Honorable George H. Sheppard

Comptrollers of Public Accounts Austin, Texas Opinion No. O-1713 Rk: (a) Is it-necessary that TexasGulf

Sulphur Company, adomestic corporation, keep astock certiflcate book, stock transfer ledger and other permanent records withIn the state of Texas even though it has astock transfer agent in NewYork? Are such ,records required to reflect all stock transfers by the corporation or only such transfers
as occur within the state andare. taxable under Art. XV, H.B. No. 

### 8, Acts, Regular Session, 47th Leg.? Will such stock transfers in Texas
onthe records of the company be taxable under said Act, even though all other acts, agreements, etc. necessary to effect the sale
or transfer of stock certificates of such corporation, occur beyond the limits of the state of Texas? 

## (b)



## (cl

Dear Sir:

Your letter of June 17, 1941 submits for our opinion the following question, which wequote therefrom:

.

"The Texas Gulf Sulphur Companyis chartered under the laws of Texas and 1sdomiciled inHarris Count Texas. valueY This corporation's stock (no par

is listed onthe NewYork Stock Exchange. There are nostock transfer records kept in Texas
as the stock transfer agent is in NewYork.

"Section 

### 6of Article~XV of House Bill No. 

### 8 of the Regular Session of the Forty-seventh Legislature reads in part:
'I* **every person ** *engaged inwhole or ^Hon. George R. Sheppard~, page 2

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### o-3713

in part in making or negotiating of sales, agreements to sell, deliveries or transfers of shares
or certificates taxable under this Article, or conducting or transactlngrrage business, shall keep or cause to be kept at someaccessible place within the State of Texas, ajust andtrue book of account, in such form as maybe prescribed bythe Comptroller, wherein shall be-plainly and legibly recorded in separate columns, the date of making every; sale, agreement to sell, delivery’or transfer of such shares or certificates, the name andnumber of shares thereof, the face value, the
nameof the seller or transferrer, the nameof the purchaser or transferee, * **I

“Please tell mewhether or not it will be necessary that Texas Gulf Sulphur Companykeep stock transfer and other records within the State of Texas andwhether or not these records shall include all transfers of stock bythe corporation.

“If the lawrequires that these records shall include all transfers of stock bythe corporation, andnoother act necessary to effect said transfer Is done InTexas, will such transfers be subject to the tax?

“I amenclosing acopy of aletter from Mr. John M.Corbett of BayCity, Texas, with reference to this matter

.‘I
TheTexas Gulf Sulphur Companywill not berequired to make, keep or maintain InTexas anyrecords of its stock transfers under that portion of Section 

### 6, Article XV,House Bill No. 8, Regular Session, Forty-seventh Legislature, quoted in your letter, because samerefers either to ’persons or corporations engaged in buying, selling, delivering or transferring stock, for themselves, as principals, or as brokers or agents for others. That portion of Section 

### 6of the cited

‘Act which is pertinent andapplicable to the Texas Gulf Sulphur Companyand other corporations whose stock is trafflcked in, reads as follows:

“Every association, company, or corporation,
or business conducted byatrustee or trustees shall keep or cause to be kept at someaccessible place within the State of Texas a stock certlficate book andajust andtrue book of account, transfer ledger or register, In such form as maybe prescribed bythe Comptroller wherein shall beHon. George H. Sheppard, page 

### 3

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### O-3713

plainly andlegibly recorded in separate columns the date of making every transfer of stock or other certificates included within this Article, the name and the number of shares thereof, the serial number of each surrendered certificate, the nameof the parties surrendering such certificate, the serial number of the certificate issued in exchange therefor;the number of shares covered by said certificate, the nameof the party to whomsaid certlficate was issued andthe face value of the stamps attached in payment of the tax onthe transfer of the Xificate. * *+
"Y**

ff* * *

. It shall also retaLn andkeep all surrendered or canceled shares or certificates and all memoranda relating to the sale or transfer of any thereof. All such books of account, transfer led&ers, registers, and certificate books, shall be retained andkept as aforesaid for aperiod of at least two (2) years subsequent to the date of the last entry madetherein as herein required; and all such surrendered or canceled shares or certificates andmemoranda relating to the sale or transfer of certificates taxable under this Article, shall be retained andkept for aperiod of at least two (2) years from the date of the delivery thereof. For. the purpose of ascertaining whether the tax im=ed m.his Article has been paId, all such books of account, transfer ledgers, registers, certificate books, surrendered or canceled shares or certificates andmemoranda relating to the sale or transfer thereof, shall at all times between the hours of ten o'clock in the forenoon andthree o'clock.in the afternoon, except Saturdays, Sundays, andlegal holidays, be open to exam.ination by,the Comptroller or his duly authorized representative." (Emphasis supplied),

