Court Opinion

ID: 4134502
Source: CourtListenerOpinion
Date Created: 2017-02-18 01:51:04.56902+00
Date Added: 2024-06-11T14:37:40.900575
License: Public Domain

Hon. Robert S. Calvert                  Opinion MO. ~-165
         Comptroller of Public Accounts
         Austin, Texas                           Re :   Whether~ certain deficiency
                                                        determinations   for sales
                                                        and use taxes by the Comp-
                                                        troller  are valid; and
         Dear Mr. Calvert:                              related questions.
               You request our opinion regarding deficiency          determinations
         showing taxes, penalties      and Interest    due by a public utility
         corporation   under the Texas Limited Sales, Excise and Use Tax
         Act.    You advised that the deficiency       determinations    contained
         the following    statement:     “In particular,    we find error In the
         followlng:~   failure    to properly report and remit sales and/or
         use tax as required by the Limited Sales, Excise, and~Use Tax
         Act.    These discrepancies    were revealed by an audit of your
         records dated October 15, 1964.         Copies of this audit, work-
         sheets, and letter     of transmittal    are enclosed for your records.”
         You advised further that the taxpayer against whom the defi2
.   I.   ciency determinations      were Issued was a purchaser of’ tangible
         personal property and your first        question was whether or not
         these deficiency     determinations   as ,issued are valid.
                                       I.
                Our answer to your first   question is In the affirmative.
         The Issuance of a deficiency     determination   is authorized by
         Article   20.06(~)(i), Taxation-Cieneral,    Vernon’s Civil Statutes,
         which provides :
                    “If the Comptroller is not satisfied    with the
                    return or returns of the tax or the amount of
                    tax required to be paid to the State by any
                    person, he may compute and determine the amount
                    required to be paid upon the basis of the facts
                    contained In the return or returns or upon the
                    basis of any information  within his’possession
                    or which may come Into his possession.     Nothing
                    in this or any other sectfon of this Act shall
                    be construed to preclude the Comptroller from
                    proceeding against the consumer for any tax

                                         -114-
       .

       Hon. Robert    S. Calvert,     page 2 (M-165)

                    which the consumer should have paid but failed
                    to pay.”
              The deficiency     determinations     contain the amount required to
      be paid, which was determined upon the basis of the Information
      In the Comptroller’s        possession.     The Information upon which the
      ComptrollerIrelied        is an audit of the taxpayer’s           records dated
      October 1% 1964 .I Therefore,           the deficiency      determinations      contain
    ’ on their f&e the statutory           requirements,     I.e.,    the amount comput-
      ed and determlned~to be paid and the basis upon which the determl-
      nations are made&’,The only question remaining, therefore,                     concern-
      ing the validity       of the determinations       Is whether or not It placed
      the taxpayer on notice as to what tax was due.                  The determinations
      contain the words “sales and/or use tax.”               An examination of the
      deficiency     determinations,     and the audit worksheets attached,              do
      not purport to distinguish         as to which tax was due, the sales tax
      or the use tax.        The audit worksheeta, however, do detail each and
      every transaction        upon which a claim of additional            tax is made,
      These transactions        are all purchases by the taxpayer and each in-
      vo’lce, the date, the person from whom purchased, and the amount are
      detailed     on the sudit worksheet.        Summaries are then prepared show-
      in&,the totals contained in the scheduled worksheets and grouping
      these total8 by taxable quarters and than assessing                   fhe,:tax, pen-
      alty, and intdrest        to be due.     It Is well settled        that the sales
      and use tax ere complementary taxes which In their every character-
      istic    are designed and enacted to supplement and complement each
      other .’ State ex rel. Transport Mfa.Equip.Co.               v.,, Bates, 224 S.W.2d
14       U It d States Gypsum Co. v. Green, 110 So. 2d
8:; Ik.~&. s       ?g;Jj.   nI,neTexas, the sales tax is a tax on the trans-
      action and’not a tax on the parties to the transaction.                      Calvert v.
      Canteen Co., 371 S.W.2d 556 (Tex.Sup. 1963); Young & Co. of Houston
           Cl      t 405::S.W.2d 174 (Tex.Clv.App.         19%. ,erPoF.,ref;)         A -
      &e%.T:‘6ie        taxpayer was placed on notice of’e&an&                  every Fran&
      action for which a tax was claimed.             Inasmuch as these are comple-
      mentary taxes, a defense to one would be a valid defense to the other
      unless the taxpayer could show that he was Injured by the assessment
      of one where the other tax would not have applied.                    Since no facts
      Indicate that an injury occurred,           our conclusion,        therefore,    Is that
      the deflclency       determinations     are authorized by statute and conform
      in the issuance thereof to the statute,             and place the taxpayer on
      notice of the facts upon which a claim for additional                   taxes are b,e-
      lng m%de.. We rust, therefore,           conclude that the deficiency           determi-
      nations as issued in this case are valid.

.

                                             -115.
Ron. Robert    S. Calvert,    page 3 (M-165)

                                      II.
      Your second question Is whether the Comptrollermay   proceed
against the vendee loca,ted in Texas for collection  of the unpaid
taxes before proceeding against the Texas vendor.
       The cases heretofore      cited hold that the sales and use tax 1s
a transaction     tax.   Consequently,        the tax liability    must fall upon
each party to the transaction,          l.e.,    the purchaser as well as the
seller,   until the.tax la paid to the state.              The negligence   or fall-
ure of the seller      to collect    the tax from the purchaser does not
relieve   ,the purchaser           the tax liability.         Spencer v. Mere, 52
So. 2d 679 (Fla.Sup.              D Ellen Town Builders v. Department of
Revenue, 222 N.E.2d 482,                11.&p.      1967) .,   n   e a tter case,
theCourt     pertinently   obser:ed?
            “The primary llablllty   Is Incurred by the one who
            purchases for use, and the seller’s   failure to col-
            lect the tax cannot operate to discharge the pur-
            chaser’s  liability.   q a D
             “The statute does not contemplate that both the re-
             tailer’s   occupation tax and the use tax reach the
             State treasury with respect to any one transaction,
             but unless It la shown that the purchaser paid use
             tax to the supplier or that the latter paid retailers’
             occupation    tax to the State, there Is nothing to pre-
             clude the Department from collecting    either the one
            .tax or the other *”
      Article  20.04 (J)> Taxation-General,  Vernon’s            Civil Statutes,
does not,,prevent a collection   from the purchaser.            ‘This Article
provides:
            “The storage> use or other consumptlon~in this
            State of tangible personal property,’ the receipts
            from the sale, lease, rental or use of which are
            required to be included In the measure of the llmit-
            ed sales tax, or tangible personal property upon
          [ which a use tax has been pald by the taxpayer using
            said tangible personal property,  1s exempted from
            the use tax Imposed by this Chapter.”
      While no Texas cases have been found which construe,,thls pro-
vision,&e   Legislature  provfded In Article 20.06(~)(i),
Nothing In this or any other, section of this Act shall be construed

