Court Opinion

ID: 4140185
Source: CourtListenerOpinion
Date Created: 2017-02-18 02:56:06.587052+00
Date Added: 2024-06-11T14:46:20.313849
License: Public Domain

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             OFFICE   OF THE    ATTORNEY WERAL      OF TEXAS
i                                  AUSTIN

               Thlr Department h6
     methi r0r 0p~rri0n 00n04m43
     7047b, whioh prorideuj
            . . . provldod thut                    miy other pro-
           vision herein to the                   '&an is processed
                                                  nd the ‘realdue
                                                   to the same gaa-
                                                  and from vhloh
                                                   o of such gas
                                                   088 value of
                                                    8tiv4drr0m

                               04 porron or oonoern ir both produoer of
                               regaling plant, ~01 the tax loorue on
                                of all produoh, based upon the wslue
                               uo h lm rtiation gsrol%ne, aolveat8, do.,

                It shoulb be noted rt the outset that the tax levied
     bi A&i010 7047b ir 8.aevemnoe tax. Thin statute oontains the
     rowmg      language; "Them 18 horoby 14vi4d    en ooaupation tax
     on'tho business or oocypation of produoins aa vithln thir State.
     ...A tax &al;1 be pdd by oaoh roduoor on
     godud~~~~.    ,a&va~4r7to5~-?Z-i3t          okht?iit%%?:e..      .

     ---
    BonoriableQ44rg4 H, Sheppard, page 2

             The r4oyoling pro~lslon of the st4tute merely provides
    the method of detamlnlng  the nurrk4tvalue of th4 original gas
    ar            Davis Ino. V* St4t4 180 S.W. (al) 429, 433. only
    E4-i         thereoi Is taxed, not’tho roflnor.

              In   order   to   xi1~lorst4nd   pro$erlr the into&ion o? the

              Th4 tirqt ~r4o~ollngplant4 v4r4 oonstruotedand put into
    operatlotiin 1938. Theso first plant8 prOduo4d oondon8ato or dla-
I   tlllat4, r&v un?lnish4d pzykduots,vhloh wro Mrkoted to reflaer8.
                 piua  4per4t4r;8io 'tirs4rQurd that   tw   00tud mlqda0-
    fur4 ?ti$sh4d produotr, and that the ld@t1&41~inv48tment and
    merot        6~n8e.~o4884ry     ?or th4 aanufaoturo of those produote
    Were jua  7 lfl4d by t&o inoreaso in tholh U&c4t oalu4.' phigzwa8
    the,stert 6? *ho, en4r41 $lsaa of o~bl.Lrig     plantcr~
                                                           tb.pmdqo4 fin-
    ished pr6duotr.     'S 444w4 or the war, rloost~'rll4~4lin& *lants
    havo.beon    rowaped to ppermltthe nmnu?aoturo of a va~$letyo?
    produytr.
              Th4 wollng plant operitlon oonrIst8 of rorubbing in-
    ooming rloh vapora with rbrorptioa'ollat presssgro8 msngLng up
    to 2,OOOpouada per ~QUWO lnoh. l%xeprooesred dry gfb814 than
    oompre88od and r4turmd to the ?orm4tlon,irhllothe absorption
    oll.ooatalnlngthe rooovered heavier       uarbuna 14 rtrlpped of
    it8 oont4nt in w                     h.Id"
                       4r a 84rler 0r rtll 8. S!h4re44~4i4d 0 n-
    dqnaato lr than promraod er re?iqed by mciddn aetheda of % 18..
    tlllation md'?r&tl+@lqt     lnto.8uohpmdyotrr a8 mi1~r41 oil,
    bo$nCmd      g44olin4,'4a4into but4n4, prop~o  ld othano ?r4io-
         l

              moling p14ntr oan funotlon4ith4r lmd4pod4ntl~ or
    In oompleto or pa&l&l Inta~atlon with ref&k&i operations. A
                    orating lndopend4ntlyof TofUmr7 opemtlon8 does
    no
    oyol-   than 43 zuut1the llqueflablohydrod~bons,vhloh are then
       more p1ant
    dollrem to a mfiasry for fuH2~1$ treatment.
                In +llq    platr  psrtlill, into&ated rith ~iinery
    operationa, th4 ropane-4thano?raotlon m4sfb4 r4turn4d to the
    r48ervolr,   aad t L mixed butma fraotlon L8 drlltored to a 'ro-
    .tia*i7'.  Th4 hrcivlorproduot8;hommr, ~a~ roflrml in roflnory
                                                                                   57%

