. 

,. 

H NEHEAL. 

August 17, 1950 

Hon. Robert S. Oalvert 

Comptroller of Public Accounts 

opinion BO. V-1084 

Austin, Texas Ret The gross receipts 

tax liability of 

United Qas Pipe Llm 

Oompauy by virtue of 

FeGGllt GXtGILSiOZl Of 

Dear Sir: 

the oorporate llmite 

of Dallas and Houstm. 

You have requested the opinion of thie office 

on the above captioned matter. 

The following facts were submitted comerming 

the operations of the United Caa Pipe Line Company. In 

Dallas, the company has been selling and delivering natural gas to the Dallas Power and Light Compauy for many 

years for use as fuel in Its geuerating plants. Recently, the city litits of Dallas were extended so as to Include the various points at which gas is delivered to. 

the Power and Light Company; The Pipe Line Company alro 

sells and delivers natural gas in Dallas to the United 

Gas Corporation, which is a gas distributing company Bubject to the tax levied by Article 7060, V.O.S. The Oar 

Corporatiou has among its customers within the Dallas. 

city limits a small number of "farm tap@ customers who 

are served through tap lines connecting directly into 

the lines of the Pipe Line Company. 

In Houston, the Pipe Line Company sells and 

delivers natural gas to the Gas Corporation for general 

distribution within the eitx. The Cas Corporation also 

has various "farm tap* aud rural service" customers 

within the city limits which are connected directly into the Pipe Line Companyls line. The Pipe Idne Company 

has for mauy years cllrectlg served several indum?ial 

consumers which were located outside of the Houston city 

liI&its. 'Houston extended its city limits on January 1, 

1950, so as to include a Synthetic rubber plant operated by the Goodyear Rubber Company and a generating plant 

operated by the Houston Lighting and Power Company. These 

tvo industrial consumers are served directly by the Pipe 

Line Company. 
Eon. Robert S. Calvert, page 2 (v-1084) 

Article 7060, V.C .S ., reads in part as followsr 

*Each Individual, company, corporation, 

or association owning, operating, managing, 

or controlling any gas . . 0 works . . . located within any Incorporated= or city 

in this State, and used for local sale and 

distribution in said town or city, and charg- 

‘ing for sucfi gas . . 0 shall make quarterly, 

011 the first day of January, April, July, and 

October of each year, a Peport to the Comptroller under oath e o . showing the gross 

amount received from such business done in 

each such Incorporated city or town within 

this State in the payment of charges for 

such gas e 0 a for the quarter next preceding* Said Individual, company, corporation, 

or association, at the time of making said 

report o D . for any Incorporated town or 

city of ten thousand (10,000) inhabitants 

or more, according to the last Federal Census next preceding the filing of said report, the said individual, company, corporation, or association, at the time of making 

said report, shall pay to the Treetsurer of 

th3.s State an occupation tax for the quarter beginning on said date an amount equal 

to one and five thousand one hundred twentyfive ten-thousandths (1.5125) per cent of 

said gross receipts, ;as shown by said report. * . . 

‘Rothzing here5.n shall be construed to 

require payment of the tax on ~~0898 rbceipts 

ereln levied more n once on 

iommyty, and whert?he ccmmodi~~ 

e same 

is prouced y one individual, company, corporation, or association, and distributed by 

another, the tax shall be paid by the distributor alone.” (Rmphasls added throughout). , 

A question of similar nature to the one now before us was presented to this office in Opinion Ro. V-994 

regarding the sales by the El Paso Watural Gas Company to 

three industrial consumers wlthln the City of El Paso. We 

quote from that opinion as follows: 

“In Opinion Ho. O-3776, dated August 
Hon. Robert S. Calvert, page 3 (V-1084) 

1, 191, this office held that if there wau 

a sale of gas to more than one oustomer or 

purchaser within a aity the distributor was 

a ’ 

to & 

ae VOP~S' under the etattrte and subject 

he tax. We quote from th%t opinion3 

.‘It is the opinion of this department 

in line with the above quoted casea that 8 

individual or corporqtion selling or diatF1~ 

but$ng 1iqul.d petroleum gas to more than one 

coMwaer in any incorporated Gity vith.3.u the 

populatfon brackets stated in Article 7060 

would be subject to the gross receipts 

dr; ievied the4-eln.t 

*It Is thus our oplnhu that the Rl Paso 

Ratural @as Company, by vl3tue of the faot 

that it sells and distributes natural gas to 

three iudtxttrial conlwier~ wlthin an incorporated city, is a ‘gas rorkat and subject 

to the occupation tax on the PQSS receipts 

of such sales aa levied by AP 8 icle 

C.S.’ 

