. -rHonorable George H. Sheppard 

Comptroller of Public Accounts 

Austin, Texas Opinion Wo, P-253 

Re: The a plicability of 

the 1 ,# sales tax to 

a sale by a new car 

dealer to a used car 

dealer. 

Dear Mr. Sheppard: 

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

"A manufacturer of motor vehicles 

sells a motor vehicle to an authorized 

new car dealer. After the sale is made 

the authorized new car dealer sells the 

car to a used car d~ealer, operating in 

some other Dart of the State of Texas, 

and the used car d~ealer resells thjs I 

car to an individual who is 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~oes this used car dealer have 

the same right to sell a new unregistered 

car as a first sale, even though he does 

not hold a contract with any manufacturer 

to sell new cars?" 

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 

a tax upon every retail sale of every 

motor vehicle sold in this State, such 

tax to be equal to one (1) per cent of 
Hon. 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 and all accessories attached 

thereto at the time of the sale, whether 

such consideration be in the n~ature of 

cash, credit, or exchange of other prope rty , or a combination of these. 

I, D . s 

“Sec. 3 (a) The term ‘sale or 

‘sales’ as herein used shall Include installment and credit sales, and the exchange of property, as well as the sale 

thereof for money, every closed transactfon 

constituting a sale. The transaction whereby 

the possession of property is transferred 

but, the seller retains title as security 

for the payment of the price shall be deemed a sale. 

tail ‘%~, The term ‘retail sale’ or sre- 

’ as herein used~ shall include 

all sales of motor vehicles except those 

whereby the purchaser acquires a motor vehicle for the exclusive purpose of resale 

and not for use. 

YZec. 5. The taxes levied in thfs 

Article shall be collected by the Assessor 

and Collector of taxes of the county fn 

which any such 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 5 supra, requires the 1% sales tax to be collected by the 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 oarrf materia 

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, p0 602) has been construed by the Supreme 

Court of Texas in the case of Motor Investment Co. v, 

Knox City, 174 S-W, (2d) 482, which involved a fact situation somewhat similar to the one above stated, 

The pertinent parts of the Court's opinion are 

here quoted: 

"Ford Motor Company manufactured an 

automobile and sold it in ~due course to 

Boling-Duggan, a partnership, a dealer in 

Dallas, and delivered the manufacturerss 

certificate along with the automobile, On 

March 7, 1940, Boling-Duggan sold the vehicle to R. M. Hedrick, taking, a chattel 

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 

a fire truck and reselling it to a consumer. 

After having so converted it, Hedrick, on 

the 30th day of April, 1940, for a valuable 

consideration sold and delivered the automobile to the City of Knox City. At that time 

said automobile had not been previously registered with nor licensed by the State Hfghway Department of the State of Texas, D e 0 

"The Certificate of Title Act, Article 

1436-1, VernonPs Penal Codes was enacted by 

the Legislature of this State in 1939 to lessen Andy prevent the theft of motor vehicles, 

and the 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 a lien on a motor vehicle 

after the first sale as herein defined, a 0 o 
Hon. Geo. H. Sheppard, Page 4 (V-253) 

"'Sec. 7. The term 'First Sale' 

means the bargain, sale, transfer or 

delivery within this State with intent 

to pass an interest therein, other than 

a lien of a motor vehicle which has not 

been previously registered or licensed 

in this State. 

"' . . . 

"'Sec. 9. The term 'Mew Car' means 

a motor vehicle which has never been the 

subject of a first-sale. 

. . . /r I 

. . . 

't7Sec.' 19. The term '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 on any 

highway or public place within this State, 

except with dealer's metal or cardboard license number thereto attached as now provided by law, the owner shall make application 

to the designated agent in the county of his 

domicile upon form to be prescribed by the 

Department for a certificate of title for 

such motor vehicle. 

"1. . .' 

"Section 27 of the Act is the section 

which requires the procurement of a certificate of title as a condition precedent to 

the right to transfer a motor 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'. . . . 

1( . . . 

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

"Moreover, under said Section 27, 

it is only an 'owner? of a motor vehicle 

that is requirrd to register such vehicle 

and secure a certificate of title therefor 

before selling the same. The tern towner,p 

as defined in Section 4, excludesmanufactures and dealers, and includes only those 

claimin? title 'after the first sale.' The 

Act divides sales of Automobiles into two 

classes, namely ?first sale' and 'subsequent 

sale.' The term 'first sales'means a transfer of a vehicle which has not previously 

been registered (Sec. 71, as distinpuished 

from a 'subsequent sale,' meanin? a transfer 

after a vehicle has been registered or should, 

in law, have been registered (Sec. 8)" Reading the Act as a whole, we think it clear 

that every transfer of a motor 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 and that it is 

not necessary that the vehicle he recs=ed 

and a certificate of title thereto obtained 

as a condition 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 new car and since the motor vehicle was acnuired by him for 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 make any difference i~f the car 

bought by the used car dealer from the ori,ginnl 

nuthorived nevl car dealer was a secondhand car:" 

It is presumed that the secondhand motor vehicle 

is a 'Used Car" as d~efined by Section 10, Article 1436-1, 

Vernon's Penal Code, as follows: 

"The term 'Used Cars means a motor vehicle that has been the subject of a first 
” .- 

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 

an interest therein, other than a lien 

of a motor 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,vment of 

the l$ quoted retail sales tax under the provisions of 

Section 3 (b) of Article 7047k, supra. 

SUMMARY 

A new motor vehicle acquired from the 

manufacturer by a car dealer, who in turn 

sells the vehicle to a used 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 

by the used car dealer for the "exclusive purpose of resale". Motor Investment Co. v. Knox 

City, 141 Tex. 530, 174 S.W. (2d) 482. A 

"Used" car sold by a "New car" de-ler to a 

"Used Car" dealer who acquires 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