Honorable Joe Resweber Opinion No. C-764 

County Attorney 

Harris County Re: Whether Motor Vehicle 

Houston, Texas Retail Sales and Use 

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 following question: 

"Is the Motor Vehicle Retail Sales 

and Use Tax due when a wholly-owned subbLlti.hl'!, %n3zwYaiLon transfers title to 

a motor vehicle to a parent corporation, 

when there is no merger and both corporations continue doing business?" 

The fact statement accompanying your opinion request 

states, among other information, the following: 

I8 Certificates of Title to sixteen (i6j automobiles, together with the 

possession of said automobiles, were transferred from Starfire Petroleum Marketing 

Comwv, a wholly-owned subsidiary of 

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; indicate the same indebtedness. 

. . . 

Article 6.01, Title 122A, Taxation-General, Vernon's 

Civil Statutes, provides for the imposition of a tax upon 

the transfer of automobiles as follows: 

"(1) There is hereby levied a tax 

upon every retail sale of every motor 

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Honorable Joe Resweber, Page 2 (C-764) 

vehicle sold in this State, such tax to 

be equal to two per cent (2s) of the total 

consideration paid or to be paid for said 

motor vehicle. 

"(2) There is hereby levied a use tax 

upon every motor vehicle purchased at retail 

sale outside this State and brought into this 

State for use upon the public highways by any 

person, firm or corporation who is a resident 

of this State or who is domiciled or doing 

business in this State. The tax imposed by 

this subsection shall be equal to two per cent 

(22) of the total consideration paid or to be 

paid for said vehicle at said retail sale. 

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. 

"(3) There is hereby levied a use tax 

in the sum of Fifteen Dollars ($15) upon any 

person making application for the initial 

certificate of title on a motor vehicle which 

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 

vehicles which tax shall be 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 shall be paid by the donee. 

"The taxes levied by or under this Chapter 

shall be in addition to any and all license 

fees and taxes levied by 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: 

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Honorable Joe Resweber, Page 3 (C-764) 

"(A) Sale. The term 'sale' aa herein 

used shall include installment and credit 

sales, and the exchange of property as well 

as the salethereoffo? money, ever- closed 

transaction constituting a sale. ----kEESaction whereby the possession of property is 

transferred but the seller retains title as 

security for the payment of the price shall 

be deemed a sale. 

"(B) Retail Sale. The term 'retail sale' 

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." (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 a t . 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 courts manv 

times. One of the most recent cases is the case of Washington" 

Sav-Mor Oil 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 'lift the 

corporate veil' in a case of this kind. Our 

research reveals that the courts which have 

considered the question in like cases have 

consistently refused to do so. These cases 

are all set forth in an annotation entitled 

'Sale by 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 revealed no subsequent cages dealing with the subject." 

The writer of that annotation says: 

'Since a wholly owned subsidiary is 

generally incorporated or acquired by the 

parent corporation for the purpose of advantageously carrying on some phase of the 

parent corporation's activities or business, 

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Honorable Joe Resweber, Page 4 (C-764) 

the courts have been reluctant to disregard 

the separate legal entities of the parties 

merely to grant relief from sales, or similar, 

taxes at the expense of the State or its subdivision. Thus the contention that because 

the wholly owned subsidiary and the parent 

corporation are so closely integrated. sales 

by the one to the other does not constitute 

'sales' within the meaning of the sales tax, 

or similar statute has been rejected by 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 the Washington case, 

"The appellant asks 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 judicial engrafting of such an 

exclusion upon the statute." 

We find no facts present in the situation presented 

that would justify excluding the sales mentioned from the 

clear provisions of the statute, and, therefore, answer your 

question in the affirmative. 

SUMMARY 

The Motor Vehicle Retail Sales and 

Use Tax is due and payable on the transfer 

of motor vehicles from a wholly-owned 

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Honorable Joe Resweber, Page 5 (C-764) 

subsidiary corporation to its parent 

corporation, there being no merger of 

such corporations and 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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