  goaorablo ffeorgeIi.Shopp4rd, p4go 3

! ,@pmeat      added   to   the oyoling unit, to yield 4 number Of fiai8bed
; p&UOt*.
              CJoliag pl4at8 oompletoly iat4grated vlth r4rin4r7
'.oper4tlon8r etur      th nelthrae-prop4n4mlrture to ths form4tloa
  48 before, vhll4 the but4no ?r4otlon under g        lep4ratloa,
                                                         o es      in
  4rpenslYo rafln4ry 4qulpm4nt rddod to th4 o~oling unit, into
  ~OlWdl bUtBa4 lJld 18ObUt4Fh4.     l'h4bollor ?r40 ion 18 ?urthor
  JWfiJJOd i&O   a V8riOt~    Of fiJJi8hOd produOt8.  See J. I(.F14ltc,
  011 k 048 Journal, April 20, 1944~ Duokor 4nd Dottrnroloh, 011
  & 048 Journal, &I       11, 19441 Jam48 0. ?eY, fh@ oil !fOOfi~,
  pooembor 6, 1943.3
            Thor0 are 300,000 or more 0881\% ohomloal Oolqp9Unds
  Yhloh me7 oonoolnbly b4 mads from tL hydroosrbona ia gas.
  (011 k Oar Jouxzu~l,J4nuaay 21, 1943.) AB Dr. Ouakv Egiorr,
  the fOrOmO8t hydr6oorboa pJ'OtB@Jli8t,said,
                IIf v4 *tart vith mothane @?i8 eloao, lll or the
        known *@hot10 pro&of8 that m4n h48 pruduood in
        organlo     ohomistry oan be derived. . .I
                 It vi11 b4 noted that          in 411 typo8 0r oyollng plents
   4bove mentioned, the init% operation 18 the rooovery Of the
   ll~O?l4blO ~OOarbOa8,               oalled OOndbMPt4 or dl8till4t4. The
   3’4OOtOr4d OOAd M8te        18 fUrthOr      pl’OO488Od      by di8tilhtiOA and
   ?raotion4tionIrefining           uperetlona) Into the r-1              finished
  prodUOt8.       At the tia4     0r   th4 pagram       0r   th4  rnreadmat   to Artlole
   7047b in 1941, there        nr    nut l pled ti oper4tloa vhloh turn&
   b ut mlng        0th ~ than o o a dea seto ,      a nd l fo v then     more edvanood
  $lant4 vhioh obkiaed a prrtlrl r4oov4z7 of the butaao fraotlon.
   lb4 lat4greted qollng pl4nt8 nov la operrtlon over the.Stat4
       lid 8uoh 4 ?arletiyof pX’UdUOt8,            l'4!qlng?rom ~@O~rn.tMte'to      the
: .-Eghly r4riaodplroduOt8         msntloned lboY4, vitkrll *tag48 or partial
. 4aaing        in botvoon, that       iC~18   not Z'448on4bZ$~tio       be inisrred that
   th4   bgi8&Jt~,iJttOndOd to bariethe tu                   trpon'~th4  ylue or the
, .&rid   or rsriaed produot.
  .. -
             "~ A 4lmllar ~U48tiCUI         he8 4ri84n     in 84v4r41     juri8diotioa8,
   inolud@g TOIA~, In r4gard to vhother the prUdUO4r~ vho UpeMt48
   l 0411, Should      pa)’ ayoytJ1t7    mtaers oa the brm.4 or th4 mark& ralus
; 0r,gea e8.p8, or ao,the b4818 -Oroert4ln produOt8 whioh ho menu-
   f~OtUE4~fl'omtha -8.            A roooat Tezaa 0184 la DurOlgeF 011 k
  ~fiJJeri48, -0. 1 .         -1 1        Dr ill* CO.,         lt 61.) ln 9.u. (2d)
  321~;by the supP4me Court. ti that ~680 gasrmiu 488igIWd t0 Den-
/ Oigor a working interest           in the leas4       in
   it84if    Ba ovomldZag rglty             48 fOiiOW8J
   MtBiM      68 pa2’t  Of th4    ouaalderatlon?OT
  .rhallbe eatltl4d to r0001~4 one~tweatyroupt+
I',
5: th4 oil, gae, oaslngh44d          gag, 4n& other'mln4r418produoed, aaved
;I md Ii%Srketsd    4t iiheprev811+ prlO4 paid by m4jOr OOmpaai48 . . .
                                                                                                                        579

