. .


## THEA~TORNEYGENERAC OF,T-E&As

BVILL WIlLSON 

## AlTGHNEY GENERAL September 7,

## 1962

Honorable Jerry Dellana County Attorney Opinion No. WW-1435 Travis County Courthouse Re: Whether wholesaler6 of Austin, Texas builders supplies mayaccept resale certificates for purchases of building materials, in lieu of the sales tax, from builders anddevelopers, whoconstruct houses on land ownedby such developers, such house6 to be sold afterwards to the general public as 

### real estate uponwhich no Dear Mr. Dellana: sales tax is colleated. Youhave asked the following questions:

“Question 1: Are csrtdrin wholesalers required to accept resale ce%- tifiaates from builders and developers whopurchase tangible personal property and then makesaid tangible personal property a part of the real property that is sold to the general public, or must they collect the tax at the time of sale?

“Question 2: Does tha definition

‘Sale for Resale’, Article 20.01 (S) a8 quoted in part ‘Sale for Resale shall mein a sale of tangible personal:. property to a

r+ purchaser whoIs purchasing said angible property for the purpose of reselling it in t;eiFma1aourtse of his business a alude builders anddeveloperiY$” In your letter you have set out the following facts:

“Builders and developers of homes in thls area are purchaelng tangible personal property, I, elo garbage dispoaerdl* built-in 8toveBp eto. from wholesalers and submitting certifiautos of resale of tangible personal. .

Honorable Jerry Dellana, page 2 

### Opinion No. WW-1435

property. In said certificate of resale, they speclfically state that it will be resold in their regular course of business; their regular couree of business is sale of real estate. They claim this exemption under Set, (N), Article 20.04, of Section 1, Chapter 20, Title 122A.

“The wholesalers, whosell these articles to the bullders,and developers 

### are apprehensive in that Article 20.12, Violations (B) mayhold themguilty of a

### misdemeanor.

. . .I’ Articles 20.01 to 20.17, inclusive, Chapter 20, Title 122A, Taxati’bn-General,V.C.S., constitute the Texas Limited Sales, Excise andUse TaxAct. All reference to articles hereafter dlscussed will be to the Limited Sales, Excise andUse TaxAct, unless otherwise shown. Article 20.02 reads In part as follows:

“ThePe Is hereby Imposed on each separate sale at retail of tangible personal property madewithin this State a limited sales tax at the rate of two per cent (2$) of the sale price of each Item or article of tangible pereonal property whensold at retail in this 

### State.

.:“(A) Method 

### of Collection and Rate of Limited Sale8 Tax. Thetax hereby Imposed shall be collected by the retailer from the consumer. II

.‘, .

“(C) Limited Sales TaxPermit Application. (1) Every person desiring

to engage In or to conduct business as a seller within this State shall file with the Comptroller an appllcatlon for a permit for each place of business.Honorable Jerry Dellana, page 3 Opinion NO.WW-1435

“(D) Limited Sales Permit Iisuances. After compliance with paragraph (C) of thb$ Ai?t&clie.by the applicant, the Comptroller shall grant and Issue to each applicant without charge a separate permit for each place of business within the State. Apermit shall not be assignable and ahall be valid only for the person in whose nameit Is Issued and for the transaction of business at the place designated therein. It shall at all times be conspicuously displayed at the place for which Issued.

“(F) Presumption of Taxability: Resale Certificate. For the purpose of the proper admlnistratlon of this Chapter and to prevent evasion of the limited salea tax It shall be presumed thatall gross receipts are subject to the tax un-, tll the contrary 1s established. Theburden of proving that a sale of tangible personal property is not 

### a sale at retail is upon the person whomakesthe sale unless he take8 from the purchaser a certificate to the effect that the tangible proparty 

### ia purchased for the purpose of reselling, leasing or renting it,

“(0) Effect of Resale Certlfioate. Theresale aertifloate relievee the seller from the burden of proof only If taken In g&d faith from a person who1s engaged In ths business of selling, leasing or rentng tangible personal property A resale certificate maybe nlvei by a purchaser, whoat the tse of pkchasing the tangible personal property, Intends to 0411, leas8 

### or rent It In tho regular course of business or lo unable to ascertain at the tlma of purchase whether theHonorable Jerry Dellana, page 4 Opinion No. WW-1435
tangible personal property will be resold, leased or rented or ~111.be used for someother purpose.” *(Emphaais added). sali( gHrty;;;a;;d Contents of Re-

. (1) Thecertificate shall:
kir ~es~~~~da% ii? dress of the purchaser. (b) Indicate the numbar of the permit, if any, isauad to the purchaser. (c) Indicate the general character of the tangible personal property sold, leased or rented by the purchaser in the regular course of business. ~(2) Thecertlfi’cate shall be substantially in such form as the Comptroller mayprescribe.