                                      -776.
Hon. Robert   S. Calved,   page 4 (M-165)

to preclude the Comptroller from proceeding aglnst the consumer
for $ny tax which the consumer should have paid but failed  to
Pay.
       Consequently,   the Legislature   has provided a mandate that
no section of the Act, including Article       20.04(J)    can be constru-
ed In a manner to preclude the Comptroller from proceeding against
the consumer.      In this respect identical    statutory   provisions   to
Article   20.04(J)   have already been construed by the Supreme Court
of Rhode Island In Capitol Building Company, Inc. v. Langton, 221
A12d 99, (1967),    wherein the court held that the exemption did not
pertain to the vendor from whom the purchaser made his purchases.
The Court reasoned that it applied to the purchaser for any sale
of the same personal property that the purchaser might make, and
that the exemption was in the statute to protect the consumer or
purchaser from double taxation and not to protect the vendor.
There Is no showing in this- case that the taxpayer Is subject to
double taxation or that the taxes on this transaction           have been
paid.    Consequently,    we must conclude that the Comptroller has
authority    on any given transaction    to proceed against the purchas-
er or the seller     or both until the tax is paid.       This authority
exists on both the sales and the use tax; and without any showing
of injury,    it doe8 not matter which tax Is being asserted against
the purchaser.
                                  III.
      Your third question is what penalties      and interest,      If any,
may be properly assessed and at what time.        Article    20.05(C),
Taxation-General,  Vernon’s Civll’Statutes,      provides’as     follows:
          “(1)    On or before the last day of the month
           following   each quarterly period of three months,
           a return for said quarterly period shall be
           filed with the Comptroller In such form as the
           Comptroller may prescribe.
          “(2)   For purposes of the Limited Sales tax a re-
           turn shall be filed by every person mubject to:the
           +3x. For purposes of the use tax a return shall
           be filed  by every retailer engaged in business in
           the State or by every person who has purchased
           tangible personal property,  the storage, use or
           other consumption of which is subject to the use

                                  -?7?-
  Hon. Robert     S. Calvert,    page 5 (M-165)

              tax, but who has not paid the use tax due to a
              retailer required to collect the tax."
         Clearly the taxpayer herein was a "person subject to the tax":
  first,   the taxpayer was a purchaser on a taxable transaction     and
  was required to file a limited sales tax return on or before the
  last day of the month following     each quarterly period;  secondly,
  the taxpayer was required to make a use tax return, since it did
  not pay 'the use tax to its retailer    and since it purchased tangible
  personal property,    the storage 9 use or other consumption of which
  was subject to the tax.
        Article  20.05(D)(3),  Taxation-General, Vernonfs         Civil   Statutes,
  provides   for returns file9 by the purchaser:
              "In case of a r&turn filed by the purchaser, the
              return shall show the total sales price of the
              tangible personal property purchased by 'him, the
              storage, use or consumption of which becomes itub-
              ject to the use tax during the preceding reporting
              period."
       The sales price of the tangible personal property purchased by
  the taxpayer, which the return requires the taxpayer to show, is
  both the basis for the sales tax and the use tax.
     " 'Article    20.05(H),    Taxation-General,   Veinon's   C$vil   Statutes,
  provides:
                        erson shall fail to . . s pay to the
                        er the tax as imposed herein when said
              report or pa ent is due, he shall forfeit          five
              per cent  (5 i?  of  the   amount  due as penalty,   and
              after the first     thirty   (30) days he shall for-
              feit an additional      five per cent (5%).     Provided,
              however, that the penalty shall never be less
              than One Dollar ($1).        Delinquent taxes shall          '
              draw interest    at the rate of six per cent (6$)
              per annumh beginning sixty (60 day8 from the
              date due.     (Emphasis supplied. 1
        This statutory   provision applies to all ' eraones" liable for
.' sales or use taxes under Chapter 20, Taxation    eneral, not merely
   to retailers  or other persons mentioned in Article   20.05.
  Hon. Robert   S. Calvert,    page 6 (M-165)

         Inasmuch as the deficiency    determinations    allege that the
   taxpayer failed    to pay the proper amount of taxes when due,
   penalties   and Interest  were properly assessed.       The due date 6f the
   taxes alleged     to be due was the last day of the month follow-
   ing the quarter in which the purchase was made. From the facts
.’ submitted it appears that all of these purchases were made and the
   taxes became due for more than thirty      (30)   da 6 prior to the date
   of payment; consequently,    a ten per cent (l&y penalty attached
   and the delinquent taxes began to draw interest         at the rate of six
   per cent (6)    sixty (60) days after the last day of the month fol-
   lowing the quarterly period for which the tax delinquency is claim-
   ed.   The,.computation of taxes, penalties      and~interest  as shown in
   Exhibit I appear to be correct.
                                       IV.
        Your next question concerns the taxability    of tangible per-
  sonal property which was shipped or delivered    after September 1,
  1961,  pursuant to contracts  entered into prior to September 1,
  196%.

                                 Contract    A
           Contract A provides that the electric          company will furnish
   material and equipment known a8 “telephone central office              equip-
 ,.,ment,,“,;p.repare the,specifications      therefor,,and    install  the equip-
   ment in a building provided by the telephone company. The lnstal-
   lotion of this equipment Was In a special purpose building,              design-
   edyfor the purpose of housing such equipment and the equipment was
   permanently attached to the building and cannot be removed without
   destroying     the utility     of the building.     It is undisputed that it
   has been for many years the intention           of the two parties    to the
   contract ~to treat the building and the equipment housed therein
   as real property,        From the evidence presented,       this intention    has
   been further expressed by treating          this equipment as improvements
   to the land and as a part thereof for ad valorem tax purposes.
   The transcript     and evidence on this matter is uncontradicted.             This
   equipment, thereforei        meets the,teSts    set out for determining the
   nature of fixtures       in Swern Public Service Co. v. Smith, 31 S.W.2d
   WV!   (Tex.Clv.A p. 19291 no writ) ; also, Hutchins v. Masterson, 46
Tex. 551 (1877 P . Consequently,        we conclude therefrom, as a matter
   of law, that this equipment when installed             constitutes real property.
   Southern California        Telephone Co. v. State Board of Equalization,
         .    422 (Cal.Sup.Ct.      1936); Hutchins v. Masterson,supra;