      gaor4ble thorgo H. Sh4pp4ml, p4g4 4

1’
      +       the proprrtle8 above d48OribOd fro0 and dear of operating
      et108       I?, 68 uid vh4a produoed, ravod 4~d mrk4t4d. . ."
                At th0 tiB4 Of th4 688igJJMJJtit ~48 knanr th8t th4
      @lo whloh h4d be4a drlll4d produood oaly avert 868, ur4 th4t
'     wr4 -8    no merkotla the vlolalty et thet tlaefor 8woeb -8.
      pgaoigor 4r4ot4d   4a 4xpon8lv4 pleat on th4 le484d pr4mi808 for
      a4 pPrpO84 Of 8@gW8tbg ths #48 intO at8 OUIJ&WJJOJIt           *X%8.
      ff14@4lf4* ~thMU#lth.PlUAt,Vh4M                    ltV48 8OpNWtedBt
      4onalderrblol~OJJ84 intO th484 O~tJJlWt8t &4801ill4,&48-011,
      dl8tilht4, kOrO*eaO, bukw,         prepeao, 8&d re8idW gJI8. m888iii
      g WdmAOig 4fo     r rUJlOOUUatb& OOntenbbg that it MI la titl4 d
      $o be paid 1 24th of the (To88 Z’4OOipt8         of 411 prOhot    mu&40~-
      tuJ-d*-     de   m8   produoed   4a  the    pZ'4ai848. .Tliooourt hold
      that Wader the oontmot Burplill       ~48 nut 4Atltled to hw4 the
                   intO 8OPL4 0-J’     006LWditf,     but -8   b UUJJd
                                                                     to lOOOp g t
                               8 48 it   V48 th.a beiry produoed ?rom the
                                         rho     Court         84ldJ

                     #I? Daa&4r                ver not          requlrod        W’th4       oontraot
              t0 rOfiJJ4 the Oil                80    pCOdUO8d,        .w    Vht  pFWi8iOJJ
              theroof       ia  it  ~roquired            80 343%e           any or the   other
              pl’OdUOt8      l14m4d      therelat          ~OlWTO~,       I.? IOU 4? the
b
i             f$Utd~r~tiH$                be,M?iMd,                t0 at'.?inaruti84r4 th4y

                     ‘.bk   vimf    &     the        variUU8      &5r408         Of     iJttkJr4~iOa,   Of     ‘OJOi~
        llnt8 vlth mfineriO8, l8 point !:&ylt~ebOvO
      jh4  8Upl'omoCOurt 18 PIOat
       QU48ttbJllJ
                 pZW8eat4d w ~~l'4QIO8ti
                                                      p.J?tiJ$t
                                         in ,thoO;arsi;%~%~~
                                                       I'.

                     At
                      this point v4 iiah to Pal        fapr   i
       7057a, VhiOh 14v1.8 U 4OOU@iOJJ       tU    ‘4JJ gir
       iC, iJJ w     2'4~OOt8, WlOgOW    to h’tiOk0.        7
      .1nii8 8 tax Of '4.125 per OMt Of th4 mulbt
     y It h8 JJeverbeon ooateAd4dth4tthem4lk4tv4li4                  thbCofIIro-~'.
       f4md    t0 inOhd6d   th4 MU4   Of th4    fini8h4d      pr4dUOt8   rO?iZ#d
       fMm   aaid oil.
                      m     th4    aSO     HO? mri8,             ma        v.-skt4,         l&.&v,      (2d)      429,
      th4        V88 made tht
      OOJJtontiOJJ             if &tiOlO  7047b 18 OOA8trWd 48
 ? lm     aa OOUupBtiOa Sax On the ooollpatlOnOi%'&i.atn(j liQuida
       g4s, it 18 tiol4tive o? Seotlon 35 or Art1014 III or the
        COn8tltutloa,vhloh prOvido8J      :

                   'HO bill l 4 + 8hl1 O&kin mOl'0thU OM sub-
              joot,.whiohah411 be 0~Fe88ti in it8 titb, l F F"