“(I) Liability of Purchaser Giving Reeale Certificate. If a purchaser who give6 a resale certificate makes

### any use of the tangible personal property other than retention, demonstration or dlsplay while holding It for sale, lease or rental In the regular course of business, the use shall be taxable to the purchaser as of the time when tba tangible personal property la 

### first noused, and the sales price 

### of tha tangible perronal property to hz ahall be deemedthe measure of the I) YJ) Resale Certificate; Commingled Fkw~ible Goods. If a purchaser gives a resale oertlflcate with respect to the purchase of funglble goods andHonorable Jerry Dellam, page 5 Opinion No. WW-1435

thereafter commingles these goods with other funglble goods not so purchased but of such slmllarlty that the identity of the constituent goods In the commlngled mass cannot be determined, sales from the mass of commingled goods shall be deemedto be sales of goods covered by the resale certificate until a quantity of sllch goods equal to the quantity of the goods so commingled has been sold.” Article 20.01 reads In part as follows:

I,

. . .

“(S) Sale for Reeale. ‘Sale for Resale’ shall meana sale of tangible personal property to any purchaser who Is purchasing said tangible personal property for the purpose of reselling It In the normal course of his buslness. Asale for resale shall Include a sale of tangible personal property to a purchaser for the sole purpose of that purchaser’s renting or leasing said tangible personal property to another personr, but not If incldental to the renting or leasing of real estate a” Article 20.04 reads In part as follows:

,I

. . .

“(19) Sale for Resale: Leasing or Renting.

(1) There are exempted from the taxes Imposed by this Chapter the receipts from all sales for resale, leasing or renting. (2) .Howevar, If a person purchases tangible personal property for the purpose of leasing or rent+Honorable Jerry Dellana, page 6 Opinion No. WW-1435

lng it to another person, and if he later sells It by meansof an occasional sale before he has collected and paid to this State as muchtax 

### onthe rental or lease charges as would have been due andpayable to this State had he not purchased the tangible person41 property for the purpose of so renting and leasing it, he shall, at the time of his occasional sale of said tangible personal property include In his reoelgts from taxable sales the amountby,whlchhis purchase price exceeded the amountof rents collected by himon said tangible personal property.

~Artlole 20.12 reads In part as follows:

BUA!!S Penalty for Engaging in



### as Seller Without Permlt. A

### perron whoengages In business 

### a8 a retailer In this State wlthout a permit or permits or after a permit has been suspended, and each officer of any corporation which so engages In business, 1s

(3) Wherea lessor makes a retail sale of leased tangible personal property to a lessee of that tangible personal property under an agreement whereby certain rental paymanta are credited @gainst the purchase prlce,of the tangible personal property, he need not collect or pay any tax on the sale price to the extent that he has collected and paid on such rental paymentsa”Honorable Jerry Dellana, page 7 Opinion No. WW-1435

guilty of a misdemeanor, and such person shall upon conviction be fined not more than Five Hundred Dollars ($500) for each c’onvlctlori. Each day of such operation shall constitute a separate offense.

“(B) Penalty for Improper Use of Resale Certlflaate. Anyperson whogives a resale certificate to the seller for property which he knows, at the time of purchase, la purchased for the purpose of use rather than for the purpose of resale, lease or rental by himin the regular course of business Is guilty of a misdemeanor, and such person shall upon conviction be fined not more than Five Hundred Dollars ($500) for each conviction.

n(D) Penalty for other Vlolatlons 0 Anyviolation of this Chapter, except as otherwkee provided, is a misdemeanor, andany person shall, whenfound guilty of such violation, be fined not more than Five HundredDollars ($500) for each violation. ” Thelimited sales tax is Imposed on each separate sale at retail In Texas of tangible personal property. Xhetax Is lmP osed on the consumer and collected by the retailer. Art. 20.02 A). Wherethe purchaser of tangible personal property Intends to resell or lease the sameas tangible peraonal property, he may give a resale certificate to the retailer In lieu of paying the tax. With respect to the purchase of tangible personal property, which the purchaser Intends to lease, note this language from Art. 20.01 (S):