                                      -7?9-
           Hen; Robert    S. Calvert,   page 7 (M-165)

           G. A. Jones v. T. D. Bull, 85 Tex. 136 (1892); C. D. Shamburger
           Lumber Co. v. Bredthauer, 62 s.W.2d 603 (Tex.Clv.App.             1933
           writ dl     )* F L Carmlechel v. U.S., 273 F,2d 392 (5th Cir.
           1960):  ~~‘A&.&r.‘793.     Fixtures.    Secf’. 72.   The electric    com-
           $tny;*theref&e,     be&e    a cont&tor        whose duty ft. was to
           Improve the realty belonging to the telephone company. The
           materials and equipment used by the electric          company were
           all purchased or specially      fabricated     prior to September 1,
           1961.    The only transaction    occurring after September 1, 1961,
           was the shipment of the equipment to the contractor            and the
           Incorporation    of the materials by the contractor        Into the
           realty of the taxpayer.       The issue presented by your opinion
           request Is whether there is a tax on the equipment and materials
           used by the contractor     to perform this contract which was entered
           Into prior to September 1, 1961.         Simply stated,    Is the incor-
           poration of these materials into realty a taxable event under
           the Limited Sales, Excise and Use Tax Act?           Since the facts
           are undisputed,    the issue presented Is purely       a question of law.
                   While there are no Texas authorities     on this subject,   the
            authorities   throughout the United States appear to be divided
            as to whether the contractor     who incorporates   materials into
            real property is a retailer     or a consumer of the materials so
             used.   163 A.L.R. 267 (1946);   171 A.L.R. 684 (1947).     The major-
.   . .   ,-Ity ,and,.mbre,modern vldw is that the contractor      is a consumer.
            Duhame v. State Tax Commission,,179 P.2d 252 (Ariz.Sup.         1947).
            me reason for this rule Is stated by this court at page 259:
                         “When a contractor   fabricates   his materials
                         for the contractee,    and the completed struc-
                         ture Is erected on the owner’s land, It Is as
                         much real property as the land itself.       The
                         conetlttient elements of tangible personal
                         property have been destroyed by their incor-
                         poration lnto the completed structure.       And
                         such a contractor,   therefore,   is pot making a
                         sale of tangible personalty     to hI$ contractee.

                         “While perhaps a contractor  may be making a sale
                         In the loose sense of the word, and while, that
                         loose sense might also be a sale at retail,  he is
                         certainly  not making a sale at retail of tangible
                         personal property which >a the necessary meaning

                                            -780.
Hon. Robert    S. Calvert,   page 8 (M-165)

           of the term ‘sale’ when used in this Act.         By
           the definitions      in this Act a contractor   when
           fabricating     personalty   into realty neither sells,
           resells,    sells at retail,     nor can he be consider-
           ed a retailer,”
      Consequently,  we must conclude that the incorporation       of tan-
gible personal property into realty,   as an improvement, is not a
sale in and of itself,   unless the Legislature   has specifically
deemed such to be a taxable transaction.      In this respect Article
20.01 (T) expresses the legislative   intent regarding contractors:
           “‘Contractor’    or ‘Repairman’ shall mean any per-
           son who performs any repair services       upon tan-
           gible personal property or who performs any lm-
           provement upon real estate,      and who, as a necessary
           and-incidental     part of performing such’servlces,     in-
           corporates    tangible personal property belonging to
           him into the property being so repaired or Improved.
           Contractor or repairman shall be considered        to be
           the consumer of such tangible personal property
           furnished by him and Incorporated      into the property
           of his customer, for all the purposes of this Chap-
           ter.
              “(1)   The above provision   shall apply on y if the
              contract  between the person performing t x e ser-
              vices and the person receiving     them contains a lump
              sum price covering both the performance of the
              services  and the furnishing   of the necessary lnci-
              dental material.
              “(2)   If the contract between the person providing
              the services    and the person receiving    them contains
              separate amounts applicable      to the performance of
              the services    and the furnishing   of the material then
              the above Section shall not apply, and the person
              furnishing   the materials   shall be liable   for the
              limited sales tax upon the agreed price of the mater-
              ials as thus set forth in the.contract.        Provided,
              however,   that  the agreed  price  of the  materials
              shall be not less than the actual cost of such mater-
              ials to the person so providing them.
              “(3)  In any case where the person so providing
              such materials has paid the limited sales tax to his

                                   -781-
      Hon. Robert       S. Calvert,   page 9 (M-165)

                   supplier when purchasing the tangible per-
                   sonal property; he shall be entitled    to credit
                   the tax so paid to his supplier-against    any
                   tax imposed by this Chapter with. respect to his
                   subsequent sale of that tangible,personal     proper-
                   ty.”
             Article     20.01   (R) also   contains   a reference   to Article   20.01
      (T):
                   “‘Use’ includes the exercise    of any right or
                   power over tangible personal property incident
                   to the ownership of that tangible personal proper-
                   ty except that it does not include the sale of
                   ,that tangible personal property in the regular’
                   course of business.    ‘Use’ specifically   Includes
                   the incorporation   of tangible personal property
                   into. real estate or Ynto improvements upon real
                   estate without regard to the fact that such real
                   estate and improvement may be subsequently sold
                   as such except as provided in Article     20.01(T)(2).”
             Cle&rly,   where the contract consists         of a contract contaln-
\     in65 a lump sum price      covering both the performance of the services
      and the furnishing       of necessary material then the contractor,          i.e.,’
       the e,lectric   company, would be deemed the consumer of such material
      ‘and there would be no sale of tangible personal property as to the
       transaction    of incorporating      the material into the real estate be-
       longing to the customer.        However, Contract A contains separate
      amounts applicable       to the performance of the se~rvices and the fur-
      nishing of the materials,          Consequently,    it may be argued that un-
      der Section 2 of Article        20,01(T)   the person furnishing       the mater-
       ials,  i.e.,   the contractor,would      be liable    for the limited sales
       tax upon the agreed price of the materials as set forth In the con-
       tract.    But the contractor      cannot be subject to the use tax inas-
      much as the term “use” will not include the i.ncorporation               of such
       tangible personal property into real estate by virtue of the statu-
       tory language in Article       20.01(R) as specifically        rsXated to Arti-
       de 20.01(T)(2).       However, the Sales Tax Act is silent as to which
       transaction    the limited sales tax attaches.           Is the taxable trans-,
    ~:actlon    in 20.01(T)(2)    referring    to the purchase of,the materials
       by the contractor,      or is it referring     to the incorporation      of the
      materials     by the contractor     into the real      roperty?    If it is refer-
       ring to the purchase of the materials by t Ke contractor,              then the
       transaction    subject to the tax will be the same for both a lump sum
       contractor and a separated contractor.            But the tax base for the
Hon. ,Robert S. Calvkrt,    page 10 (M-165)

