. . 

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 may accept 

resale certificates for purchases of building materials, 

in lieu of the sales tax, 

from builders and developers, 

who construct houses on land 

owned by such developers, 

such house6 to be sold afterwards to the general public 

as real estate upon which no 

Dear Mr. Dellana: sales tax is colleated. 

You have asked the following questions: 

“Question 1: Are csrtdrin wholesalers required to accept resale ce%- 

tifiaates from builders and developers 

who purchase tangible personal property 

and then make said 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 r+ a purchaser who Is 

purchasing said angible property for 

the purpose of reselling it in t;eiFma1 aourtse of his business a 

alude builders and developeriY$” 

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, who sell these 

articles to the bullders,and developers 

are apprehensive in that Article 20.12, 

Violations (B) may hold them guilty 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 and Use Tax Act. All reference to articles hereafter dlscussed will be to the Limited Sales, Excise and Use Tax Act, 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 made within 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 when sold at retail 

in this State. 

.: “(A) Method of Collection and 

Rate of Limited Sale8 Tax. The tax 

hereby Imposed shall be collected by 

the retailer from the consumer. 

II 

.‘, . 

“(C) Limited Sales Tax Permit 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. A permit shall 

not be assignable and ahall be valid only for the person in whose 

name it 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. 

The burden of proving that a sale 

of tangible personal property is not 

a sale at retail is upon the person 

who makes the 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. The resale aertifloate relievee the seller from the burden of 

proof only If taken In g&d faith 

from a person who 1s engaged In ths 

business of selling, leasing or rentng tangible personal property A 

resale certificate may be nlvei by 

a purchaser, who at 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 the 
Honorable Jerry Dellana, page 4 Opinion No. WW-1435 

tangible personal property will be 

resold, leased or rented or ~111. be 

used for some other purpose.” *(Emphaais added). 

sali( gHrty;;;a;;d Contents of Re- 

. 

(1) The certificate 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) The certlfi’cate shall be 

substantially in such form as 

the Comptroller may prescribe. 

“(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 no used, and the sales price 

of tha tangible perronal property to 

hz ahall be deemed the 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 and 
Honorable 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 deemed to 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 mean a 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. A sale 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 means of an occasional 

sale before he has collected 

and paid to this State as 

much tax on the rental or 

lease charges as would have 

been due and payable 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 amount by ,whlch his 

purchase price exceeded 

the amount of rents collected 

by him on said tangible personal property. 

~Artlole 20.12 reads In part as follows: 

BUA!!S 

Penalty for Engaging in 

as Seller Without Permlt. 

A perron who engages 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) Where a 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 payments a ” 
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. Any person 

who gives 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 him in 

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 Any violation of this Chapter, except as otherwkee provided, 

is a misdemeanor, and any person 

shall, when found guilty of such 

violation, be fined not more than 

Five Hundred Dollars ($500) for 

each violation. ” 

The limited sales tax is Imposed on each separate sale at 

retail In Texas of tangible personal property. Xhe tax Is lmP 

osed on the consumer and collected by the retailer. Art. 20.02 

A). Where the purchaser of tangible personal property Intends 

to resell or lease the same as 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 A sale 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, If a 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. The State 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, and must 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 who Is 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 

same to 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. He Intends to sell a house, whloh is real 

estate. To hold that a person who Is In the business of constructing houses on his own land, with the Intention of selling 

such houses to the general public, may claim 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. 

Where a person purchases tangible personal property In the 

form of? aonntruotion material to build or repair his own house, 

and such person performs his own construction. work, he gets no 

axamption from the sales tax. He is 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 owns his own land, and 

contracts with another to construct a building thereon, such 

contractor becomes the ultimate consumer of the products so consumed in construction, If the contract is let as a lump sum 

contract I) Attorney General’s Opinion No. ~~-1258. If the contract Is In the form of a split bid, the tax Is paid either by 

the contractor or the owner of the building, depending on which 

one of them furnishes the materlals~ to go into the building. 

Art. 20.01 (T). To hold that all these classes of persons must 

pay the salee tax, but that a developer who builds houses on 

his own land for resale may In effect become exempt from the 

tax by urje of a Sale for Resale Certificate when he purchases 

builder’s supplies, Bnd thereafter collects no tax at all from 

his customer on the ground that,his customer Is purchasing 

real property and not tangible personal property, is to reach 

an absurd reault. 

