Untitled Texas Attorney General Opinion ( 1940 )


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    OFFICE OF THE ATTORNEY GENERAL OF TEXAS
    AUSTIN
    OtUl.0 0. HAllW
    *1101*mvOUfuL
    Hon. George H. Sheppard
    Comptroller OS Public Aooounts
    Austin, Texas
    Dear Sir:
    hlch you ask whether,
    frsporting goods~
    6 Gocds Com,r,anyis a
    ts” stores owned an6
    ogeratea by !Yilscn                     s separate ,from said ohain
    OS “mceii gTdLlC%S’~
    vhat Wloon L CO., Inc., Is
    833 of preparing,  pociring
    that it ov!no m&a operates
    said products ar8 sold and
    hin the meaning OS the “Chain
    Co. is enother
    athletic  equipment
    and it ovme and operates in Texas
    one “store               em is dofimd    in tho “Chain Store Tax
    e sold.  Fifty-five
    tlng Goods Co. is
    olqned by 5llson 8: Co., Inc.’ There Is no other oonneotion or
    relationship   betweea the two oorgorations.
    Your question is~ whether all of tho stores of said
    two corporations    constitute  one single chain or the stores OS
    one corporation    are a separate ohain Srom those of the other
    corporation.
    Hon. George 8. Sheppard,, page 2
    The Texas “Chain Store Tax Statute”          was paessb as
    Eouse Bill No. 18, 44th Legislature,          1st Called Session,
    Aots 1935; and it is codified      as Article     11116 of Vernon’s
    Annotated Penal Code. ‘It provides that every person, oorpora-
    tlon, etc.,    shall pay a license     fee on every store they operate,
    and a schedule of lloense tees is prasorlbed           whereby the greater
    the number of stores operated,tha         larger is the amount per store
    that must be paid.      For example, ii only one store is operated
    the license    tee is one dollar    ($l.OO), but if six stores are
    operated by the same parson the license fees total one hundred
    and thirty-two    dollars  ($132.00),     and if twelve stores are
    operated by the same person the lloense rees total six hundred
    and thirty-two    dollars  ($632.00).      Seotion 6 of the Aot pro-
    vbies :
    “The provisions    OS this Act shall be construed to
    apply to every person, ogont, receiver, trustee,           rim,
    oorporatlon,    copartnership   or assooiation,     either domestlo
    or foreign,    which is controlled   or held with others by
    majority stoolc ownership or ultimately        oontrolled    or
    aireated by one management or assooiatlon         of ultimate
    management .‘I
    Section   I OS the Aot provides:
    “The term ‘store’ as used in this Act shall be oon-
    strued to mean and lnoludc any store or stores 0r any mer-
    cantile   establishment  or establishments  not speoifloally
    exempted within this Act which are owned, operated, maln-
    tained, or oontrolled    by the s3me perscn, agent, receiver,
    trustee,   rim, oorporation, copartnership or association,
    either dome&lo or foreign,      in which goods, wares or
    merohandise OS any kfnd are sold, at retail .or.wholesale.*
    Ke believe   your question is controlled    by the oase of
    H. E. Butt Grooery Co. v.      Sheppard, 137 S. ;!i. (Zd) 823 (writ of
    error refused),   in whioh the Court of Civil Appeals at Austin
    held that In a case in which two corporations       eaoh owned and
    operated grooery stores and the same person owned a majority
    of the stock in eaoh of said oorporations     all of the stores
    owned and operated by both oorporatlons     oonstituted   one single
    chain by,virtue    of said stoek ownership.   The court saib:
    -.
    Hon. George H. Sheppard,    page 3
    *Sod. 0 was manifestly      intended to prevent large
    chalnc~ of storea,   which receive the benefits     flowing
    from such system (considered       and enumerated in part by
    the U. 3. Supreme Court in State Board of Tax Com’rs.
    v. Jaokson, 
    283 U.S. 527
    , 51 S. Ct. .540, 73 I.. Xd. 1248,
    