purpose of computation may be different     inasmuch as the computa-
tion for the lump sum contractor     shall be made upon the actual
cost of the materials    to the contractor  while the tax’base for
the separated contractor    shall be the agreed price of the mater-
ials as set forth in the contract so long as it is not less than
the actual cost of the materials to the contractor.          Consequently,
if a separated contractor    agrees to a price of materials furnish-
ed by him which is higher than his actual cost, then the contract
price will be the basis for the computation of: the tax. However,
if the transaction    to be taxed under a separated contract Is not
the purchase of the materials by the contractor       but the incorpora-
tion of the materials by the contractor     Into realty,     then the sep-
arated contractor    would be paying a tax based on one transaction,
i.e.,  Incorporation   of materials  into realty,   and a lump sum con-
tractor would be paying a tax based on a different        transaction,    i.e.,
purchase of materials before incorporation.        Inasmuch as the stat-
ute Is not clear as to which transaction      shall be the subject mat-
ter of the tax then we must resort to prior interpretation          by the
Comptroller and to the rules of statutory      construction.

     The Comptroller    by Ruling   No. 9 (95-0.09)    provides:
           “A contract may recite    the charges for skill
           and labor separately   from the charges for mater-
           ials for the purpose of causing the customer to
           be the ultimate consumer of the ma,terial.”
      Ruling No. 2 (95-0.02)     provides that.the      contractor   should
give a resale certificate      to his supplier and accept the tax from
his customer upon the agreed price of the materials or accept an
exemption certificate     In lieu of the tax should his customer be an
exempt organization,      The effect   of such ruling Is to remove the
contractor   as a consumer from the transaction         so that the furnish-
ing of the materials    Is directly    to the customer.       The customer is
considered   the ultimate consumer of the materials and the person
subject to the tax. ‘It is worthy to note that the Comptroller did
not rule that there were two transactions,        i.e.,     the purchase of
materials by the contractor      and the sale of the materials         by the
contractor   to the customer.     The effect   of the ruling is merely to
deem that under a separated contr,act,       the customer, not the contrac-
tor, is. the consumer a The Comptroller apparently construed the
purpose of 20.01(T) as that of allowing a contractor             to perform
work for an exempt organization       without incurring a tax on the
materials used in the performance of a contract.             Consequently,
we have been unable to find a clear decisive         administrative      in-
terpretation   that the Legislature     intended a statutory       “sale” to

                                  -783-
      Hon. Robert    S. Calvert,   page 11 (M-165)

      occur by virtue of Incorporating    tangible personal property ln-
      to real    roperty.  We note that the Sales Tax Act had been amend-
      ed iri 19k!3 and 1967 with no substantial   change in Article     20.01(T).
      We cannot assume. that there has been a legisl;stioe    re-enactment of
      any administrative   policy to the effect   that the incorporation      of
      tangible personal property into realty is a statutory       sale.     Do the
      rules of statutory   construction  suggest such Interpretation?
              We hold that they do not.        It is fundamental In construing
      tax statutes that they be given a construction             in harmony with the
      Constitution       of the state and federal governments.         They may not
      be interpreted       to deprive a person of property without due process
      of law.      Article   I, Section 3.6 of the Constitution       of Texas and the
      fifth amendment to the Constitution           of the United States require
      that taxing statutes be certainand            definite   in their scope and
       standard and the classlflcatlon         of the subjects of taxation be
       clear,    definite,   and reasonable and free from any discrimination.
      They are required to be interpreted           “fairly  for the government
      and justly for the citizen.”          54 Tex.Jur.2d    165, Taxation,     Sec. 41.
      Article     VIII, Section 1, Tex.Const.       requires that “Taxation shall
      be equal and uniform.”         It prevents any substantial       discrimination
      while requiring all classifications           to be reasonable and all tax
       enactments to operate equally within the class:.            54 Tex.Jur.2d      147-
       5.0,   152, Taxation, Seca. 29, 31.        Tax discrimination      results   in a
       violation     of the constitutional     requirement of equal protection        of
. .
      ‘the law.      54 Tex.Jur.2d   144-145, Taxation,, Sec. 26.       No court will
      adopt a ccnstruction        that results   in discriminatory     taxation.
      Western Public Service:~Co, v. Mehar             116 Tex. 193, 292 S.W. 168
       (1927); 54 Tex.Jur.2d 167, Taxation: 'Sec. 41.
            It is settled that "where'the legislative         intent is' ambigu-
      ous or obscure, a rule of strict       construction   is applied against
      the state and of liberal     construction    in favor of taxpayers.     . a *”
      Also    . e 0 in construing   statutory   provisions   delegating   a power
      to tax, every reasonable doubt Is resolved in favor of the tax-
      payer, both as to whether a power to tax was ever granted and
      whether the conditions    attached to its exercise       were ever perform-
      ed.   Nor will any exercise    of a taxing power be extended by impli-
      cation to embrace persons or property not plainly within the levy."
      54 Tex.Jur.26   166-67,   Taxation, Set; 41.
            Ap lying these principles,    we have concluded that Article
      20.01(T P (2) fails   to contain such clear and definite   language as
      would require the act of incorporating     materials   Into realty to
      be deemed a taxable      event. This being so, we are required by the
      rules of strict     construction to hold that such is not a taxable

                                          -184-
 Hon. Robert     S. Calved,     page 12 (M-165)

