OFFICE OF THE AlTORNEY GENERAL OF f%xAs 

AUSTIN 

-cIlurc 

-IOU OFFICE OF THE ATTORNEY GENERAL OF TEXAS 

AUSTIN 

Honorable George H, Sheppard 

Comptroller of public Aooounts 

Austin, Texas 

Dear Sir: Opinicn No. O-4056 

R0: Whether or not the ten per oent 

additional charged the buyer by 

merohants in order to cover the 

Federal tax should be included 

in the "receipts from the sale" 

on which the 2 per cent State 

sales tax on radios end cosmetics 

(Art, 7047-L, V.AC.S.) is calculated. 

This is in reply to your request for our opinion on 

the question of whether or not, when certain articles are sold 

at retail, the extra charge collected by merchants because of 

the recent Federal Revenue Act of 1941, levying a ten per cent 

tax, should be included in computing the tax on the sale of 

radios and cosmetics due the State of Texas under Article X, 

House Bill No. 6, Forty-seventh Legislature, 1941, oodified as 

Article 7047-L of Vernon's Annotated Revised Civil Statutes of 

Texas. If a radio or a quantity of cosmetics sold at retail 

for ten ($10.00) dollars before the Federal Revenue Act of 1941 

went into effect, and if said radio or said quantity of oosmetios sold at retail for eleven ($11.00) dollars after the Act 

went into effect, the one ($1.00) dollar being added to cover 

the ten per cent Federal tax, would the State tax be oaloulated 

on a sale price of ten ($10.00) dollars or on a sale price of 

eleven ($11.00) dollars? 

The State tax in question, to-wit, said Article 7047-L, 

V.A.C.S., reads in part as follows: 

%eotion 1. Each person, partnership, assooiation, or corporation selling at retail new radios or 

new cosmetics, shall make quarterly on the first days 

of January, April, July end October of each year, a 

report to the Comptroller under oath of the owner, 
Honorable George H. Sheppard, Pa&e 2 

manager, or if a corporation, an officer thereof, 

showing the aggregate gross receipts from the sale 

of any of the above named items for the quarter next 

preceding; and shall at the same time pay to the 

Comptroller * luxury excise tax equal to two (2) per 

cent of said gross receipts as shown by said report. 

I'* * * 

"Nothing herein shall be construed so as to 

require payment of the tax on gross receipts herein 

levied more than onoe on the proceeds of the sale 

of the same article of merchandise, A retail sale 

EIS used herein, means a sale to one who buys for 

use or consumption, and not for resale:. Gross receipts of a sale means the sum which the purchaser 

Pays, or agrees to pay for an article or commodity 

bought at retail sale." 

The Federal taxes in question are levied under the terms 

of "Public Law 250, Chapter 412, Seventy-seventh Congress, First 

Session," known as the "hevenue Act of 1941," effective October 

1, 1941. That part of the Act with whioh we are concerned levies 

two types of taxes, to-wit, (1) a manufacturers and producers tax, 

and (2) a sales tax. 

That part of th? "Revenue Act of 1941" that concerns 

radios is S&ion 545, which amends Section 3404 of the Internal 

Revenue Code, and reads as followsa 

"There shall be imposed upon the following articles (including in each CBSR, except in the case of 

musical instrurr,ents, parts or accessories therafar 

sold on or in cocnection with the sale thereof) sold 

by the manufacturer, producer, or importer a tax 

equivalent to 10 per centum of the price for which 

sold: 

"(a) Radio receiving sets, automobile radio receiving sets, combination radio and phonograph sets, 

and phonographs. 

"(b) Chassis, cabinets, tubes, reproducing 

units , power packs, antennae of the 'built-inc.type 
Honorable George H. Sheppard, Page 3 

and phono~aqhm~r~~nj-~,E., wh.i&.%x WLL+R&J~~ fv 

use on or in ccnnection with, or as component parts 

of, any of the articles enumerated in subsection 

(a), whether CP not primarily adaptsd for such use, 

"(c) Phonograph records. 

"(d) Musical instruments." 

That part of the "Revenue xct of 1941" that oonoerns 

cosmetics is a part of Section 552, which adds 8 chapter 19 to 

the Internal Revenue Code, and reads 8s follows: 

"Sec. 2402. (a) Tax. - There is hereby imposed 

upon the following articles sold at retail a tax 

equivalent to 10 per centum of the price for which 

so sold: Perfumes, *ssenoes, extracts, toilet waters, 

cosmetics, petroleum jellies, hair oils, pomades, 

hair dressings, hair restoratives, hair dyes, arome.- 

tic cachous, toilet powders, and any similar substance, 

article, or preparation, by whatsoever naxie known or 

distinguished; any of the above which are used or applied or intended to be used or applied for toilet 

purposes. 

