Honorable George H. Sheppard 

Comptrollers of Public Accounts 

Austin, Texas 

Opinion No. O-1713 

Rk: (a) Is it-necessary that TexasGulf 

Sulphur Company, a domestic corporation, keep a stock certiflcate book, stock transfer ledger 

and other permanent records withIn the state of Texas even though 

it has a stock transfer agent in 

New York? 

Are such ,records required to reflect all stock transfers by the 

corporation or only such transfers 

as occur within the state and are. 

taxable under Art. XV, H.B. No. 8, 

Acts, Regular Session, 47th Leg.? 

Will such stock transfers in Texas 

on the 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 we quote therefrom: 

"The Texas Gulf Sulphur Company is chartered . 

under the laws of Texas and 1s domiciled in Harris 

Count Texas. 

value Y 

This corporation's stock (no par 

is listed on the New York Stock Exchange. 

There are no stock transfer records kept in Texas 

as the stock transfer agent is in New York. 

"Section 6 of Article~XV of House Bill No. 8 

of the Regular Session of the Forty-seventh Legislature reads in part: 

'I* * *every person * * *engaged in whole or 

^ 
Hon. George R. Sheppard~, page 2 . 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 some accessible 

place within the State of Texas, a just and true 

book of account, in such form as may be prescribed 

by the 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 

and number of shares thereof, the face value, the 

name of the seller or transferrer, the name of the 

purchaser or transferee, * * *I 

“Please tell me whether or not it will be 

necessary that Texas Gulf Sulphur Company keep 

stock transfer and other records within the State 

of Texas and whether or not these records shall include all transfers of stock by the corporation. 

“If the law requires that these records shall 

include all transfers of stock by the corporation, 

and no other act necessary to effect said transfer 

Is done In Texas, will such transfers be subject to 

the tax? 

“I am enclosing a copy of a letter from Mr. 

John M. Corbett of Bay City, Texas, with reference 

to this matter .‘I 

The Texas Gulf Sulphur Company will not be required 

to make, keep or maintain In Texas any records 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 same refers 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 6 of the cited 

‘Act which is pertinent and applicable to the Texas Gulf 

Sulphur Company and other corporations whose stock is trafflcked in, reads as follows: 

“Every association, company, or corporation, 

or business conducted by a trustee or trustees 

shall keep or cause to be kept at some accessible 

place within the State of Texas a stock certlficate book and a just and true book of account, 

transfer ledger or register, In such form as may be 

prescribed by the Comptroller wherein shall be 
Hon. George H. Sheppard, page 3 

. O-3713 

plainly and legibly 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 name of the 

parties surrendering such certificate, the serial 

number of the certificate issued in exchange therefor;the number of shares covered by said certificate, the name of the party to whom said certlficate was issued and the face value of the stamps attached in payment of the tax on the transfer of the 

Xificate. * * + 

"Y * * 

ff* * * . It shall also retaLn and keep 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 and kept as aforesaid for a period of at 

least two (2) years subsequent to the date of the 

last entry made therein as herein required; and all 

such surrendered or canceled shares or certificates 

and memoranda relating to the sale or transfer of 

certificates taxable under this Article, shall be 

retained and kept for a period 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 

and memoranda relating to the sale or transfer thereof, shall at all times between the hours of ten 

o'clock in the forenoon and three o'clock.in the 

afternoon, except Saturdays, Sundays, and legal 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 by the Texas Gulf Sulphur Company as 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 and keeping 

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 and are 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 

and maintain a public office or place in this 

State for the transaction of its business, where 

transfers of stock shall be made and where shall 

be kept for inspection by the 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 

owned by them respectively, the amount of stock 

Paid, and by whom, the transfer of said stock, 

with the date of the transfer, the amount of 

its assets and liabilities, 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 and acting 

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 a record to be kept of all 

stock subscribed and transferred, and all business 

transactions. Their books and records 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 on the books of the . 

corporation in such manner as the by-laws may prescribe." 

The requirements of the last statute quoted have 

been held by the courts to be mandatory; 10 TEXAS JURISPRU- 
Hon. George H. Sheppard, page 5 o-3713 

DENCE 814. We think the constitutional and the other statutory provisions, quoted above, should be similarly regarded 

because of the use therein of the mandatory term 'shall." 