 event.     Furthermore, the interpretation       of Article   20.01(T)(2
 in such a manner a8 to treat contractors          who perform under pr 1or
 lump sum contracts      as being exempt from the tax and not falling
 within the taxing act, but to treat’contractors            who have p’erform-
 ed pursuant to a prior separated contract as not being exempt
 and falllng,wlthln      the taxing act, would’ be treating      two similarly
 situated.persons      in a different    manner. This inconsistent       treat-
 ment would be a violation        of due u’rocess and the eaual urotection
 clause of both the United States and Texas Constitutions,
 Ni3. 1 Oil Corp. v. Sheppard, 89 S.W.2d 1021, 1023
 1935 , error ref.).     Calvert v. McLemore, 163 Tex.
551 (1962).       We d; not think that the statutes compel such an in-
 terpretation,      and under the applicable     canons of statutory     construc-
 tion, we cannot give it such interpretation.            As related to con-
 tracts entered into before September 1, 1961, we believe that if
 Article    20.01(T) is Interpreted      to require a different     result for
 the lump sum contractor       than for the separate contractor,        we
 would be allowing mere form to prevail over substance.~ This would
 amount to tax dlscrlmlnation         and unequal treatment.     It would also
 be subject to. attack on the basis of producing, a retroactive             ap-
 plication,     since the article     does not protide a~,fllxed standard of
 duty so as to give the contracting         parties an opportunity      to com-
 ply with the permitted options.
         Recently,   an analogous situation         was disposed of which in-
  ,volved the construction       and applicationof         the Minnesota sales and
   use tax.    Attorney   General’ s    Opinion    (Minn,   July 27, 1967),     P-H
   State & Local Tax Serv,, para. 23, 505.               There, as here, the prob-
   lem concerned construction        ,pontractors      who had entered into an en-
   forceable   construction     contract unconditionally         vesting the rights
   and obligations    of the parties thereto and making no provisions               for
1 allocation    of future taxes prior .to the enactment date of the tax
   law.    However, some ofthe purchases which had been made pursuant
  thereto were not consummated until after               the effective~date     of the
   tax law, which Imposed the tax upon sales made In the state after
   the date of the enactment of the law. Minnesota had adopted ,the
   common law and had Incorporated          into its statutes the rule of a
   presumption against a retroactive           effect.     The Minnesota Attorney
   General, faced with such a presumption and in the absence of any
   expressed legislative      intent in the statute to impose taxes retro-
  .act%vely’on    such a voluntary transaction           as a lump sum, cost plus,
   or time and material contract,’ with a guaranteed price,                held that
   the purchases or sales made pursuant to the enforceable                 contract
   execucad.before     the’tax enactment but completed afterwards were
   non-taxable    transactions.

                                       -m-
            .
 Hon. Robert    S. Calvert,     Page   13   (M-165)

          In the course of the opinion,       the Attorney General took no-
 tice that such retroactive         imposition   of taxes based upon such
 a ~voluntary act is held invalid as a denial of constitutional                 due
 urocess and observed that the courts will arford urotection                 from
 ‘such retroactive       sales taxation.     The case of the-state     v. Indus-
 trial Tool & Die Works, Inc., 220 Minn, 591, 21 N.W.2d 31 (1945)
 was cited in support thereof, ,wherein the court distinguished                 a
 retroactive     nonLDrofits    tax +rom a tax on voluntarv a&.           auot-
 lng from Welch v: Henry , 305 U.S. 134, 147, 59 s.ci.             121;1i5-26
  (1938))    as follows:
             “‘In the cases In which this Court has held in-
             valid .the taxation of gtfts made and completely
             vested before the enactment of the taxing stat-
             ute decision   was rested on the ground that the
             nature or amount of the tax could not reasonably
             have been anticipated     by the taxpayer at the time
             the uarticular   voluntarv act which the stat)Jte later
            ;made’the taxable event .: ‘NiCbbls v. .Coo3idge> .‘2’{11
             U.S., 531, 542; 47 S. Ct. 710, 713.        . . . Since, in
             each of these cases, the donor might freely have
             chosen to give or not to give, the taxation,          after
             the choice was made,,of a gift which he might well
             have refrained   from making had he anticipated        the
             tax, was thoughtto     be so arbitrary     and,oppressive
.,          ’as to be .a denial of due proces,s.      Hut there are
             other forms of taxation whose retroactive          imposi-
             tion cannot be said to be similarly        offensive   be-
             cause their incidence     is not on the voluntary act
             of the taxpayer.‘”    (Italics  omitted.)
       Article 20.02,       Taxation-General,         Vernon’s   Civil   Statutes,
 merely provides:
               “There is    hereby Imposed a limited salestax    at
               the,rate    of two per cent (2%) on the receipts
               from the    sales at retail  of all tangible personal,
               property    within this State.”
        ‘hhere Is nothing in the,statute  from which an Intent may be
 ,infer’red to Impose taxes retroactively    on such a construction
 contract    entered into prior to the effective   date of such taxing
  statute.    The construction  contracts in question herein consti-
 tute the kinds of “voluntary acts” which the Minnesota Attorney
 General concluded from the cited authorities      would be protected
 Hon. Robert   S. Calvert,    page 14 (M-165)

 by the courts from retroactive     sales taxation.     Here the parties
 merely chose at the time of the contract. to separate the cost
 of materlale from the labor rather than to price: them together.
 Had the Telephone Company chosen the latter       course, its tax lla-
 bility   would not be in question.     To permit the statute to be
 construed so as to Impose taxes based on the mere form of a con-
 tract entered Into prior to the taxing statute would be to allow
 the taxing tncidence to fall upon the voluntary act of the tax-
   ayer occurring  prior to the assage of the taxln        statute.   Hence
 t he incidence of the tax woul B operate in the pro 6 ibited retro-
 active manner.
        Texas has adopted the common law, and it also follows           the
  rule of presum tion against retrospective        application   of statutes.
  53 Tex.Jur.2d  fig-53, Statutes,    Sec. 28.    In addition,   Article    I,
; Section 16, Tex.Conat.,    expressly provides that “No . . . retro-
  ac~tlve law . . . shall be made.’ It also’applles          to the levy or
  Imposition of taxes.    Castleberry     v. Coffee,, 272 S.W. 767 (Tex.
  CommIApp. 1925).
        Consequently,    we must conclude that constitutional          conslder-
 ations compel an interpretation        of Article    20.01(T) in such a
 manner that the prior lump sum contractor          will not be treated dlf-
.ferently    from the prior separated contractor;         and construing     the
 statute in the light of the constitutional           requirements,     we hold
 that the transaction      of delivery   and incorporation      of the mater-
 ials Into real property pursuant to the contract entered into prior
 to the enactlqent of the law In question was non-taxable              and did not
 constitute     a sale of tangible personal property occurring           after
 the statute became operative        and effective.     After the tax law be-
 came effective,      the parties are, of course, free to contract           that
 the liability     for the tax upon the transaction        Is Incurred by the
 contractor     if he is a lump sum contractor      or by his cuetomer if         /
 he Is a separated contractor,        and the tax base will be the costs
 of the materials      to each,   The cost of materials      to the ,lump sum
 contractor     Is what he pays for the materials,        and the cost of
 the materials     to the separated contractor’s       customer is the cost
 as provided in the separated contract          if that amount is equal to
 or greater than ths actual value.          The effect    of Article    20.01(T)
  (2) then Is to authorize a transfer of liability           from the contrac-
 tor to his customer so that if the customer is an exempt organlza-
 tion he may claim the exemption in lieu of paying the’tax on the
 materials.       We do not perceive   that the Legislature       intended a tax
 to be levied upon the act of incorporating          materials     Into the
 realty by a separated contractor        and no tax to be levied upon the