I'* * * 

"Sec. 2403. (a) Fvery person who sells at retail 

any article taxable under this chapter shall make 

monthly returns under oath in duplicate and pay the 

taxes imposed by this chapter to the collector for 

the district in which is located his principal place 

of business * * * . 

fl * * * 

"(c) In determining, for the purposes of this 

chapter, the price for which an article is sold, there 

shall be included any charge for coverin& and containers of whatever nature, and any charge incident 

to placing the article in condition packed ready for 

shipment, but there shall be excluded the mount of 

tax imposed by this chapter, whether or not stated as 

a separate charge. A transportation, delivery, insurance, installation, or other charge (not required 
Honorable George H. Sheppard, Page 4 

by the foregoing sentence to be included) shall 

be excluded from the price only if the amount 

thereof is established to the satisfaction of the 

Commissioner, in accordance with the regulations. 

There shall also be excluded, if stated as a separate charge, the amount of any retail sales tax 

imposed b:f any State or Territory or political 

subdivi(lion of the forekoinb, or the District of 

Columbia, whether the liability for such tax is 

in-posed on the vendor or the vendee." 

Let us examine the State law, to-wit, Article 7047-L, 

V.A.C.S. It says th&t each person, etc., "sellin& at retail new 

radios or new cosmetics, shall make quarterly * * * a report * * * 

showing the a®ate &ross receipts from the sale of any of the 

above named items * * *; and shall * * * pay to the Comptroller 

a luxury excise tax equal to two (2) per cent of said brass receipts * * *.'I It is important for us to determine what reoeipts 

are "from the sale," We believe it is a question ?f what part 

of the money passes is the sale price, 

Section 545 of the Federal Revenue Act of 1941, which 

is the part that concerns radios, is a manufacturers and producers 

tax, It is levied against the manufacturer, producer or importer. 

The tax is measured by the amount the manufacturer, producer or 

importer receives for it when he sells the article, but, neoertheless it is a tax ag,ainst said manufacturer, producer or importer. 

The courts have held in many instances that taxes levied by statutes worded like said Section 545 are against the manufacturer, 

producer or importer, Lash's Products Company VS. United States, 

278 U. S. 175, 73 L. Ed. 251, 49 Sup. Ct. R. 100; Thurman V, 

Swisshelm, 36 Fed. (Zd) 350; Con-Rod Exchange, Inc., V* Henrioksen, 

28 Fed. Supp. 924; and People v. ';'erner, 364 Ill. 594, 5 N. E. 

(2d) 238. An amount equivalent to such a tax is usually added to 

the price of the article by the manufacturer in the same manner 

that he aids other costs incurred in prodwin& the article, for 

example, increased rents, ad valorem taxes, unemployment oompensation taxes, and many other i.tems or cost; and each person in 

turn buyink and reselling the article passes this added cost on 

until it reaches the consumer. The consumer cannot pass it on. 

In the case of taxes of this kind the consumer usually p&ys them 

in the form oi an increased cost to the oonsumer. The tax becomes 

8 part oi; the sale price. Ihis view is clearly illustrated by the 

language of Justion Holmes in the case of Lash's Products Company 

V. United States, supra, in which he saidr 
Honorable George H. Sheppard, Page 5 

"This is a. suit to reoover the amount of certain taxes paid under the Revenue Aot of 1918 (Act 

of February 24, 1919, C. 18, 1 628, 40 Stat. 1057, 

1116). By $ 626 there is imposed on 'soft drinks, 

sold by the manufacturer, * * * in bottles or other 

closed containers, a tax equivalent to 10 per oentum 

of the price for which so sold.1 

by the petitioner, 

This tax was paid 

calculated at ten per oentum of 

the sum actually received by it for the goods sold. 

But the petitioner had notified its customers beforehand that it paid the ten per cent tax and it contends 

that in this way it passed the tax on and that the 

true price of the goods was the sum received less the 

amount of the tax. 'The phrase 'passed the tax on1 is 

inaccurate, as obviously the tax is laid and l~emains 

on the manufacturer and on him alone. Heckman & Co. 