7060, 8. 

The only reported case which ve have found oonstrulng the meaning of the term “gas works" as used in 

Article 7060 Is that of Utilities Ratural Gas Ga. vi State 

133 Tex. 313, 318, 128 S.W.2d 115=1155 . 0' our4 

said; 

0 we have no doubt th%t the aim-. 

ple fait’& a delivery of gas la made In 

the city, by means of said pipe line, to a 

single customer, and to nobody else, was not 

Intended by the legislature to be comprehended by the term tdistrlbutlon’ as used. 

This term as used does not mean the transfer of the poaseaaion of gas, by mean8 of the 

pipe line, to a sinnle wrah%ser where such 

‘individuals or conoerns in the city. Any 

other oonstruatlon of the term vould, in out 

oplnlon, involve a departure from the leglslative intent.” 

Under that decision the sale to one Industrial 

customer within a city does not mean, that a pipe line 
Eon. Robert S. Calvert, page 4 (V-1084) 

company 3.8 engaged in operating a "gas vorks" for the local sale and distribution of gas. It is our oplnlon that 

while the United ffaS Pipe Line Company is engaged in making "local sales" in Dallas, it is not a *dlstalbutor* of 

gas as that term was construed by the Court in the Utllities Ratural Gas case. The Pipe Line Company in senx 

the~Gas Corporation Is selling to a 'distributor' who 

li.subject to the tax rather than to a consuming or ouatomg& to only one industrial consuIper in Dallas (the Dallas 

Thus the Pipe Line Company is selling and delivering 

Paver and Light Ccuapany), and it is our conclusion that It 

is not liable for the occupation tax levied by Article 7060. 

With respect to the sales within Houston, it is 

submitted that the Pipe Line Company is making sales and 

deliveries to two Industrial consumers or customers. It 

has been our opinion that persons engaged in the distr$.bution and sale of gas to tvo or more customers vithin the 

corporate llmlts of cities and towns are operating a 'gas 

works" and are liable for the occupation taxes levied by 

Article 7060. It is therefore our concluslcn that the 

United Gas Pipe Line Company 3s liable for the tax in the 

amount of 1.5125 per cent of gross receipts arFsing from 

the sale of natural gas to all its consumers or customers 

within Houston from December 31, 1949 the date the company began operating a "gas workss wl&tn that city. 

It Is our understanding that the United Gas 

Pipe Line Company is a wholly owned subsidiary of the 

United GasCorporation. We have, for purposes of this 

opinion, assumed that the sales to the fazes tap and PUral service customers within Dallas and Houston vere 

bona fide sales to the distributor and that the Pipe 

Line Company is not, through a joint operation, dlrectly engaged or financially interested in the actual distribution of gas to those customers. 

A pipe line company vhich sells to two 

or more industrial consumers within a aity 

is operating a "gas works" and is liable for 

the occupation tax levied by Article 7060, 

V.C.S. A oompany whlah sells to only one industrial consumer is not subject to the tax. 
. 

I 

Hon. Robert S. Calvert, page 5 .(v-1084) 

Utilities Rat-Ural Gas Co. v. StEt:e,$3 

I",: Ho:: V-9g'+*&ddO-37;6. 

31 126 s w 2 115 (1939) 

APPROVED: 

W. V. Geppert 

Taxation DlvLaion 

Everett Hutchinson 

Executive Assistant 

Charles 13. Hathews 

First Assistant 

FL/mwbrm 

Yours very trrily, 

PRICE MRIRL