                                    -18%
Hon. Robert     S. Calvert,    page 15 (M-165)

same act done by a lump sum contractor.
     Thls.lnterpretation,      therefore, is consistent with and al-
lows the~enforcement      of Attorney General’s Opinion No. C-30 (1963),
from which we quote, in part, at page 5 as followcj:
              “We believe   that the purpose of the provision
              mentioned (Article    20.04(~),  Vernon’s Civil
              Statutes)   was to make provisions   for such per-
              sons as contractors    whb have entered into con-
              struction   contracts  based upon the fact that the
              contractor   could purchase certain materials at
              certain prices without a tax on the sale of the
              materials and he agrees to perform the contract
              for a certain amount. If a contractor      ehculd be
              required to pay a tax on the~material,     then he
              would suffer a loss in performing his contract.
              The~Legislature    did not want to make a person
              who had made a bona fide contraCt before the
              effective   date of the Act to suffer a loss on
              account of the Act .‘I
      By that opinion this office      ruled that the purchase of mater-
iala by a contractor      to perform his obligations     under a contract
entered into prior to September 1, 1961, would be exempt from the
tax’under Article     20.04(R).    At that time the Attorney General made,
no ‘distinction   between lump sum contractors      and. separated contrac-
tore for the purpose of exemption.         We see no reason to make such
a distinction    at this time.     This conclusion   Is also consistent
with Attorney General’s Opinion No. WW-1435 (1962), which held that
developers    and builders wer,e selling    real property and not tangible
person81 property and that regardless        of the form of their contract
they could not be held to be reselling         the materials   purchased by
them.                                    ‘:
      Th$s is also consistent-with     Attorney General’s   Letter Opinion
dated R@ember 24, 1961, which held in reference        to the prlor:con+
tract pqovislon   that there could be no distinction      between prior
contracts  whether they were lump sum or a coat-plus       contract  (a
cost-plus  contract generally    contains separate amounts applicable
to the cost of materials    and the cost of services    and are conslder-
ed sep8r8ted contracts).
         The ,only remaining   question     concerning   Contract~A   is the pro-
vieion     that:

                                    -788.
     Hon. Robert    S. Calvert,    page 16 (M-165)

                “Title to said material shall pass
                -_                                .~ to the
                Telephone Company upon shipment thereof from
                factory to’ storerooms consigned to the Tele-
                phone Company or to the installer    of the Elec-
                tric Company in care of the Telephone Company.
                The Telephone Company shall thereafter    be sole-
                ly responsible   for loss or damage, including
                the value of installation   work performed, result-
                ing from fire or any other cause whatsoever.”
          Article    20.01(K)(l)    provides    that:
                “tSalel   means and includes any transfer of
                title   or possession    or segregation   in contem-
                plation of transfer,of      title  or possession,   ex-
                change, barter,     lease or rental,    conditional  or
                otherwiee,   in any manner or by any means whatso-
                ever, ‘of tangible personal property for a conslder-
                atlon D”
     The Issue presented by this clause was whether or not the trans-
     fer of title prior to installation      by the contractor      Is in and
     of itself  a sale of tangible person81 property.           We understand
     thst there was no transfer of possession         to the Telephone Com-
     pany but that’tiie   equipment and materials      Involved stayed In
     the stole possession   of the contractor-electric       company during
     the entire period of time until completely         Installed;    that the
     arrangement was for a “turn-key” job whereby,tHe taxpayer did
     not accept the goods until they were completely installed            and
     in good working order; and further,      that, the parties did not in-
     tend that this provision    be an unconditional       transfer of owner-
     ship of the.matesia&s Involved but meant that It would be a desig-
     nation of ownership to determine the responsibility           for the goods
     should loss from unavoidable acts ensue.          That is, upon the hap-
     pening of certain conditions,     i.e.,  loss, or damage, the Tele-
     phone Company was to be responsible      and bear such loss.
            In determining tax liability    it is fundamental that sub- !
     stance,   rather  than the form   of the transaction   govern.     a4 C.J.S.
     165, Taxation,    Sec. 62; 51 Am.Jur. 43, Taxation, Sec. 10. Ac-
     tqalitlce   and consequences of a commercl,al transaction,       rather
     than the method employed in doing business,        are controlling    facts
     In determining such llabllity.
                “The refinements or technicalities of contracts
                and conveyances are not the true diagnostics of

                                        -189-
..
Hon. Robert     S. Calvert,   page   17   (M-,165)

           taxability    of *a . transfer,
                                       .   . It is ,. ,more ef-"
                                                              ..
           ficient    to put In contrast on tne one siae
           the substance and practical         effect   of what
           was actuall~v done. and on’the other the im-
           port and design of the terms of the taxing
           statute."     Bank of,New York v. Kelly, 38 A.2d
899, 901 (R.J. Prerog.Ct.        1944).

       For Instance when the contrsct    provided that title    passed
upon dellvery‘to    the job site of an exempt entity,     the courts
have c6nstrued such.contract    provisions    as not constituting    a
sale :
           “The circumstance   that the title   to the lum-
           ber passed to the Government on delivery     does
           not obligate  it to the contractor's    vendor
           under a cost plus contract more than under a
           lump sum contract .” Alabama v. King and Boozer,
           314 u.,s. 1, 13 (1941).

      The court in that case refused to allow the government’s
immunity from tax to attach to the contractor’s   purchase of mater-
ials for the perfonaance of a cost-plus  contract with the govern-
ment even though title  to the goods p8Ssed to the government upon
delivery.
           “The Government may look at actualities      and
          'upon determlnation     that the for&employed    for
           doing business or carrying out the challenged
           tax event 1% Unreal or a Sh8m may SUStain       or
           disregard   the effect   of the fiction  as best
           serves the purposes of the tax statute.       To
           hold otherwise would permit the schemes of tax-
           payers to supersede the legislation      and the
           determination   of~the time and the manner of tax-
           8tion.n   Higgins v. Smith, 308 U.S. 473, 477'
              (1939)   *
      Consequently,  it is not the contract.whitiR   tionstitutes a sale
but the pprformsnce of the contrsct   which is the taxsble event.
It is not What ,ths parties agreed to do, it'is    wh8t the parties
actually  do that the tax must be levied upon.     It would be strange
Indeed that we could take the position    that this contractual    pro-
vision ~8% not sufficient   upon which to constituta     a sale between

