductions will buy. 

4. An employeeas rights are non-assignable; however, he may direct that the stock be issued 

in the names of himself and another as joint 

tenants. 

Our opinion is that, where the original stock set 

aslde Is issued pursuant to the employee's authorization and 

exercise of option, to the employee and another as joint 

tenants, there has been no "transfer" within the meaning of 

the Act and no tax thereon is due. 

Attorney GeneralIs Opinion No. O-3594 (1941) held 

that no tax accrues hereunder upon the Issuance by a corporation of original (previously unissued) stock. Opinion No. 

O-4026 (1941) held that the sale or transfer of certificates 

for rights to stock by an original subscriber to receive 

original issue stock, is a taxable incident. Opinion No. 

O-4029 (1941) extended this holding of taxability to a transfer of a right to subscribe to stock even where such right is 

not evidenced bra "certificate for rights to stock," basing 

this conclusion primarily upon the wording and construction 

of the Federal stock transfer tax act, However, this latter 

opinion was overruled by Opinion No, O-5833 (1944), holding 

that such rights to subscribe are not taxable under the Texas 

law, supporting its conclusion with a careful comparison of 

the wording of the Texas, Federal, and New York Acts, and judicial and administrative constructions of the latter. 
Hon. Robert 5. Calvert Page 4 Opinion No. m-819 

In the present situation, the employee, by authorizing an issue of stock in the name of himself and another 

as joint tenants, has implicitly transferred to the joint 

tenant a portion of his exclusive right under the option 

plan to subscribe to stock. However, an application of the 

reasoning of Opinion No. o-5833 would declare such a transfer non-taxable under the Texas law. Sinee, as pointed out 

above, it is contemplated that sueh subscriptions will be 

filled with reserved original Issue stock, no transfer tax 

will accrue under the State act upon such issue. It should 

be apparent, however, that, in the event a situation arises 

as in point 3 above, where the employee receives over-thecounter stock, purchased by the Company, In lieu of the exercise of his option, a transfer tax will accrue. 

In view of our answer to your first question, it 

becomes unnecessary to consider herein your questions two 

and three. 

SUMMARY 

Where an employee elects, under a stock 

purchase plan, of the type submitted, to have 

original stock issued in the name of himself 

and another as joint tenants, no tax accrues 

under the Texas stock transfer tax law (Ch. 16, 

H.B, 11, 3rd C.S., 56th Leg., Title 122A, R,C.S.) 

Very truly yours, 

WILL WILSON 

Attorney General 

JRIzbct 

APPROVED: 

OPINION COMMITTEE: 

W. V, Ceppert, Chairman 

James M. Farris 

J. Arthur Sandlin 

John C. Steinberger 

Zellner J. Turlington 

REVIEWED FOR THE ATTORNEY CENERAL: 

By; Leonard Passmore