“The court will never adopt a 

construction that will make a 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, 

The resale certificate rel%eve& the 

seller from the burden of proof only If taken in good faith from aperson who Is engaged In the business. 

of selling, leasing orrenting tant: 

1 personal property. ‘D 0 .‘( 

ptasis addedJ e 

The above quoted sentence from Par. (Q), Art, 20.02, shows 

the legislative Intent. For a purchaser of tangible personal 

property to be authorized under th,e Limited Sales, Excise and 

Use Tax Act to we a Resale Certificate In lieu of oavlnn the 

tax at the time 

the b 

IiF% 

3 of his purohaeep he’ must be “# 0 

usinesa of sellin * 

a &&ag;d 1; 

leasing dfl renting tanglble.persona 

3 

In the busihess of selling real estafe 

orm of lots with housea,aff13.xad thereto is not engaged 

in the business of selling tannible ,peraonal property, And a 

Demon engaged In eellinE both lumber at retail and houses 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 who Intend 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 proger ty 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. 

An Exemption Certificate Is used only by an exempt legal 

entity or exem t organization, which are listed In Paragraph 

(F), Art. 20.0!. Real estate developers are not listed in this 

paragraph a Some products are exempt b 

human consumption (not served a8 meals 7. 

name, such as food for 

Some products are 

exempt> because of taxes which have already been Imposed thereon, such as cigarettes. Some products, without naming them specifically, are exempt becauee of some circumstance 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 manner In the fu,ture, such aa fuel for a locomotive engine e Nowhere In the Act do we Elnd “builders1 Supplies” 

listed as an exempt prdduct, a6 such, The only time builders’ 

eupplles aan fall within the Sale for Resale Exemption Is when 

the sale ia made to 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. 

n n e 9 when the legislative Inten& 

ascertained, or Is plainly manifest, . 

Is binding upon the courts, and must 

given effect if It Is legally possible 

do so. To Ignore the legislative ln- 

:: 

be 

to 

tent and give a statute a construction 

obviously contrary thereto, or to refuse 

to enforce a statute according to the 

legislative Intent, when ascertained, Is 

said by the Supreme Court to be ‘an inexcusable breach of judicial duty’ and 

‘an unwarranted Interference with the 

exercise of lawful legislative authorlty.l” 

39 Tex, Jur. 171-172, Statutes, Set, go. 
. 

Honorable Jerry Dellana, page 11 Opinion No. WW-1435 

In answer to Question No. 1, we hold’. that wholesalers of 

builders’ supplies, who sell to developers, builders, and lumber companies who purchase tangible persona> property for the 

purpose of Incorporating such tangible personal property Into 

real property owned by 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. 

We answer Question No, 2 by holding that Art. 20.01 (S), 

of the Limited Sales, Excise and Use Tax Act, which defines 

“Sale for Ressle”, does not Include such developers, builders, 

and lumber companies within the meaning of “any purchaser”, 

since that phraae only includes those who sell “It” In the 

‘hormal course of his business”; the word “It” referring to 

tangible personal property and such developers and builders are 

not so engaged, but are engaged In the business of selling real 

estate. 

SUMMARY 

Wholesalers of builders’ supplies, who 

se&l to developers and builders who purchase 

tarlglble personal property for the purpose of 

Incorporating such tangible personal property 

into real property owned by such developers and 

builders, such real property~to be sold thereafter to the general public as real estate, 

muat collect the sales tax from such developers 

and builders. 

Art. 20.01 (S), of the Limited Sales, 

Excise and Use Tax Act; which defines “Sale 

for Resale”, does not include developers and 

builders within the meaning of “any purchaser”, 

since that phrase only tincludes those who sell 

“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, 

WILL WILSON 

Attorney General of Texas 
Ronorable Jerry Dellana, page 12 Opinion No. UW-1435 

Riley Eugene Fletcher 

Afisletant 

APPROVED: 

OPINION COlvMIlvEE 

W. V. Geppert, Chairman 

Arthur %n~lln 

J. C. Davis 

IWIBiWEDFORTHEATTORNEYffBNl!RAL 

BY: Leonard Pasemore