M 0 e 0 Asale for resale shall Include a sale of ,tangible personal property to a purehaser for the sole purpose of t,hat purchaser’s renting or leasingsaid tangible personal property to,another perso&Honorable Jerry Dellana, page 8 Opinion No. Ww-1435

. but not 

### if incidental to the renting or leaelng of real estate.” ~phasle addep. Thus, 

### Ifa person uho operates a bed rental business wants to purohase from the,manufacturer or distributor a bed, such person Is entitled to give a resale certificate for the purchase of the bed. TheState will receive its tax from the customer who renta the bed, which tax will be collected by the operator of the bed rental service, and remitted in his quarterly tax returns. Rut if the bed Is purchased by the operator of an apartment house, In order to furnish an apartment, which will be rented as real estate, there will be no sales tax to collect from the tenant. Hence, the operator of the apartment house is the ultimate consumer 

### of the bed so purchased, andmust pay the sales tax to his supplier. lhe first sentence In Art. 20.01 (S) reads as follows:

“‘Sale for Resale’ shall mean a sale 

### of tanalble oersonal oroperty to any gurchaser whoIs purchasing said tangible personal proart for the purpose of~‘reselllng !w n the normal course of business.N i?fmphasia addeg. This clearly contemplates that the tangible personal property purohaaed for the purpose of resale must be resold In the form of tangible personal property, In order for the purchaser to be authorized to execute a resale certificate and deliver the sameto his supplier 

### In lieu of paying the tax. If a person purchases a garbage disposal unit to Install In a house which he owns, with the Intention of afterwards sellln$ the house, such a peraon clearly does not Intend to resell “It (the garbage dlsposal unit) to anyone. HeIntends to sell a house, whloh is real estate. Tohold that a person whoIs In the business of constructing houses onhis ownland, with the Intention of selling such houses to the general public, mayclaim the privilege of using a Sale for Resale Certificate upon the purchase of a garbage dlspoeal unit to be Installed In such house, would be to hold that such person is not In the busMess of selling houses, but instead Is in the business of selling lumber, nails, bathtubs, plumbing fixtures, shingles, electrical wiring, etc. Wherea person purchases tangible personal property In the form of?aonntruotion material to build or repair his ownhouse, and such person performs his ownconstruction. work, he gets no axamption from the sales tax. Heis neither an exempt person,1

Honorable Jerry Dellana, page 9 Opinion No. WW-1435

nor are the construction materials exempt products, for neither Is listed in Art. 20.04. If a person ownshis ownland, and contracts with another to construct a building thereon, such contractor becomes the ultimate consumer of the products so consumedin construction, If the contract is let as a lumpsum contract I) Attorney General’s Opinion No. ~~-1258. If the contract Is In the 

### formof a split bid, the tax Is paid either by the contractor or the owner of the building, depending onwhich one of themfurnishes the materlals~ to go into the building. Art. 20.01 (T). Tohold that all these classes of persons must pay the salee tax, but that a developer whobuilds houses on his ownland for resale mayIn effect become exempt from the tax by urje of a Sale for Resale Certificate whenhe purchases builder’s supplies, Bndthereafter collects no tax at all from his customer on the ground that,his customer Is purchasing real property andnot tangible personal property, is to reach an absurd reault.

“The court will never adopt a construction that will makea statute absurd or ridiculous, or one that will lead to absurd conclu-. 

### slons or consequencea, if the language of the enactment is susceptible of any other 

### meaning.,” 39 Tex. Jur., Statutes, Sec. 118, page 222. Paragraph (Q) of Art. 20.02 reads ,in part as follows:

“Effect of Resale~Certlflcate, Theresale certificate rel%eve& the seller from the burden of proof only If taken in good faith from aperson whoIs engaged In the business. of selling, leasing orrenting tant: 1 personal property. ‘D0

.‘( ptasis addedJ e Theabove quoted sentence from Par. (Q), Art, 20.02, shows the legislative Intent. For a purchaser of tangible personal property to be authorized under th,eLimited Sales, Excise and Use TaxAct to we 

### a Resale Certificate In lieu 

### of oavlnn the tax at the time the b IiF% 3of his purohaeep he’must be “# 0 usinesa of sellin * a&&ag;d 1; leasing dflrenting tanglble.persona 3 In the busihess of selling real estafe ormof lots with housea,aff13.xad thereto is not engaged in the business of selling tannible ,peraonal property, Anda Demon engaged In eellinE both lumber at retail andhouses as seal eata&-oould we his Resale Certificate 

