December 3, 

### 1973

The Honorable Robert S. Calvert Comptroller of Public Accounts State Finance Building Austin, Texas

Dear Mr. Calvert: Opinion No. H- 173 Re: Various questions concerning the application and interpretation of Articles 6. 01, et seq., Vernon’s Texas Civil Statutes, Taxation- ’ General, the Motor Vehicle Sales and Use Tax Your opinion request raises several questions relative tothe Motor Vehicle Retail Sales and Use Tax (Articles 6.01, et seq., Vernon’s Texas Civil Statutes, Taxation-General). You advise us that on November 

### 16,1971, an entity we shall call the Marketing Corporation 

### tooktitle to

### a1972 automobile which ithad acquired from the manufacturer. The principal, ifnot the only, business ofthe Marketing Corporation was to transfer possession ofautomobiles to licensed dealers for leasing and rental to the general public. Marketing Corporation had a contract covering such transactions with another company which we shall call Sales, Inc., No. 1. From November 16, 1971, to June 13, 1972,. title to the 1972 automobile remained inMarketing Corporation, although Sales, Inc. , No. 1, had possession and was leasing and renting the automobile tothe general public. On June 13, 1972, Marketing Corporation assigned title to the automobile to Sales Inc., No. 1, which, onthe same date, assigned itto athird company we shall call Sales, Inc., No. 2. Sales, Inc., No. 2, inturn sold the automobile at retail to abona fide purchaser. On June 14, 1972, Marketing Corporation applied for atitle to a new automobile, listing the 1972 automobile as atrade-in and seeking to deduct its value from the value ofthe new automobile indetermining the sales tax, ifany, tha was due under the provisions of $D(3) ofArticle 6.03, V. T. C. S , TaxationGeneral, which provides: p. 795The Honorable Robert S. Calvert, page 2 (H-173)

“Any person purchasing motor vehicles for resale at retail who has obtained a certificate of title to a motor vehicle which he uses for personal or business purposes 

### may deduct the fair market value of such vehicle from the ‘total consideration’ when such person purchases another motor vehicle uponwhich he obtains a certificate oftitle as a substitute vehicle for personal or business use and the original vehicle is offered for sale at retail. ” Your first question asks whether theAssessor-Collector has authority to take a sales affidavit without the signature ofan appropriate officer ofMarketing Corporation. Article 6.05 requires that each transaction involving the sale or exchange of amotor vehicle be accompanied by an affidavit from the purchaser and the seller outlining the terms ofthe transaction. The statute provides:

“Where any party to a sale, exchange, even exchange or gift is a corporation, the president, vice president, secretary, manager or other authorized officer ofthe corporation shall make the affidavit for the corporation. ” Since the Marketing Corporation is aparty to two ofthe transactions described inyour letter, we believe that, in connection with these two transactions, the affidavit must be signed by “the president, vice president, secretary, manager or other authorized officer ofthe” Marketing Corporation, in conformance with the ewct wording ofthe statute and that the Assessor-Collector may not accept itwithout such signatures. Your second question inquires:

“2. Where title is taken inthe name of [the Marketing Corporation], does Article 6.03, Section D(3)apply on a replacement value? ” We assume that when you refer to title being taken inthe name ofthe Marketing Corporation, you had inmind the second vehicle that the Marketing Corporation acquired.

p. 196The Honorable Robert S. Calvert, page 3 (H-173)

Section D(3) ofArticle 6.03which we have quoted above, provides for a deduction from the total consideration used to compute the sales or use tax, It

### was enacted in 1971by the 62nd Legislature and has not been the subject of judicial interpretation. Your letter indicates that the Marketing Corporation did not purchase the vehicle for resale at retail ;that it did not use the vehicle for personal or business purposes; that the second vehicle 

### was not acquired as a substitute vehicle for personal or business use; andthat the original vehicle was not offered for sale at 

### retaii. Assuming these facts to be true, the deduction provided inthe,statute would not be applicable. Your third question, completely separate from the factual situation outlined inyour letter, asks:

“3. Where title is held inthe name ofthe dealer or seller and is used unregistered inaccordance with Article 6686, Revised Civil Statutes of Texas, for reference Article 6.03, Section B, does Attorney General Opinion No. M-141 apply on motor vehicles that are used by the dealer, his employees, and members offamily. Also, does itapply to registered vehicles used before sale from someone other than the dealer. ” Article 6.03B defines the term “retail sale” as follows:

“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 and shall not include those operated under and in accordance with the terms ofArticle 6686, Revised Civil Statutes of Texas, 1925, as amended, ” Attorney General opinion No. M-141 construed this provision in October, 1967, before the reference to Article 6686, V. T. C.S., was added by the 60th Legislature, effective October 1, 1968. Article 6686, V. T.C. S., pertains to dealers’ licenses and regulates those instances when automobile dealers may operate unregistered vehicles through the use of such dealers’ temporary licenses.

p* 797The Honorable Robert S. Calvert, page 4 (H-173)

Some of the conclusions inAttorney General Opinion M-141 are affected by this amendment. For instance, the conclusion inthe opinion that “demonstrators” are taxable to dealers would nolonger be correct because 54(a) of Article 6686 allows unregistered vehicles to be used as demonstrators. However, with specific reference toyour question, the last paragraph of $4 ofArticle 6686 provides inpart: “Such tags shall notbe used to operate vehicles for the personal use of adealer or his employees. ‘I Ofcourse, as pointed out inAttorney General Opinion M-141, whether a vehicle is being used personally is a question offact. However, it is plain that avehicle employed for the personal use ofthe dealer, his employees, his or their families, or of someone other than the dealer is subject to the tax. Such use with dealers’ licenses is prohibited by the above-quoted provisions of Article 6686. This would be true even though the same automobile is also being used for proper purposes specified inArticle 6686 for unregistered vehicles. Again, as inAttorney General Opinion M-141, we suggest that you clarify these matters by rules and regulations promulgated under the authority of Article 6.02, V. T: C.S., Taxation-General. SUMMARY 1. When a corporation sells or exchanges a motor vehicle, the sales affidavit required by Article 6.05, V, T.C. S., Taxation-General, must be executed by an authorized officer of the corporation. 2. A corporation that does not purchase motor vehicles for resale at retail but is engaged inwholesale leasing and sales ofautomobiles is not entitled to deduct thevalue of such automobiles as provided inArticle 6.03 D(3), V. T. C.S., TaxationGeneral, when it sells a leased automobile and acquires another for the same purpose. 3. An automobile devoted wholly or partially to the personal use ofa dealer, a dealer’s employees or their respective families,

p. 798. . .

The Honorable Robert S. Calvert, page 5 (H-t73)

or to someone other than the dealer is subject tothe Motor Vehicle Sales and Use Tax, Very truly yours, *

JOHN L. HILL Attorney General of Texas APPRQVED:

DAVID M. KENDALL, Chairman Opinion Committee

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