    73 A. L
    . R. 1464, 
    75 A. L
    . R. 1536, and in Eurt v. Cooper,
    130 Tet. 433, 110 S. W. (26) 896, sustaining        the validity
    of the Act as oonstitutlng      a reasonable olasslfloation),
    from ciroumventlng    the tax burdens imposed under the Aot,
    by organizing   separate corporations     to operate them, the
    oapital stook or whioh, or a msjority of it, being owned
    by a parent oorporation      or holding company, or by an
    individual   or assooiation    of individuals.    Thus through
    a oommon management or control over a number ot individual
    units or oorporations     th’3 clear puqose of the law vrould
    be defeated.    . . .
    “* . . The ownership by Butt or S3$ or the stock in
    one corporation,    and of 755 of the stock In the other,
    gaVe   him such unified control of both corporations,    through
    suoh stook ownership, as to bring the stores owned and con-
    trolled   by such separate corporations   under the provisions   ,,_.._
    of tha Aot; and required that they be treated as one ohain
    for tax purposes.”
    There ara no words in the statute which lndlcnta that         .-
    the Legislature      intended that Soations 6 and 7, as oonstrued by
    the H. 3. Butt, Grocery Co. aaso, should not apply just as
    strongly   to stores selling       differen’: types of merchandise as
    they do in a 08s~ where all of the stores sell the same kind of
    merchandise.      In the H. E. Butt Grocery Co. oaae the stores of
    both or the corporat:ons        (of ivhioh the majority stock of eaoh
    was owned by the same person) sold grooeries,          but we think the
    rule’would    be the sanm it the stores of one corporation        sold
    groceries   and the stores ot the other corporation        sold an
    entirely   airferent     type 0r g00a0.
    In the case of State Board of Tax Commissioners v.
    Jackson, 
    283 U.S. 527
    , 51 6. Ct. 540, 
    75 L. Ed. 1248
    , the
    Sugreme Court of the United States upheld the oonstitutionallty
    of the Indiana chain store tax law, which is almost identioal
    with the Texas “Chain Store Tax Statute.”     xhe Court upheld the
    statute wherein it levied a larger tax per store on large ohalns
    than it did per store on smaller ohslns or on persons owning
    only one store, beoause there Is a difierenoe    in suoh stores.
    The Court said:
    Hon. George H. Sheppard,      gage 4
    n       there are msny points of alfrerenoe           between
    ohaln it&i*     and   inaepsndently       owned unlt6.    These oonsiat
    in quantity buying, whioh involves the applioation               of the
    mass prooess to distribution,           oomparable to the mass method
    used in production;       buying for oash end obtalniw          the
    advanta&?e-of a oash discount;           skill in buying, so as not
    to overbuy, end at the 880.0 time keep the stores stooked
    with produots suitable        in size, style and Quality ior the
    neiahborhood customers who patronize             them: warehousinu of
    goods and alstributlng        from-a single warehouse to k&rous
    stores;    abundant supply. of capital         whereby advantage may
    be taken of opportunities         f or asta lishment of new units;
    a prloing and-sales       poiioy difforsnt       from that of the       -
    individual    store,    involving    slightly    lower prioe>s; a greater
    turn-over,    and constant analysis of the turn-over            to asoer-
    tain relative     profits    on varying iterrs; unified,       and there-
    fore cheaper and better advertising            for the entire ohaln in
    a given locality;       standard form of display for the promo-
    tion of sales;      superior mrhna.$,sxentand nethod;         concentration
    of manafiement in the suecial          lines of goods hsndlad bv the
    ohain; special aooounting methods; staZdardizatlon               or-store
    macazement, sales policies          and goods sold.”      (undersooring
    ours)                                                                         ‘i.,
    :,,
    Xe recognize     that such *ldifferencesW In respect to
    stores in large ohains do oat exist to as great an extent where
    the stores in tho chain do not all sell the sama kind of mer-
    chandise as exists in a Case where all of the stores sell identf-
    tally the same kind of oorunaaities, but dome or said edifferencese
    exist.    ?:a believe   enough of staid “d-es”             exist to sustain
    the constitutionality        of tha Act whan it Is construed so as to
    place “sporting      good&stores      nnd “meat proauotfP stores in the
    sore chain by virtue of ,said stores being controlled            by the same
    %a jority    stook ownerahign.       Even though the stores’ sell alrrerent
    kinds 0f merchandise, the follows            “aifrerenoes”   exist:    “buying
    for cash snd obtaining, the ,advantage of a aash disoount”;            eabun-
    dant sqqly      OS oapital”;     snd *superior management and method”,
    In the Oase of Uhamplogment Compensation Commission v,
    City Ice & Coa1.06.,2U    1:. C. 6, 3 3. X. (2d) 290, the Supreme
    Court of North Carolina upheld a provision     in the North Caroline
    Unemployment Co5pensatj.on A.ct similar to Sections 6 end 7 in the
    Texas Vhaln Store Tax %a$\;te”,     and ‘held three corporations                    .
    Eon. George B. Sheppard,   page 5
    (of which the majority stock of eaoh waB owned by the e~eme
    group Of persons) to conetitute    the aame uait within the
    meaning and purposes of the Aat; and in that oase two or the
    three corporations   engaged exclusively  In the buying and
    sell&    of lee end ooal, end the.other   oOrporntlOn haqdled
    only dairy produota.
    Our answer to your questions le that all of the Stores
    of said two corporations,  towlt, eaid “sporting   goods” store
    and said *meat produots” stores,  constitute   one single ohaln
    under the TeTae “Chain Store Tax Statute.”
    .                                           Yours very truly    *
    kTSID~%Y.G~RAL OF TEXAS
    Ceoil   C. Roteoh
    Assistant
    CCR:AbU
    1
    APOVEDEOV 13, 1940
    

Document Info

Docket Number: O-2763

Judges: Gerald Mann

Filed Date: 7/2/1940

Precedential Status: Precedential

Modified Date: 2/18/2017