It is apparent from the underlined portions of this statute that only such stock transfer records are required to be kept bythe Texas Gulf Sulphur Companyas pertain to taxable transactions, under the above-cited stock transfer tax act. This language of the statute negatives any Intention on the part of the Legislature to require the making andkeeping of the described records with reference to sales or transfers of shares or certificates or stock which are not taxable under the Act. These records are only required to be kept for a period of two (2) years andare merely to assist the Comptroller In the effective enforcement of the Act.Hon. George H. Sheppard, page 4 

### O-3713

But this cannot be said of other pertinent provlSiOns'of the Constitution of Texas and statutes thereunder. Article 10, Section 

### 3,Constitution of Texas, provides, in part, as follows:

'Sec. 

### 3. Every railroad or other corporation, organized or doing business in~thls State under the laws or authority thereof, shall have andmaintain apublic office or place in this State for the transaction of its business, where transfers of stock shall bemadeandwhere shall be kept for inspection bythe stockholders of such corporations, books, in which shall be recorded the amount of capital stock subscribed, the names of the owners of the stock the amounts ownedbythemrespectively, the amount of stock Paid, andbywhom, the transfer of said stock, with the date of the transfer, the amount of its assets andliabilities, and the names and places of residence of its officers. ** ***'
.~ Article 

### 1358,Revised Civil Statutes, reads as follows:

"Each corporation or joint stock company of every description, whether organized andacting under a special charter or general law of this State, shall keep ,its principal office withIn the State."

Article 

### 1328,Revised Civil Statutes, in connection with the duties of directors, provides as follows:

"They shall cause arecord to be kept of all stock subscribed andtransferred, andall business transactions. Their books andrecords shall at all reasonable times be open to the inspection of any stockholder."

Article 

### 1334,Revised Civil Statutes, reads as follows: "The stock of any corporation created under this title shall be deemed personal estate, and shall be transferable only onthe books of the

. corporation in such manner as the by-laws mayprescribe."

Therequirements of the last statute quoted have been held by the courts to be mandatory; 10TEXASJURISPRU-Hon. George H. Sheppard, page 

### 5 o-3713

DENCE814. Wethink the constitutional and the other statutory provisions, quoted above, should be similarly regarded because of the use therein of the mandatory term 'shall." Hence, weare constrained to hold that the Texas Gulf Sulphur Company, in failing or refusing to make,~keep andmaintain in Texas the stock transfer records and other records contemplated by the above constitutional and statutory provisions, is violating the plain letter of said provis-ions andthe public policy of the State, as declared bythe Constitution.

Bythis conclusion wedonot meanto say that the Texas Gulf Sulphur Companymaynot continue to maintain a stock transfer agent and stock transfer records in the state of NewYork or elsewhere beyond the limits of Texas. Wee merely intend to say that such extra state agents andrecords must be considered cumulative andadditional to the records requFred by the Constitution and statutes to bemadeandkept at all times in Texas. Thelatter records are controlling andmandatory, required by law to be kept for the protection andbenefit of stock holders; the‘extra-territorial records, if any, are permissive and are kept, in the discretion of the corporation, merely for the convenience of those buying and selling stocks in other states.

Moreover, wefind nothing in the language of these controlling constitutional and statutory provisions to indicate an intention 

### onthe part of the Legislature to limit the keeping in Texas of stock transfer records to such sales, transfers or transactions as occur in Texas andare taxable under Article XV, House Bill No. 

### 8, Regular Session, Fortyseventh Legislature, as in the case of 

### section 6of said Act, hereInabove dlscussed. All sales or transfers of shares or certificates of stock, whether intrastate or extrastate, must be recorded onthe transfer records of the corportation and not merely such records of sales, transactions and transfers
as are taxable under said Act. This is the plain intendment andpurpose of such provisions.

