THEATTORNEYGENERAL 

OF T‘EXAS 

AUSTIN ~LTEXA~ 

WILL WILSON 

A-I-I-G- GENEIIAL July 8, 1960 

Honorable Robert S. Calvert Opinion No. !dN-876 

Comptroller of Public Accounts 

Capitol Station Re: When a "first sale" 

Austin, Texas of gasoline within 

contemplation of the 

Motor Fuel Tax Law 

occurs under a conslgnment for the purDear Mr. Calvert: pose of sale. 

You request our opinion as to whether the taxable "first 

sale" of motor fuel occurs upon delivery of the fuel into the 

storage tanks of a retail dealer or upon withdrawal by him of 

the fuel from such storage tanks under terms of a form of 

contract submitted with your request. 

The kind of transaction under consideration is within the 

scope of Articles. 9.01, 9.02 and 9.03 of what Is commonly 

known as the Motor Fuel Tax Law (Ch. 9, H.B. 111 56th Leg., 

3rd C.S., 1959, same being Ch. 9 of Title 122A 'TaxatlonGeneral" of the Revised Civil Statutes of Texas). 

The pertinent portions of the above statutes are: 

"'First sale' shall mean, except as 

otherwise provided herein, the first sale 

or distribution in this State of motor 

fuel, produced, refined, compounded, imported 

into, of; otherwise acquired in said State; 

. . . . Art. g.Ol(lO). 

"'Distribution' shall mean and Include 

any transaction other than a sale, in which 

ownership or title to motor fuel, . . . 

passes from one person to another." Art. 

9.01(5). 

"'Distributor' shall mean and Include every 

person who refines, distills, manufactures, 

produces, ,or compounds motor fuel or blending 

materials In this State:,. . .or in any other 

manner acquires or possesses said products, 

for the purpose of making a first sale, distribution zr use of said products ,ln this State; 

. . . . Art. 9.01(h). 
Honorable Robert S. Calvert, Page 2 Opinion No. ww-876 

"'Dealer' shall mean and includeevery 

person other than a distributor who engages 

in the business in this State of distributing 

or selling motor fuel within this State." Art. 

9.01(7). 

"Art. 9.03 Reports (1) Every distributor 

who shall be required to collect the tax levied 

by this Chapter upon the first sale or dlstribution of motor fuel In this State, . .shall 

.remit. .the amount of such tax required 

Eo'be collecied. . .and at the same time, such 

distributor shall make anddeliver to the Comptroller. . .a report. . . .' 

The contract under consideration in its controlling portions 

provides that the Distributor (called Seller in the contract) 

may make deliveries of gasoline into the underground tanks of a 

retail seller (called Dealer in the contract), 

.at such time, day or night, as ma 

be convenient for Seller, and shall Fi--+L ave 

rights of ingress to and egress from said 

place of business and unrestricted access to 

Dealer's tanks for the purpose of making such 

deliveries and for the purpose of gauging 

tanks, reading pump meters and inspecting all 

equipment used in connection with the storage 

and dispensing of gasoline. Dealer hereby 

authorizes Seller to do any and all things 

necessary and proper to preserve Its gasoline, 

including, without limitation, locking the 

fill-pipe caps leading to the tanks and retaining custody of all keys thereto. Seller 

authorizes Dealer to withdraw such gasoline 

from the tanks solely by means of the computer 

pumps located at Dealer's place of business. 

Title to such gasoline shall remain vested in 

Seller until and unless the same shall be purchased by Dealer. Gasoline shall be deemed to 

be purchased and title thereto shall pass from 

Seller to Dealer as the gasoline passes through 

and Is recorded on the meters of the computer 

pumps. 

"2, Gasoline delivered and stored by Seller 

hereunder shall be in the custody but not the 

possession of Dealer and Dealer shall exercise 

ordinary care in protecting the same from loss, 

damage or destruction. Dealer shall Immediately 
Honorable Robert S. Calvert, Page 3 Opinion No. ww-876 

notify Seller of any defective condition 

of the pumps, meters, tanks, pipe lines, 

locks attached by Seller or any other 

condition which may affect the safety of 

Sellerls gasoline. Dealer agrees thatxe 

shall withdraw gasoline from the tanks only 

by means of the computer pumps and shall 

keep locked all computer pumps when neither 

he nor any of his employees is present on 

the premises. The quantity of,gasoline Nchased by Dealer shall be determined from a 

reading of the meters on the computer pumps 

and all gasoline withdrawn from the tanks 

whether by Dealer or third parties shall be 

deemed to have been dellvered'to and purchased by Dealer. Dealer agrees that he 

will not tsmoer with the meters on such 

pumps and wliI not permit third parties to 

do so. Dealer shall maintain daily a detailed 

record of all gasoline purchased by him, such 

record to be made aval1abl.e for inspection by 

Seller at any time and shall render a full 

accounting to Seller at such times and in such 

manner as Seller may require for all gasoline 

purchased Dealer shall pay Seller on 

igrnand for gasoline purchased at the price 

set forth in. . . . 