                                     -790-
    Ron. Robert    S. Calvert,    page 18 (~-165)

    the contractor    and the federal government for the purposes of
    tax Immunity and then in another transaction     say that the pro-
    vision Is sufficient    to constitute  a sale between a contractor
    and his customer for the purposes of levying a tax.        The con-
    tractual  provision   Is either a sale or it is no,t a sale, and
    if it Is not a sale for the purpose of granting tax Immunity
    It is clearly   not a sale for the purpose of imposing,the     tax.
    Consequently,   we must hold that In absence of some other act or
    some*other performance,     such as a transfer of possession   or the
    exercise  by the customer of an Incident of ownership over the
    property wh%ch was the subject matter of the contract,       no Zax
    will Incur merely by virtue of the contractual     provision   desig-
    nating the party to be responsible     for loss or damage.
          In the view and disposition        we have taken In this Opinion,
    we do not reach the question of whether the transaction               falls
    within the exemption provisions         of Article    20.04(H),‘Taxation-
    General, Vernon’s Civil Statutes.           We observe that this Article
    makes no distinction     as to whether title        passed prior to incor-
    poration ,into realty or after such incorporation.              Likewise,    it
    makes no distinction     as to a lump sum or a separated contractor.
    It may well be that the original          supplier or selIer of the mater-
    ials sold them to the taxpayer’s          contractor    In contemplation     of
    the contract and transaction        in question,     and that the taxpayer,
    as the third party, Is thus exempt from tax under Article                20.04(R)
_   because the property Is being “used” to perform the prior contract.
    However, we have no such facts before us, and we cannot assume
    that this Is so.      The original     supplier or seller may have sold
    the materz$als to the contractor        long before the contract was con-
    templated,.and     the contractor    already carried a sufficient          stock
    of materials    to fill   the contract at the time of its contempla-
    tion.    If so. the taxcaver mlaht not be entitled            to claim tax,:’
    ex&ption~un&r:~Articie-20.04~H)           in view of the holdin        in Calvert
    v. ,BritishiAtnerican   011 Producing Co., 397 S.W.2d 839 7Tex.r
    1966)ompucomputer
            wh c                                           machines (which were
    categorized    as tangible personal prope&y)rather            than dealing with
    the apparent real property question here presented.                In that case,
    the court held that Article        20,04(H) contemplates for tax exemp-
    tion a written contract      between the purchaser and a third party
    and not between the seller        and the purchaser.       We, therefore,      will
    not pas8 upon whether’the       taxpayer’s     transaction    falls within the
    exemption provisions      of Article    20,04(~).
                                  Contract      B
         The next contract,  Contract B, covers the purchase of telt-
    phone directories.   We understand that thdee telephone directories

                                        -791.
Hon. Robert S. Calvert, page 19 (M-165)

were purchased by the taxpayer for the puTpose of distributing
the same to its customers in the areas that it served.             All
purchases Involved were made after September 1, .1961, and tiere
made pursuant to contracts       entered Into prior to September 1,
1961.    The  issue  presented   by ,this contract   is whether or not
the telephone directories      were used to peaform a contract entered
Into prior to September 1, 1961.          The title  and possession    of
the telephone dlrector$es      passed to the taxpayer after September
1, 1961.     Consequently,   the taxpayer Is the person who must
show that these were used to perform a prior contract. The con-
tract that he must show and that he Is required to perform Is
that one between the purchaser and a third party.            This contract
was not submitted with the opinion request and we further under-
stand that notice of such contract was not filed with the Comp-
troller   within 120 days from the effective        date of the Act as
required by Article     20.04(R).     Consequently,    we must conclude
that the facts as presented to us In the opinion request are
Insufficient     upon which to base an exemption and In view of
the fact that all the provisions         of exemption have not been met.
                        Contracts   C& D
                                                                a+
       Contract C covers the purchase of office        supplleti,  office
furniture    and equipment and Contract ? covers the purchase of
electronic    data processing   equipment.    The purohase of these
h8terlals’wae    Identical   with the question presented to the Texas
Supreme Court in th;g;ayWogdCalvert         vi British-American     Oil
Producing. Company                 839 (lgbb)    1     hi h th          f
held that such p&chases’w&e         taxable abien: z s:owinE %iz the
purchaser used the property to perform a written contrac,t
entered,into    prior to September 1, 1961.      The facts are lden-
t;lcal here and thus we must reach the same result and we con-
clude that the tax on these Items was properly levied.
                            Contract    E   1
       Contract D provides for ‘the Joint use by the Telephone
Company and otlier utility      companies of wooden poles,    wherein
other utility    companies are allowed to attach lines and devices
to the Telephone,Company’e       poles,  and the Telephone Company Is
allowed to attach its lines and devi’ces to the utility          companies’
poles.    The  parties  jointly   call  this arrangement  a,,pole-rental.
The Sales Tax Act does not define the word rental.             However,
clearly,   there must be more than the denomination by the parties
that such a transaction       be a rental.   There must be a transfer
of possession    or dominion plus a license      In the transferee    to

                                -792-
.

    Hon. Robert    S. Calvert,   page 20 (M-165)

    use the property in order to constitute            a rental.  A license
    to use without a concurrent transfer of poss~ession or.domlnion
    doss.not   constitute   a rental.    As we understand the ‘control and
    poessssion   of these poles remain with the respective          owners of
    the poles with merely the.license         to’use by the other company.
    We must conclude,     therefore,   that luithouf a transfer     of possess-
    ion there can be no rental and thus no taxable event.               However,
    should it be shownthat        the control    or the possession    of the
    ~olcs be transferred.      then the auestlon must arise as to whether
                                                lertv.    The Texas Court8
                                                                                   .
                                                                                   ,

    ments’. Irrthe Reynolds v. McLemore case, the court held that te               E-
    Phone lines and wires were a Permanent fixture  and a fee lnteres              t.
    In the Ward Count case, the court held that the taxing authority
    had the ---T-f
              power   ax and enforce a real property Ben upon tele-
    graph lines and poles.   In all three cases the court rejected   the
    argument that the poles and lines were personal property.     Conse-
    quently, we must conclude phat if there was In fact a rental of ,!
    the poles that such would not be a rental of tangible personal
    property but would be a rental of real property and not subject to
    the Texaa Limited Sales, Excise and Use Tax Act. d
                                     V.
         The next question asked      concerns the purchase of electricity
    for the use in transmitting      telephone messages and operating    tele-
    phone equipment and whether      this electricity  was exempt from the
    tax prior and subsequent to      July 1, 1963.
          Prior to July 1, 1963, the exemption        found in Article     20.04(Q),
    Taxation-General,  Vernon’s Civil Statutes,        provided:
                  “There are exempted from the taxes imposed by
                  this Chapter the sale, production,    dlstribu-
                  tion, lease or ,rental of ;and the storage,     use
                  or other consumption In this State of gas and
                  electricity  when used in industrial,    manufactur-
                  ing, mining, agricultural,   dairy or poultry
                  operations  or pumping water for Irrigation      or

                                      -793-
.