Theaccrual of astock transfer tax on stock transfers, madebythe required stock transfer agent in Texas or reflected in the stock transfer records and other pertinent records of the Texas Gulf Sulphur Companyrequired to bekept in Texas, is indicated bythe following language of Section I of the Act:

"There is hereby Imposed andlevied atax as hereinafter provided onall sales, agreements to sell, or memoranda of sales, and all deliveries

.or transfers of shares, or certificates of stock,
or certificates for rights to stock, or certifi-Hon. George H. Sheppard, page 

### 6 o-3713

cates of deposit representing an interest in or representing certificates madetaxable under this Section in anydomestic or foreign association, company, or corporation, or certificates of interest in anybusiness conducted bytruste,e or trustees madeafter the effective date here, ***." (Empahsis Supplied). - __ .~ Thetax levied bythis Act is an excise tax upon the privilege of transferring shares or certificates of stock by sale or gift, andthe duty to pay such 'tax is imposed upon the seller, or transferror thereof. This tax measure, of course, can have no extra-territorial operation, under fundamental principles of lawand comity, but atax will accrue andbecome collectible if any one of the following four transactions or events occurs within the state of Texas:

(1) Anexecutory contract or agreement to sell shares or certificates of stock, whether oral
or evidenced bythe "bill or.memorandum of sale" required bySection I of the Act. "memoranda of sales" (The phrase specifically namedin the tax levy, to our minds, does not enumerate another or fifth transaction to be taxed but merely refers to the written evidence of "sales" or "agreements to sell," designated in Section Ias taxable transactions).
(2) Anexecuted contract of sale of shares
or certificates of stock, whether oral or evidenced by the "bill or memorandumof sale" required bySection I of the Act, Thi,s taxable transaction refers to an executed contract of sale of shares or certificates (stock delivered andpurchase moneypaid), in contra-distinction to anexecutory but absolute andunconditional contract to sell such shares or certificates. 

### (3) Adelivery of'shares or certicicates of stock, etc. (4) Atransfer of shares or certificates of stock uponthe official books andrecords of the corporation.
Wethink it is not the intention of this Act to levy

aburdensome and cumulative tax oneach and every one of the transactions enumerated above and in Section 1of the Act as taxable, even though they all occur in Texas; but rather the intention is manifest to reach andtax only one of such trans-Hon. George H. Sheppard, page 

### 7 O-3713

actions or steps leading to acomplete transfer of such shares
or certificates from one stockholder to another. For instance, if the executory contract or agreement to sell shares or certificates of stock is subject to the tax because it is executed in Texas, then the subsequently executed sale, delivery
or transfer onthe corporate records of such shares or cer" tificates, in successive steps, will not be taxed. Similarilg, if the sale of such shares or certificates occurs in Texas,
soas to be taxable, then the subsequent delivery or transfer upon the records of the corporation of such shares or certificates will not be taxable.

Onthe other hand, if each andall of the taxable transactions enumerated in the statute and above, transpire beyond the territorial limits of Texas, except the transfer of such shares or certificates upon the certificate books, transfer ledgers or other proper official records of the Texas Gulf Sulphur Company, by it or bya uly constituted transfer agent, andthis latter act or transa 2ion,is fan caused andrequired, 'under the mandatory constitutional and statutary provisions above discussed, to be done andrecorded in Texas, then such transfer will be subject to the excise stamp tax in question. Stated more concretely, such required transfer will be taxable even though the agreement or contract to sell, the executed sale andthe delivery of such shares or certificates was executed anddone upon the floor of the New York Stock Exchange soas to be exempt from this tax under .the principles discussed in our opinion No. 

### O-3594, directed to you. Trusting the foregoing fully answers your inquiries,
weare
Yours very truly

ATTORNEY'GENERAL OFTEXAS PMN:ob:jrb:wc

APPROVED

JULY29, 1941 s/Grover Sellers FIRSTASSISTANT ATTORNEY

GENERAL Bys/Pat M.Neff, Jr. Assistant

APPRCV?ZD

OPINIONCOMMITTEE BYBWB CHAIRMAN ->-