                      Of thi8 tho          OOU&          raid:
                                                                                 580

                 think th4   Aot 18    JJOt 8UbjOOt   t0   Shl8   objao-

        hydrooerbon OOnteJJt
                         liid the MIldU4 yr f6
        by ~%egOibg BOthOdS t0 th4 8-4   -I-pMdUOiJJg ?OFW-
        t1oJlpndorlylq'ths lllndfmm vhl4h the 48 18 pro-
        duoed, the taxable vale O? ruoh 68 8l~f1 k th%%e
        fifth8 Of the gr088 V4iUO Of en ft&O) pmUOt8   OX-
        tluoted, 86~PBt6d and 84v4d ?Z'Om8uoh w8,' but
        suoh quoted provl8loa m6roly pIPOvId the m&hod Of

                    18 a rLnri oon8lde~tlon vhloh ve virh to ldvaaoo.
              (rzrare
botiOa i 9if~mi014 vm          0f th~m~~titutio~ 0r th* skt4                or
9-8       .proridOsthtlt411 tBX48 8h411 b4 “4qtu1        UJd URifOd       .    s40-
tlm 2 0r aaid Artlole VIII provid48 that            "ell 0ooUpatlon %X48
gmii      b6 ~QUB~ &ad UJIifOFJII
                                PpUJJth0 8-4 0x488 Of 8UbjOOt8. ...'
mmr0r.6,       I* 18 the duty 0r the omrt4~to pl404 8 ooa8trm~tloa
aa t4xingCt4tUt4th4tvllla4koth4                  t4x 6qU4landtuLlr0rla
wg a l   nn subjeots Oitbe 8"        01488. It ir obylow th4t 411
~.l'BtCW8or OyOling plPnt8 vho er4 8180 p r uduo 4 r a0r               la lr 4 or
fh8 8upO 01688,     &Ad it  18 6qUBlly   obvloua    &l&t  oaking     &Lop".
44880r,     vho 18 elao e r?bfln4r,pay 4 tar boaed ~poa the *a ue or
th4 reria6d produots, BAd peamlttlng the 8irplO             pZ’OO4880~    to   peT
l tat b484d on the value or the tmrermd             ooademat*~V6uld         ~6‘
gult la hU'8h insQBliti48 aad oomplste laok or pnLr0miit;J.                    Evea

      .~
   .         Xa aaawr  to your first qwation, thonf4r4~yoU 4r4
advlrwl that it 18 the Opinion Of th18.dwnt         tb4t;:in;th4
lltU4tloa there presented, the tu should he b484d upon th6 me&et
741~4    of 3/5thS Of the OOnd4MBt4 Or diat1114te OXtHOteb, 8bpaNt-
ed and 8av4d frcm 8Ucrhgas, aad AOt upon the market valua,~otthe
r4rined, flniahed produot.                             .    .
             Your 84OOad QlO8tiUJl1st
                                      If

          Uher4 the produoor end the operator or th4 r44y4liag
OhAnt 4r4 nut th4 aam6; huv vi11 the relue of the jjJtr.,)t?
                                                         m668UMd
Lo 0omputlJJgthe taxt
                                                                                                581.
gooorable tiorgo H, Sheppard, pago 6

          If 18 iAd44d 8trBJagothat, in the thirteen yeerr
94XB8 h48 had 8 @8 tU l   k tjJte,   OJJlJ
                                         OJW0684 Oo no o r mir
                                                             it rg
w8 mohed    the l~elh t.   OOUrt8. It 18 4tOJl MM    8tmXlg4
vhea p0  ooaslder th4 8ktUti, vhloh o.Ft~i~d~    18 w mod.1
o? olmltr or oertalaty.    hJU4QU4JJtlj,  it 18 M8t U&O&l-
&o   tbt  vheA thlr  0686 maohe th4 Suprem     Court the larws
v4r4 not 80 dravn th4t the Cotartoould olerl?y thb intoat of
@JO   8ktUt4.

                v4   8   lek Of th4 4480 Of v. RI mri8, IJJO.1; Skto,
160 S.W. (26)t29. There the             produoorr ooatnot4d 1~1thD4Irir
to pro0488 th0 868 PNdUOOd, urd           t0    l’4-         th.     reaidw         to    the
forwtloa fromvhlahIt had bemn             kksn,        uml     in    retma         pro
MriS OAO-hJiirOf the p8 prodUOt8               01p di8tilbt4              &4it4d         tram
suoh @aa, a&l retdning the other           one-half         or      the    prOdUOt8.