    Hon. Robert   S. Calvert,   page 21 (M-165:)

               for electrical  processes     such as elcctro-
               plating and electrolysis.”
          The Issue raised is whether this electricity         was used in an
    Industrial   operation or a manufacturing operation.         With regard
    to the latter,     we cannot conclude that the Telephone Company is
    manufacturing or processing        tangible personal property.     Even
    though electricity     is considered     tangible personal property and
    the message transmitted      to some extent processes     the electricity,
    we feel that the overall       transaction    is that of a service render-
    ed by a telephone company. We feel that this was the legislative
    intent in Article     20.04(B)(4)    which provided:
               “There are exempted from the taxes imposed
               by this Chapter the receipts     from the sale,
               production,  distribution,    1ease:or rental of
               and the storage,    use or other consumption In
               this State of telephone:and     telegraph  service.”
          The function of the telephone‘company       Is to render a service
    and not to manufacture messages or process electricity.             The
    sole ques,tlon then is whether the use of electricity         by the tele-
    phone company is an industrial      use.   The courts of Texas have con-
    &rued “industrial”’     not as a technical   term but as a term to be
    construed in its plain and ordinary acceptance.          Calvert v. Austin
    Laundry and Dry Cleaning      365 S.W.2d 232 (Tex.Civ.App.        1963 error
    ref..  n.r.e.1.    In this iesoect   the sales of electricitv       u&d to
    propel street cars or used Lo pump water for, municipal water works
    have not been deemed to be sales to “industrial”         consumers.     State
    v. Smith, 11 S.W.2d 513 (Mo.Sup. 1938).         Inasmuch as exemptions
    are str&tly     construed we cannot readily     conclude that the plain
    meaning of the word “Industrial”      demands a conclusion       that the
    Telephone Company is performing an lndustrlal         operation.
          The 58th Legislature    amended Article  20.04, by an Act that
    became effective  on July 1, 1963.     This *amendment, by subsection
    (Q),  exempts all electricity    from the sales tax, except when sold
    for residential  or commercial use, and defined commercial use as
    follows :
               “For the purpose of this Subsection thr: terms
               ‘residential  use’ and ,‘commercial use’ shall
               have the following  meanings: . . ~. ‘Commercial
               use’ means use by persons engaged in selling,
               warehousing, or distributing   a zommodity or
               service either professional   or personal.”

                                     -194-
Hon. Robert     S. Calvert,     page 22 (M-165)
     I

        We conclude that the Telephone Company is a person engag-
ed in distributing     a service,  and thus falls within the defini-
tion of commercial use.       Commercial use is excepted from the ax-
emption provision     and the use by the Telephone Company of eltc-
tricity    to p'trform its operations  is a taxable use.

                         SUMMARY

         A deficiency   determination    showing the amount of
         taxes, penalties    and interest   claimed by the Comp-
         troller   and containing   a statement identifying    the
         Information upon which the additional       tax assess-
         ment is bastd, together with attached worksheets
         showing the transaction     upon which the Comptroller
         bases the determination     Is a valid determination,
         and ,inasmuch as the sales and use tax art complt-
         mentary taxes the Comptroller      Is not required to.       "
         elect which tax is being assessed but merely requir-
         ed to deflignate the transaction      upon which the assess-
         ment Is made.
                                  II.
         Upon any transaction      the Comptroller may proceed
         with a deficiency     determination  against the seller
         or the purchaser or both without proceedin        against
         tht other.    The Limited Sales, ,Excise and 8 st Tax
         is a transaction'tax      wherein each party to
         action as liable     for the tax until the tax
         paid to the State.
                                  III.
         The penalties    and Interest   to be contained In the
         dtficitncy   determination    are computed from the
         last day of the month immediately following      the
         quarter In which the transaction      which gave rise
         to the tax occurred and not from the date of the
         deficiency   determination.
                                  Iv.
                              Contract   A
         Materials used pursuant to a contract  entered in-
         to prior to September 1, 1961, for incorporation

                                         -19s.
.   .

        Hon. Robert   S. Calvert,   page 23 (M-165)

             into realty after September 1, 1961, are not
             subject to the sales or use tax.   The act of
             incorporation  Into realty is not a statutory
             sale.
                               Contract    B
             1% +&p,,%haensLELof showing that the ttlt hone
             d$rectorles   were used to perform a writ4 en con-
              tract prior to September 1, 1961, and since notlce of
              such contract was not given by the taxpayer    to the
             Comptroller of Public Accounts within the 120 day
             period after September 1, 1961, the purchase of
              telephone directories   cannot be held to be exempt
             under the provisions    of Article 20.04(H).
                             Contracts     C &D
             The purchase of office   supplies,   furniture   and
             equipment and electronic   data processing     equip-
             ment after September 1, 1961, pursuant to con-
             tracts entered into prior to September 1, 1961, is’
             not exempt absent a showing that such equipment
             was used to perform a contract     written  and entered
             Into prior to September 1, 1961.
                                Contract   E
             An agreement between a telephone company and a
             utility wherein each company allows the other to
             attach Lines and devices onto each company’s ret-
             pectlve poles does not constitutt   & thilr&B’le:%~~~t-
             action   under,the Texas Limited Sales,   Excise ,a&
             Use Tax Act,                                       $

            :‘.A telephone company is ‘not considered’ an Inaue-
              trial optration    for the purposts of’ txtmptIon of
               eltcbfk?ity  :&rchased prior to Jul      1, 196% ama
                                                     t o ba ren&~-1
                                                 sold 1t.a eom~~r(o 7 a4
. .   .

      Hon. R0bert.S.      Cslvert,   page 24 (M-165)            ,,

               use and not exempt after    July 1, 1963.

                                           V&truly     yours,

          Prepared by Kerns B. Taylor
          Assistant Attorney General
          KBT:ms
          APPROVRQ':
          OPINION,COMMITTEE*
          Hawthorne Phillips,  Chairman
          w. V., Geppert, Co-Chairman
          Nola White
          John Reeves
          Jack Sparks
          Alvin Zimmerman
          A. J. Carubbi, 3r.
          Staff LegAl Assistant