Honorable Ben Atwell 

Chairman, Revenue and Tax Committee 

House of Representatives 

Austin, Texas Opinion No. M-443 

Re: Constitutionality of 

H.B. 25, 6k.t Leg., 

Dear Representative Atwell: 1st C.S. 1969 

You have asked our opinion whether House Bill No. 25, 

61st Legislature, First Called Session, 1969, is constitutional. 

Our opinion is that this Bill is constitutional. 

The Bill amends Title 122-A, Taxation-General, Revised Civil Statutes of Texas, 1925 by adding a new 

Chapter 16, which imposes a tax of $2.50 on each traneaction of sale or transfer of shares, certificates, bonds 

or securities issued by certain entities and under specified 

conditions. 

The Bill provides definitions of terms and for collection and payment of the tax, for allocation of the revenues 

received and other relevant provisions, 

The formal provisions of the Bill are constitutional: 

(1) The Bill contains only one subject and its 

caption is sufficient (Art. III, Sec. 35), 

(2) The Bill is a revenue measure and it originated 

in the House (Art. III, Sec. 33), and 

Set 2$3) The en acting clause is in proper form (Art. III, 

. . 

We have considered the substance of the Bill with reference to the following constitutional provisions: 

(1) That portion of Article VIII, Section 1, which provides that, 

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Honorable Ben Atwell, page 2 (M-443) 

"Taxation shall be equal and uniform. . . .' 

(2) Article I, Section 3 which reads as follows: 

"All free men, when they form a social compact, 

have equal rights, and no man, or set of men, 

is entitled to exclusive separate public emoluments, or privileges, but in consideration of 

public services." 

(3) Article I, Section 19 which reads as follows: 

"No citizen of this State shall be deprived of 

life, liberty, property, privileges or immunities, or in any manner disfranchised, except by the due course of the law of the land." 

(4) The due process and equal protection clauses of 

Section 1 of the Fourteenth Amendment of the United States 

Constitution which read as follows: 

"Section 1. . . . nor shall any State deprive 

any person of life, liberty, or property, without due process of law; nor deny to any person 

within its jurisdiction the equal protection of 

the law." 

The provisions of the Bill to which we have directed 

our more particular considerations are those contained in 

Article 16.02 thereof which reads as follows: 

"Article 16.02. Imposition of Tax; Exceptions. 

(a) There is imposed a tax of $2.50 on each 

transaction of sale or transfer of shares, certificates, bonds, or securities, issued by the same 

company or governmental entity when the sale or purchase, or transfer occurs within six months of the 

acquisition of the shares, certificates, bonds, or 

securities. 

(b) The tax imposed by this Article does not apply to: 

1 The initial issue of stocks by a corporation; 

[I 2 The sale of stocks owned by a mutual fund 

so long as it is not the stocks of the mutual 

fund itself which are sold; or 

(3) bonds or securities issued by the United 

States government, a state or local government, a county, or any political subdivision." 

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Honorable Ben Atwell, page 3 (M- 443) 

The classification of the transactions taxed and of 

those exempt has been our principle concern in considering 

your question. we believe the case of Hurt v. 

Cype;, 130 Tex.1~3$~E?~0W.2d 836 (1937) supportsthese 

c ass fications made by the Pill. Of more particular concern 

is the provision which imposes a tax of $2.50 on each of the 

taxable transactions enumerated, in view of the fact that 

some securities, at times, sell on the open market for sums 

which are very near or at times less than the amount of $2.50 

per share, which amount is the amount of the tax for a transfer of one or more shares of a company. 

The holding in New York, ex rel. Hatch v. Reardon, 

204 U.S. 152, 159-160 (lgv() resolves our question in favor 

of the constitutionality of House Bill 25 under consideration. The Court upheld the New York tax of two cents on 

each hundred dollars of face value of stock for every sale, 

etc thereof. One of the stocks transferred was worth $30.75 

a share of its face value of $100.00 while the other share 

transferred was worth $172.00. The Court stated that while 

the inequality of the tax, so far as actual values are concerned, was manifest, yet equality had to yield to practical 

considerations and usage and that there must be a fixed and 

indisputable mode of ascertaining a stamp tax. The Court 

further held and stated as follows: 

.Valuation is not the only thing to 

bi ionsidered. As was pointed out by the 

Court of Appeals, the familiar stamp tax 

of two cents on checks, irrespective of 

amount, the poll tax of a fixed sum, irrespective of income or earning capacity, 

and many others, illustrate the necessity 

and practice of sometimes substituting 

count for weight. 

Co. v. Pennsylvania, 13a U 

and Manufacturers' Bank v. 

%'/ U.S. 4bl. e s on (p.159-160) 

In the subsequent case of Carmichael v. Southern Coal Co., 

301 U.S. 495, 511-512 (1937) the Court again held that the 

administrative convenience and expense in the collection or 

measurement of a tax are alone a sufficient justification 

for the difference between the treatment of those who would 

pay a small amount of tax and those who would pay larger 

amounts. Accord: Clay Productzs, Inc. v. U.S., 52 F.2d 1033 

Ct. of Claims, 193) Vaughan v. New York, 5 N.E.2d 53 

N.Y. Ct. of App., l&6), 108 A.L.R. 950 and the annotation 

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Honorable Ben Atwell, page 4 (M-443) 

immediately following; New York v. Latrobe, 279 

* and International Shoe Co., v. Sh artel, 

U.S. 421 

279 U.S. 

Under the authorities cited in the immediately preceding paragraph, we believe the relationship between the 

amount of the tax imposed by House Bill 25 and the value 

of property transferred, or of the privileged exercised, 

is within that degree of power inherent in the Le islature. 

Panhandle Oil Co. v. Knox, 277 U.S. 218, 223 (1928). 

SUMMARY 

House Bill 25, 61st Legislature, First 

Called Session, 1969, is constitutional.~ 

Its classification as to transactions 

which are taxable and those which are 

exempt, as well as the amount of the 

tax with reference to the value of 

properties transferred, are within constitutional limitations. 

Prepared by: W. i. Allen 

Assistant Attorney General 

APPROVED: 

OPINION COMMITTEE 

Kerns Taylor, Chairman 

George Kelton, Co-Chairman 

James Broadhurst 

Alfred Walker 

John Banks 

Jim Swearingen 

W. V. Geppert 

Staff Legal Assistant 

Hawthorne Phillips 

Executive Assistant 

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