## THEATTORNEYGENERAL OF T‘EXAS

AUSTIN ~LTEXA~
WILL WILSON A-I-I-G- GENEIIAL July 8, 1960

HonorableRobert S. Calvert OpinionNo. !dN-876 Comptroller of Public Accounts Capitol Station Re: When a "first sale" Austin, Texas of gasoline within contemplationof 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 withdrawalby him of the fuel from such storage tanks under terms of a form of contract submittedwith your request. The kind of transactionunder 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, samebeing Ch. 9 of Title 122A 'TaxatlonGeneral" of theRevised Civil 

### Statutes of Texas).
The pertinent portions of the above statutes are: "'First sale' shall

### mean, except as otherwiseprovided 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'shallmean and Include any transactionother than a sale, inwhich ownership or title to

### motor fuel,

. . . passes from one person to another." Art. 9.01(5). "'Distributor'shallmean and Include every person who refines, distills,

### manufactures, produces, ,orcompoundsmotor fuel or blending materials In this State:,.

. .or in any other manner acquires or possesses said products, for the purpose ofmaking a first sale, distribution zr use of saidproducts ,lnthis State;

. . . . Art. 9.01(h).HonorableRobert S. Calvert, Page 2 Opinion No.

## ww-876

"'Dealer' shallmean and includeevery person other than a distributorwho engages in the business in this State of distributing or sellingmotor 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. .theamount of such tax required Eo'be collecied.

. .andat the same time, such distributor shallmake anddeliver to the Comptroller.

. .areport.

. . .' The contractunder consideration in its controllingportions provides that the Distributor (calledSeller in the contract) may make deliveries of gasoline into the underground tanks of a retail seller (calledDealer in the contract),

.at such time, day or night, asma be convenient for Seller, and shall ave Fi--+L rights of ingress to and egress from said place of business and unrestrictedaccess to Dealer's tanks for the purpose of making such deliveries and for the purpose of gauging tanks, reading pumpmeters and inspectingall equipment used in connectionwith 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 authorizesDealer to withdraw such gasoline from the tanks solelyby 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 shallbe purchased by Dealer. Gasoline shallbe deemed to be purchased and title thereto shallpass from Seller to Dealer as the gasolinepasses through and Is recorded on themeters of the computer pumps. "2, Gasoline delivered and storedby Seller hereunder shallbe in the custodybut not the possession of Dealer and Dealer shall exercise ordinary care in protecting the same from loss, damage or destruction. Dealer shall ImmediatelyHonorableRobert S. Calvert, Page

## 3 OpinionNo.

## ww-876

notify Seller of any defective condition of the pumps,meters, tanks,pipe lines, locks attachedby Seller or any other conditionwhich may affect the safety of Sellerls gasoline. Dealer agrees thatxe shallwithdraw gasoline from the tanks only by means of the computerpumps and shall keep locked all computerpumps when neither he nor any of his employees is present on the premises. The quantity of,gasolineNchasedby Dealer shall be determined from a reading of themeters on the computerpumps and all gasolinewithdrawn from the tanks whether by Dealer or thirdparties shallbe deemed to have been dellvered'toand purchasedby Dealer. Dealer agrees thathe will not tsmoer with themeters on such pumps and wliI not permit thirdparties to do so. Dealer shallmaintain daily a detailed record of all gasolinepurchased by him, such record to be made aval1abl.e for inspectionby Seller at any time and shall render a full accounting to Seller at such times and in such manner as Sellermay require for all gasoline purchased Dealer shallpay Seller on igrnand

for gasolinepurchased at the price set forth in.

. . . 

## “3. .Upontermination of this agreement, Dealer'shallpromptly pay Seller for all gasoline purchased from Seller for which payment has not theretoforebeenmade. In addition, Dealer w, at the time of such termination,

for cash the gasoline storedby 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 interferewith such removal." (Underscoring added) Other statements in the contract refer to Dealer"as custodian of gasoline so delivered and stored," to his "custodialliability," and to his "anticipatedpurchases 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 occurrenceuponwhich themotor fuel tax becomes due.HonorableRobert S. Calvert, Page 4 Opinion No. WW-876

We are of the opinion that the taxable "First sale" occurs "as the gasolinepasses through and is recorded on the meters on the computerpumps"--that is, as the retail dealer withdraws it from the storage tanks for sale to his own customers. Wedo not believe that the delivery of the gasolineby 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; statuteshere&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 throughhis comwuterwumws we believe he has custody of the gasoline with the-legal-statusof a bailee. Charlesk. Stleff; Inc.v. City of San Antonio, 130 Tex, 594, 111 S.W.2d 1086 (1938). "Any kind of personalpropert bailment.

. *It* 6 Am.Jur. (RevEd , 3 may be the subject of Bailments, sec. 62, p. 220. The applicable law we believe is well stated in the case of WhitehouseBros. 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 responsibilityto pay the purchase price, it is ordinarilynot a conditional sale, but Is a consignmentalthough the baileemay have the option of purchasing the goods themselvesby paying a stipulatedprice, ormay have a right to sell them to other persons upon accounting to the bailor for a stipulated sum, and though the baileels compensation in thematter may depend upon such profit as he shall realize on the differencebetween the price at which the goods are consigned and the price at which they are sold, and though thebaileemay 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 followingparagraph, are citedwith approvalby 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 contractunder considerationas 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 (thebailee) liked is essentiallydifferent from an option to return a purchase if he shouldnot 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 tomake himself the debtor for them does not alter his first holding of the goods as a ballee. See also: 

## 8C.J.S., Ba3alments,sec. 3d-e, pp. 2x3-240, and sec. 42, p. 325; 6. (RevEd) 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 contractunder 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 themotor fuel tax and tomake the reports required of a distributor under this Article.

SUMMARY

Under the contract in question the taxable "First sale" under theMotor Fuel Tax Law (Ch. 9, H.B. 11, 56th Leg., 3d C.S., 1959, samebeing 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 computerpumps of the retail Dealer.
Yours very truly,
WILL WILSON Attorney General of Texas

WEA:cm 

# w

AHsistantHonorableRobert S. Calvert, Page 

## 6 OpinionNo.

## 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