.-rHonorable George H. Sheppard

Comptroller of Public Accounts Austin, Texas Opinion Wo,P-253 Re: The aplicability of the 1,#sales tax to asale byanewcar dealer to a used car dealer. Dear Mr. Sheppard:

You have requested the opinion of this Departmentbased upon the following fact situation:

"Amanufacturer of motor vehicles sells amotor vehicle to anauthorized newcar dealer. After the sale is made the authorized newcar dealer sells the car to a used car d~ealer, operating in some other Dart of the State of Texas, andthe used car d~ealer resells thjs I car to an individual whois required to pay a 1%sales tax." Your first question is: "Will it be necessary for this used car dealer to register the car and pay a 1%sales tax before offering the car for sale or d~oesthis used car dealer have the same right to sell anewunregistered car as afirst sale, even though he does not hold acontract with any manufacturer to sell newcars?" The pertinent parts of Chapter 184, Article VI, Acts of the 47th Legislature, 1941 (codified as Article 7047k, Vernon's Civil Statutes) follows:

"Sec. 1. (a) There fs hereby levied atax upon every retail sale of every motor vehicle sold in this State, such tax to be equal to one (1) per cent ofHon. Geo. H.Sheppard, Page 2 (V-253)

the total consideration, paid or to be paid to the seller by the buyer, whSch consideration shall include the amount paid or to be paid for said motor ve- ,hicle andall accessories attached thereto at the time of the sale, whether such consideration be in the n~atureof cash, credit, or exchange of other property, or acombination of these. I,D

. s

“Sec. 3 (a) Theterm ‘sale or
‘sales’ as herein used shall Include installment and credit sales, andthe exchange of property, as well as the sale thereof for money, every closed transactfon constituting asale. Thetransaction whereby the possession of property is transferred but,the seller retains title as security for the payment of the price shall be deemed asale. tail ‘%~, Theterm ‘retail sale’ or sre-

’ as herein used~shall include all sales of motor vehicles except those whereby the purchaser acquires amotor vehicle for the exclusive purpose of resale andnot for use.

YZec. 5. Thetaxes levied in thfs Article shall be collected bythe Assessor and Collector of taxes of the county fn which anysuch motor vehicle is first registered or first transferred after such a sale; the Tax Collector shall refuse to accept for reqistration or for transfer any motor vehicle until the tax thereon is paid. I,

. . .It will be noted that Section 5supra, requires the 1%sales tax to be collected bythe Tax Collector of the County in which the motor vehfcle is first registered or first transferred after such sale, Therefore the statutes which qovern the registration of the motor vehicle must be considered in oarrfmateria with the statute imposing the sales tax.Hon. Geo. H.Sheppard, Page 3 (V-253)

The "Certificate of Title Act", codified as Article 1436-1, Vernon's Penal Code, (Acts 46th Legislature, 1939, p0602) has been construed by the Supreme Court of Texas in the case of Motor Investment Co. v, Knox City, 174S-W, (2d) 482, which involved afact situation somewhat similar to the one above stated,

The pertinent parts of the Court's opinion are here quoted:

"Ford Motor Companymanufactured an automobile and sold it in~duecourse to Boling-Duggan, a partnership, adealer in Dallas, anddelivered the manufacturerss certificate along with the automobile, On March 7, 1940, Boling-Duggan sold the vehicle to R. M. Hedrick, taking, achattel mortgage lien for $770 of the sale price, Boling-Duggan delivered the manufacturer's certificate to its vendee Hedrick at the time of the sale, but did not note thereon the above lien0 Hedrick purchased the automobile for the purpose of converting it into afire truck and reselling it to a consumer. After having so converted it, Hedrick, on the 30th day of April, 1940, for avaluable consideration sold and delivered the automobile to the City of Knox City. At that time said automobile hadnot been previously registered with nor licensed by the State HfghwayDepartment of the State of Texas, De0 "The Certificate of Title Act, Article 1436-1, VernonPs Penal Codes was enacted by the Legislature of this State in 1939 to lessenAndyprevent the theft of motor vehicles, andthe importation into this State of and traffic in stolen motor vehicles, and the sale of encumbered motor vehicles without disclosure of existing liens, The pertinent provisions of the Act are as follows: "'Sec. 4. The term 'Owner' includes any person, firm, association, or corporation other than manufacturer, importer, distributor, or dealer claiming title to, or having a right to operate pursuant to alien on amotor vehicle after the first sale as herein defined, a0oHon. Geo. H.Sheppard, Page 4 (V-253)

"'Sec. 7. Theterm 'First Sale' means the bargain, sale, transfer or delivery within this State with intent to pass an interest therein, other than alien of amotor vehicle which has not been previously registered or licensed in this State. "'

. . . "'Sec. 9. Theterm 'MewCar' means amotor vehicle which has never been the subject of a first-sale.