            D4ti8 th4JJrrsde8 OOJltlUOtVith       th. ~OdUOOM,
vherqpyho pUrohr84d frOm themell of thdr one-Id? iJJtOM8t
la the oond4Jasate   Or diatilhto                 from the #aa. Urdor
thl8  OoatraOt, Dati8 paid the prodwora 1.36 par krrel for
their produot durlnsllay, 1941, rrrd41.           for the ren8Forag tlao
laVOlV4diJJ the *tit.      %x48 ver 4  paid o n3/ s      or lll or the
oondsn84t4   HOOVOWd    fX’Om the 668,  006@UtOd      8t   tha YduO th4
84A4 48 the prioo paid by D0pi8 to the pl’duoo~,                f&i’ 8t 41.36
en&@.44 ger barrels
         ..
            AftOr pUZ'4h48~ th0 O,OZLd4M4tO, ad.8              traA8port.d it
to COlQnl8Cbi*ti, ml'4        ho Sold it'8t pZ'iO.8ww                ?Pm $.1.%
to $2.25per bmml.         %hhsstat4 8U4dmri8 iOr&&48 00mpUttwi~
et th4 prloe MOOiTOd      by him et Corpus   Chrirti,       ,I048  th4  ooat 4r
truqortation.

       produoor *hall  b8 e good relthegruwn t-free
       fioaPfMUd UJd OOll\uiOn   &I M&Wd8 th0 StBtO'B Ohi&
       $8r the taxer 1pnd6P thi8 Aot. WhWhV. ?Irp thi8Aot
       48.i vhole, UJd UpOOiBl1y vh4A V4 04A8idW th4
       de?lAltloA of rnrket t41~* thenia o&Mnml,      v4
       U-O o~~~vl~~ed that It demoa8trrte8 l olw lo&r-
                                 ,

                                                                                                  582

    Honorable George II.Sheppard; peg4                       7

              In 4~Mvlmg at thla o4n41~1oa, the Cm         furthorOon-
    ‘sldored    portion 0r thl8
                    the            *tat&r  requ¶ziJq the purohrrerto
    deduot the tUe8 w     th4   ~Oh48.    PX'iOe, %I4 COul't raid:
.
                     “Th4 purOh48er 4Oll4Ot8 th4 tU from tho pm-
               duoer.by deduoting th4 amount bhweo? from the maeuat
               0r the puxwh484    prioe. . lAr 4 edlJJg o fth e p                              er t0?
               th18 8t8tUte 148t 4bOVO rUmti@Xd sXI+B&aWX'bw
               plakethe pt~OhaSej!   llrble t0 th0 St&O iOF,iBWtCnr
               levied W thla Aat
               the value ce mp
                rwuoor tmrbror.
               Ld         008   Mfj OQA+%4lJQJ
               pZy tho pmduoclr aae prloe,         the kx                   dw the
               atate et that prloe, k44p th4 tax rt theta                   sloe
               SO(p?eglkd            a a dth e np I   the   sta t@ l tU   6e BAOthW
               prloe.”          (&4#~818     OW8j

    vith the 4lk8VOh’ t0 @IOstiOn n Of t$d.JliOn %O. o-3&7,                         Bad   Over-
    Z’td48 thrt POrtiOJJOf 8Bid Opinion.
                          Your third Qieatlon 181
                                                      III
                          tfheo the     04n44aa18      bath roduoer end operator          or   the
                                                                 6Wh.00MeW~   h48
                                                                               ?alled to
                                                                  .ea
                                                                   p r wideain botion

                .,.i? uaJ'prOthJ4erof-y8 8h4u f&t1 to lvdit the

               other pdr*imJt   to 880ert4la 4 oerreot aamunt due,
               Mdt&apm              Of 868 8hll b~ii~biO,,.46 UI Bd-
                                t    r   8b4 l'4484Ii4~O'WQB4MO8OS
               the rUgid%%       %~~O?
               totlveo of'the     Wmptml
               tO8ti(trrfi4B  Ubd wit;.
mnorablo ObOr80 8. Sheppard, pI80 8

               Th4 vordillgor th4 aktute  ir aloar* Aa l plwdu0.~,
me     arson    or oonoern inquired about In your third question is
Ilab Pl for     th.   audit     fee.

               Trurting       that   this fbllp   anevers your lnqulrlea, vo
br.9
                                                   Tourr row   bulJ,