The same view was taken by the Supreme Court of Illinois in the 

case of People v. Werner, supre, in which the court said: 

"* * * Section 617 of the internal revenue laws 

(26 U.S.C.A.p$ 3601-3629, see 26 U.S.C.A. 1 1420 et 

seq. note) levies a federal excise txx of one cent per 

gallon on the producer or importer of gasoline and prescribes for his registration and thjr conditions under 

which he shall furnish bonds, make returns, and pay the 

tax to the federal collector of the district. No excise tax is imposed upon or paid by the retailer of gasoline, It may be true that the federal excise tax upon 

gasoline which is paid b:y the producer or importer is, 

upon its sale to the retailer, added to the cost of the 

product as a separate charge, in the same manner as 

transportation, delivery, insurance, or other charges 

are added. The itemization of these separate charges, 

or any of them, in the invoices sent by the producer or 

importer to the retailer, does not change the fact that 

the producer or importer has paid the tax to the federal tovemment and has thereby, in effect, raised the 

cost of the gasoline to the retailer. The federal excise tax has thernfor~e made the t;asoline cost one cent 

per gallon more to the retailer, just as import and 
r 

Honorable George H, Sheppard, Page 6 

. 

other taxes levied by the federal government are added to the price of cigars, cigaretts, clothing, or 

automobiles sold by producers or importers to retailers, The retailer, whether of tobacco, gasoline, 

clothing, or automobiles, has no duty or burden of 

collecting or paying over to the federal government 

any manufacturer's, importer's, or excise taxes - 

they have already been paid before he gets the nrticle, and they are as much a part of the cost to him 

as are freight, express, insurance, or other charges 

which enter into and increase the cost of such articles. * * * n 

A similar view was taken by the court in the case of Elmer Candy 

Company Y. Fauntleroy, 19 Fed, (2d) 664. 

It is our conclusion that the ten per cent increase in 

the amount collected on the sale of a radio, because of the Federal tax, is a part of the sale price. 

We reach a different conclusion in the case of cosmetics. 

Section 552 of the Federal Revenue Act of 1941, which concerns 

radios, is a retail sales tax. It is a tax on the retail sale, 

and although the seller remits the amount of the tax to the Gwernment the tax is collected from the buyer in the retail sale, 

to-wit, the consumer. In this o&se the consumer pays the tax without any disguise. In construing a Federal sales tax on gasoline 

that was similar in wording to this particular Federal sales tax 

on cosmetics the Supreme Court of Michigan in the ease of Standard 

Oil Co. Y. State, 283 Mich. 85, 276 N. ?:. 908, said: 

' * * + The trial court held that both of the 

above-mentioned federal taxes are taxes on the sale 

of gasoline and lubricating oil and not taxes upon 

their manufacture and permitted plaintiff to recover. 

"Appellants admit that the federal excise tax 

above mentioned is not a tax on the manufacturer, but 

is a tax on the sale. 

11 * * * 

'I * * * when sales we made directly from producer 

to oonsumer, the sales tax attaches the instant 8 sale 

is made. In view or the fact that the federal e*cise 
c 

. 

Honorable George H. Sheppard, Pabe 7 

tax and the State sales tax attach at the instant a 

sale is made, it follows that the federal tax has not 

become a part of the sale price, but is a fund, which 

when collected is payable by the manufacturer to the 

federal government. Such fund does not become a part 

of the 'gross proceeds' realized by the manufacturer 

from the sale, ad is not subject to taxation within 

the meaning of Act No. 167, Pub. Acts 1933. 

fl * * * 

"The conclusion is inevitable that the federal 

excise tax may not be considered as a part of the retail prioe, and the judgment of the trial court is affirmed." (Underscoring ours) 

It is our conclusion that the ten per cent increase in 

the amount collected on ~the 6~10 of cosmetics, because of the 

Federal tax, is not a part'of the sale price. - 

Our answer to your inquiry is that the Federal tax in 

regard to radios is a manufacturers and producers tax, and the 

tax is actually paid by the manufacturer or producer and added 

to the selling price as a part of the cost of production. Said 

increase in cost to the consumer is a part of the sale price. But 

on the other hand, the Federal tax in regard to cosmetics is a 

retail scles tax, and the tax is actually paid by the buyer, towit, the consumer. Said increase in cost to the consumer is not 

a part of the sdle price. In both cases the consumer pays an 

amount equivalent to the Federal tax; but, in the oise of' radios 

it is in the form of an increased price because of an increased 

production cost caused by a tax on the producer, md in the case 

of cosmetics it is in the form of an undisguised sales tax borne 

directly by the consumer, In computing tho State tax on the sale 

of radios it should be calculated on the amount paid by the purchaser including the amount added because of the Federal tax; but 

in computing the State tax on the sale of cosmetics it should be 

calculated on the amount paid b:r the purchaser excluding the 

amount added because of the Federal tax. 

APPROVED NOV 7, 1941 

Yours very truly 

ATTORNEY GENERAL OF TELAS 

(S) Grover Sellers 

FIRST ASSISTANT 

ATTORKJiY GENLRAL 

CCR:ej 

(S) By Cecil C. Rotsch 

Assistant