... /r I

. . . 't7Sec.' 19. Theterm 'Dealer' means any person purchasing motor vehicles for resale at retail to owners. "'

. . . "'Sec. 27. Before selling or disposing of any motor vehicle required to be registered or licensed in this State onany highway or public place within this State, except with dealer's metal or cardboard license number thereto attached as nowprovidedby law, the owner shall makeapplication to the designated agent in the county of his domicile upon form to be prescribed bythe Department for a certificate of title for such motor vehicle. "1.

. .' "Section 27 of the Act is the section which requires the procurement of acertificate of title as acondition precedent to the right to transfer amotor vehicle. By the ternis of that section such certificate of title is required for motor vehicles 'raquired to be registered or linensed in this State, on any highway or pubi% plane within thisState'.

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.Hon. Geo. R. Sheppard, Page 5 (V-253)

"Moreover, under said Section 27, it is only an 'owner? of amotor vehicle that is requirrd to register such vehicle andsecure a certificate of title therefor before selling the same. Thetern towner,p as defined in Section 4, excludesmanufactures and dealers, andincludes only those claimin? title 'after the first sale.' The Act divides sales of Automobiles into two classes, namely ?first sale' and 'subsequent sale.' Theterm 'first sales'means atransfer of avehicle which has not previously been registered (Sec. 71, as distinpuished from a 'subsequent sale,' meanin? atransfer after avehicle has been registered or should, in law, have been registered (Sec. 8)" Reading the Act as awhole, wethink it clear that every transfer of amotor vehicle, regardless of the number thereof, from manufacturer to dealer, dealer to dealer, and from dealer to 'owner,s as define-the Act, constitutes a 'first sale,s andthat it is not necessary that the vehicle he recs=ed anda certificate of title thereto obtained as acondition precedent toTbe valrdfty of such 'first sale,'" IEmphasis added)

In view of the foregoing construction of the law it is not necessary for the used car dealer to register the newcar and since the motor vehicle wasacnuired byhimfor the "exclusive purpose of resalev', it is exempt from the motor vehicle retail sales tax under the provisions of Section 3 (b), Article 71347k,supra.

Your second question is: Would~ it makeany difference i~fthe car bought bythe used car dealer from the ori,ginnl nuthorived nevlcar dealer was asecondhand car:" It is presumed that the secondhand motor vehicle is a 'Used Car" as d~efined bySection 10, Article 1436-1, Vernon's Penal Code, as follows:

"The term 'Used Cars means amotor vehicle that has been the subject of afirst” .-

Hon. Geo. H.Sheppard, Page 6 (V-253)

sale whether within this State or elsewhere." This sale constitutes a "Subsequent Sale as defined in Section 8, Article 1436-1, Vernon's Penal Cod~e,as follows:

"The term 'Subsequent Sale' means the bargain, sale, transfer, or delivery within this State, with intent to pass aninterest therein, other than a lien of amotor vehicle which has been registered or licensed within this State or when it has not been required under law to be registered or licensed in this State." Nevertheless, the "Used car" being acquired by the used car dealer for the "exclusive purpose of resale", the transaction is exempt from the pa,vmentof the l$ quoted retail sales tax under the provisions of Section 3 (b) of Article 7047k, supra. SUMMARY Anewmotor vehicle acquired from the manufacturer by acar dealer, whoin turn sells the vehicle to aused car dealer, need not be registered under the provisions of the "Certificate of Title Act", Article 1436-1, Vernon's Penal code, and is not subject to the 1%motor vehicle retail sales tax, (Article ?047k, Vernon's Civil Statutes) when acquired bythe used car dealer for the "exclusive purpose of resale". Motor Investment Co. v. Knox City, 141Tex. 530, 174S.W. (2d) 482. A "Used" car sold bya "Newcar" de-ler to a "Used Car" dealer whoacquires it for the "exelusive purpose of resale", is exempt from the 1%retail motor vehicle retail sales tax. Article 7047k, Sec. 3 (b). Yours'very truly, Edd ATTORNEYGENERAL 0

ATTORNEY

GENERAL BY @qgy&J&

C. K. Richards CKR/lh:jrb Assistant