### only for the ~Honorable Jerry Dellana, page 10 Opinion No. b-1435

lumber he sells as personal property, In both Arts. 20.01 (S) and 20.02 (5) reference is made to purchasers whoIntend to sell or resell “it” In the “normal course of bualness” or “regular course of business.” Such second,,sale or resale of “it” refers to “tangible personal progerty l There is no resale of tangible personal property, or it” as such, In the situation described in your letter. It Is true that theae developers are engaged In a “normal course of 

### buelnese” and a “regualr course of business”, but their business is the sale of real estate, not tangible personal property.AnExemption Certificate Is used only by an exempt legal entity or exemt organization, which are listed In Paragraph (F), Art. 20.0!. Real estate developers are not listed in this paragrapha Someproducts are exempt b humanconsumption (not served a8 meals7.name, such as food for Someproducts are exempt> because of taxes which have already been Imposed thereon, such as cigarettes. Someproducts, without namingthemspecifically, are exempt becauee of somecircumstance which has already occurred with respect to them, such as sales of tangible personal property under contracts executed prior to the effective date of the Act; or occurs at the time of the sale, such

‘as an occasional sale; or are destined to be used in a particular mannerIn the fu,ture, such aa fuel for a locomotive enginee NowhereIn the Act doweElnd “builders1 Supplies” listed as an exempt prdduct, a6 such, Theonly time builders’ eupplles 

### aan fall within the Sale for Resale Exemption Is when the sale ia madeto a wholesale or retail buildera’ supply establishment, which truly Intends to resell “it” In the form of tangible personal property In the “normal” OP“regular” course of 

### business, and ribt to one who Intends to consume 

### or use It.

nn e 9whenthe legislative Inten& ascertained, or Is plainly manifest,

. Is binding upon the courts, andmust given effect if It Is legally possible do so. To

### Ignore the legislative ln- :: be to tent andgive a statute a construction obviously contrary thereto, 

### or to refuse to enforce a statute according to the legislative Intent, whenascertained, Is said by the SupremeCourt to be ‘an inexcusable breach of judicial duty’ and

‘an unwarranted Interference with the exercise of lawful legislative authorlty.l” 39Tex, Jur. 171-172, Statutes, Set, go..

Honorable Jerry Dellana, page 11 Opinion No. 

### WW-1435

In answer to Question No. 1, wehold’

. that wholesalers of builders’ supplies, whosell to developers, builders, and lumber companies whopurchase tangible persona> property for the purpose of Incorporating such tangible personal property Into real property ownedby such developers, builders, and lumber companies, such real property to be sold thereafter to the general public as real estate, must collect the sales tax from such developers, builders, and lumber companies. Weanswer Question No, 2by holding that Art. 20.01 (S), of the Limited Sales, Excise andUse TaxAct, which defines

“Sale for Ressle”, does not Include such developers, builders, andlumber companies within the meaning of “any purchaser”, since that phraae only includes those whosell “It” In the

‘hormal course of his business”; the word “It” referring to tangible personal property and such developers andbuilders are not so engaged, but are engaged In the business of selling real estate. SUMMARY

Wholesalers of builders’ supplies, who se&l to developers andbuilders whopurchase tarlglble personal property for the purpose of Incorporating such tangible personal property into real property ownedby such developers and builders, such real property~to be sold thereafter to the general public as real estate, muatcollect the sales tax from such developers andbuilders. Art. 20.01 (S), of the Limited Sales, Excise andUse TaxAct; which defines “Sale for Resale”, does not include developers and builders within the meaning of “any purchaser”, since that phrase only tincludes those whosell

“It” in the “normal course of his business”; the word “‘It” referring to tangible personal ~~~p~~t~~~~~d~“~~t”~~~l~~~~e~~~~~~d~~~~~re

ness of selling real estate. Yours.very truly, WILLWILSON Attorney General of TexasRonorable Jerry Dellana, page 12 Opinion No. UW-1435

Riley EugeneFletcher Afisletant

APPROVED: OPINIONCOlvMIlvEE W. V. Geppert, Chairman Arthur %n~lln J. C. Davis IWIBiWEDFORTHEATTORNEYffBNl!RAL BY: Leonard Pasemore