.
,.

H NEHEAL.

August 17, 1950

Hon. Robert S. Oalvert Comptrollerof PublicAccounts opinion BO. V-1084 Austin, Texas Ret The gross receipts tax liabilityof United Qas Pipe Llm Oompauy by virtue of FeGGllt GXtGILSiOZl Of Dear Sir: the oorporatellmite of Dallas and Houstm.
You have requestedthe opinion of thie office on the above captionedmatter.

The following facts were submittedcomerming the operationsof the United Caa Pipe Line Company. In Dallas, the companyhas been sellingand deliveringnatural gas to the Dallas Power and Light Compauy for many years for use as fuel in Its geueratingplants. Recently, the city litits of Dallas were extended so as to Include the various points at which gas is deliveredto. the Power and Light Company; The Pipe Line Company alro sells and deliversnatural gas in Dallas to the United Gas Corporation,

which is a gas distributingcompany Bubject to the tax levied by Article 7060, V.O.S. The Oar Corporatiouhas among its customerswithin the Dallas. city limits a small number of "farm tap@ customerswho are served through tap lines connectingdirectly into the lines of the Pipe Line Company.

In Houston, the Pipe Line Company sells and delivers natural gas to the Gas Corporationfor general distribution

within the eitx. The Cas Corporationalso has various "farm tap* aud rural service" customers within the city limitswhich are connecteddirectly into the Pipe Line Companyls line. The Pipe Idne Company has for mauy years cllrectlg served several indum?ial consumerswhich were located outside of the Houston city liI&its.'Houstonextended its city limits on January 1, 1950, so as to include a Syntheticrubber plant operated **by** the Goodyear Rubber Company and a generatingplant operatedby the Houston Lighting and Power Company.These tvo industrialconsumersare served directlyby 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 associationowning, operating, managing, or controlling

any gas . . 0 works

. . . located within any Incorporated= or city in this State, and used for local sale and distributionin said town or city, and charg- ‘ing for sucfi

gas . . 0 shallmake 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 businessdone in each such Incorporatedcity or town within this State in the payment of charges for such gas e 0 a for the quarternext preceding* Said Individual,company, corporation, or association,

at the time of making said report o D
. for any Incorporatedtown or city of ten thousand (10,000)inhabitants or more, according to the last Federal Census next precedingthe 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 occupationtax 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,;asshown by said report. *

. . ‘Rothzing

here5.n shall be construedto require payment of the tax on ~~0898 rbceipts ereln leviedmore 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 distributoralone.” (Rmphasls added throughout). , A question of similarnature to the one now before us was presented to this office in OpinionRo. V-994 regardingthe sales by the El Paso Watural Gas Company to three industrialconsumerswlthln the City of El Paso.We quote from that opinionas follows:

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

1, 191, this officeheld that if there wau a sale of gas to 

### more than one oustomer or purchaserwithin 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** corporqtionselling or diatF1~ but$ng 1iqul.d

petroleumgas to more than one coMwaer in any incorporated Gity vith.3.u

the populatfonbrackets 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 ‘gasrorkat and subject to the occupationtax on the PQSS receipts of such sales aa levied by AP8icle 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 UtilitiesRatural 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 Intendedby the legislatureto 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 customerwithin a city does not mean, that a pipe lineEon. Robert S. Calvert,page 4 (V-1084)

company 3.8

engaged in operatinga "gas vorks" for the local sale and distributionof 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 construedby the Court in the Utllities Ratural Gas case. The Pipe Line Company in senx the~Gas CorporationIs selling to a 'distributor' who li.subjectto the tax rather than to a consuming or ouatomg& to only one industrialconsuIper in Dallas (the Dallas Thus the Pipe Line Company is sellingand delivering
Paver and Light Ccuapany), and it is our conclusionthat It is not liable for the occupationtax leviedby Article 7060.

With respect to the sales within Houston, it is submittedthat the Pipe Line Company is making sales and deliveriesto two Industrialconsumersor 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 operatinga 'gas works" and are liable for the occupationtaxes leviedby Article 7060. It is therefore our concluslcnthat the United Gas Pipe Line Company 3s liable for the tax in the amount of 1.5125 per cent of gross receiptsarFsing from the sale of natural gas to all its consumersor customers within Houston from December 31, 1949 the date the company began operatinga "gas workss wl&tn that city.

It Is our understanding that the United Gas Pipe Line Company is a wholly owned subsidiaryof the United GasCorporation. We have, for purposes of this opinion,assumed that the sales to the fazes tap and PUral service customerswithin Dallas and Houstonvere bona fide sales to the distributor and that the Pipe Line Company is not, through a joint operation,dlrectly engaged or financiallyinterestedin the actual distribution of gas to those customers.

A pipe line companyvhich sells to two
or more industrialconsumerswithin a aity is operatinga "gas works" and is liable for the occupationtax 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)

UtilitiesRat-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 ExecutiveAssistant Charles 13.

Hathews First Assistant FL/mwbrm Yours very trrily,
PRICE MRIRL