“3. .Upon termination of this agreement, 

Dealer'shall promptly pay Seller for all gasoline purchased from Seller for which payment 

has not theretofore been made. In addition, 

Dealer w, at the time of such termination, 

for cash the gasoline stored by Seller 

place of business. If Dealer does 

urchase such gasoline, Seller shall have 

the right, without notice and without recourse 

to legal proceedings, to remove said gasoline 

from the tanks and Dealer agrees that he will 

not interfere with such removal." (Underscoring added) 

Other statements in the contract refer to Dealer"as custodian 

of gasoline so delivered and stored," to his "custodial liability," 

and to his "anticipated purchases of such gasoline." 

We can discern nothing, In the contract contrary to the 

above provisions, which would alter the legal status of the 

Dealer In relation to the gasoline delivered into his tanks, 

nor the occurrence uponwhich the motor fuel tax becomes due. 
Honorable Robert S. Calvert, Page 4 Opinion No. WW-876 

We are of the opinion that the taxable "First sale" 

occurs "as the gasoline passes through and is recorded on the 

meters on the computer pumps"--that is, as the retail dealer 

withdraws it from the storage tanks for sale to his own 

customers. 

We do not believe that the delivery of the gasoline by 

the party designated inthe contract as Seller into the underground tanks of the retailer, under the terms of this contract, 

is a "first sale ' "sale ' "distribution ' or "use" of the 

aasoline under a&? of th; statutes here&above mentioned or 

under the holding-of State v. City of El Paso, 135 Tex. 359, 

143 S.W.2d 366 (1940). 

Prior to withdrawal by the retail dealer through his 

comwuter wumws we believe he has custody of the gasoline with 

the-legal-status of a bailee. Charles k. Stleff; Inc. v. City 

of San Antonio, 130 Tex, 594, 111 S.W.2d 1086 (1938). 

"Any kind of personal propert 

bailment. . *It* 6 Am.Jur. (Rev Ed 3 , 

may be the subject of 

Bailments, sec. 62, p. 

220. 

The applicable law we believe is well stated in the case of 

Whitehouse Bros. v. S. H. Abbott & Son, 228 S.W. 599 (Clv.App. 

9211, wherein at page b01 the Court quoted from a Georgia case: 

"On the other hand, if the effect of the 

contract is that the property is delivered 

from the bailor to the bailee with the understanding that the title is to remain in the 

bailor, and the bailee does not assume initial 

responsibility to pay the purchase price, it 

is ordinarily not a conditional sale, but Is 

a consignment although the bailee may have the 

option of purchasing the goods themselves by 

paying a stipulated price, or may have a right 

to sell them to other persons upon accounting 

to the bailor for a stipulated sum, and though 

the baileels compensation in the matter may 

depend upon such profit as he shall realize on 

the difference between the price at which the 

goods are consigned and the price at which they 

are sold, and though the bailee may be responsible 

to the bailor for the value of such goods as he 

may sell on a credit, whether he collects from 

the purchasers or not." 

Both the Whitehouse case, and the case of Sturm v. Boker mentioned 

in the next following paragraph, are cited with approval by the 

Supreme Court in the Stieff case (supra). 
Honorable Robert S. Calvert, Page 5 Opinion No. ww-876 

The distinction applicable to the form of contract under 

consideration as between a contract of sale or return and a . .- bailment is clearly stated in Sturm v. Boker, 150 U.S. 312 

(1893) wherein, at page 329, the Court said: 

The law seems clear and settled that the exercise by a 

"An option to purchase if he (the bailee) 

liked is essentially different from an option 

to return a purchase if he should not like. 

In one case the title will not pass until the 

option is determined; in the other the property 

passes at once, 

and return." 

subject to the right to rescind 

bailee of his option to purchase goods held by him In that 

capacity and to make himself the debtor for them does not alter 

his first holding of the goods as a ballee. See also: 8 C.J.S., 

Ba3alments, sec. 3d-e, pp. 2x3-240, and sec. 42, p. 325; 6. 

(Rev Ed) Bailments, sec. 37, pp. 198-200; The Law GovernIng'Sales of hoods, Samuel Williston, Vol. 2, (Rev.Ed., 194o), 

PP. 306-307. 

The party designated in the contract under consideration 

as Seller, under the provisions of Art. 9.03 of the Motor Fuel 

Tax Laws, Is the Distributor and required to collect and remit 

the motor fuel tax and to make the reports required of a distributor under this Article. 

SUMMARY 

Under the contract in question the taxable 

"First sale" under the Motor Fuel Tax Law (Ch. 9, 

H.B. 11, 56th Leg., 3d C.S., 1959, same being 

Ch. 9 of Title 122A "Taxation-General" of the 

Revised Civil Statutes of Texas) occurs upon 

withdrawal of the gasoline from the storage tanks 

and as It passes through and is recorded on the 

meters on the computer pumps of the retail Dealer. 

Yours very truly, 

WILL WILSON 

Attorney General of Texas 

WEA:cm 

w 

AHsistant 
Honorable Robert S. Calvert, Page 6 Opinion No. W-876 

APPROVED: 

OPINION COMMITTEE: 

Gordon C. Cass, Chairman 

J. Arthur Sandlin 

Tom McFarling 

B. H. Tlmmins, Jr. 

REVIEWE.DFOR THE ATTORNEY GENERAL 

By: Leonard Passmore