Hence, we are constrained to hold that the Texas Gulf Sulphur 

Company, in failing or refusing to make,~keep and maintain 

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 and the 

public policy of the State, as declared by the Constitution. 

By this conclusion we do not mean to say that the 

Texas Gulf Sulphur Company may not continue to maintain a 

stock transfer agent and stock transfer records in the state 

of New York or elsewhere beyond the limits of Texas. Wee 

merely intend to say that such extra state agents and records 

must be considered cumulative and additional to the records 

requFred by the Constitution and statutes to be made and kept 

at all times in Texas. The latter records are controlling 

and mandatory, required by law to be kept for the protection 

and benefit 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, we find nothing in the language of these 

controlling constitutional and statutory provisions to indicate an intention on the part of the Legislature to limit 

the keeping in Texas of stock transfer records to such sales, 

transfers or transactions as occur in Texas and are taxable 

under Article XV, House Bill No. 8, Regular Session, Fortyseventh Legislature, as in the case of section 6 of said Act, 

hereInabove dlscussed. All sales or transfers of shares or 

certificates of stock, whether intrastate or extrastate, must 

be recorded on the 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 

and purpose of such provisions. 

The accrual of a stock transfer tax on stock transfers, made by the required stock transfer agent in Texas or 

reflected in the stock transfer records and other pertinent 

records of the Texas Gulf Sulphur Company required to be kept 

in Texas, is indicated by the following language of Section 

I of the Act: 

"There is hereby Imposed and levied a tax as 

hereinafter provided on all 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 made taxable under this 

Section in any domestic or foreign association, 

company, or corporation, or certificates of interest 

in any business conducted by truste,e or trustees 

made after the effective date here, * * *." 

(Empahsis Supplied). - _ _ 

.~ 

The tax levied by this Act is an excise tax upon 

the privilege of transferring shares or certificates of stock 

by sale or gift, and the 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 law and comity, but a tax will accrue 

and become collectible if any one of the following four transactions or events occurs within the state of Texas: 

(1) An executory contract or agreement to 

sell shares or certificates of stock, whether oral 

or evidenced by the "bill or.memorandum of sale" 

required by Section I of the Act. 

"memoranda of sales" 

(The phrase 

specifically named in 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 I as taxable transactions). 

(2) An executed contract of sale of shares 

or certificates of stock, whether oral or evidenced by the "bill or memorandum of sale" required by Section I of the Act, Thi,s taxable 

transaction refers to an executed contract of 

sale of shares or certificates (stock delivered 

and purchase money paid), in contra-distinction 

to an executory but absolute and unconditional 

contract to sell such shares or certificates. 

(3) A delivery of'shares or certicicates of 

stock, etc. 

(4) A transfer of shares or certificates of 

stock uponthe official books and records of the 

corporation. 

We think it is not the intention of this Act to levy 

a burdensome and cumulative tax on each and every one of the 

transactions enumerated above and in Section 1 of the Act as 

taxable, even though they all occur in Texas; but rather the 

intention is manifest to reach and tax only one of such trans- 
Hon. George H. Sheppard, page 7 O-3713 

actions or steps leading to a complete 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 on the 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, 

so as to be taxable, then the subsequent delivery or transfer upon the records of the corporation of such shares or 

certificates will not be taxable. 

On the other hand, if each and all 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 by a uly constituted transfer 

agent, and this latter act or transa fan 2ion,is caused and required, 'under the mandatory constitutional and statutary provisions above discussed, to be done and recorded 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 and the delivery of such shares or 

certificates was executed and done upon the floor of the New 

York Stock Exchange so as 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, 

we are 

Yours very truly 

ATTORNEY'GENERAL OF TEXAS 

PMN:ob:jrb:wc 

APPROVED JULY 29, 1941 

s/Grover Sellers 

FIRST ASSISTANT 

ATTORNEY GENERAL 

By s/Pat M. Neff, Jr. 

Assistant 

APPRCV?ZD OPINION COMMITTEE BY BWB CHAIRMAN ->-