Untitled Texas Attorney General Opinion ( 1962 )

. . THEA~TORNEYGENERAC OF, T-E&As BVILL WIlLSON September 7, 1962 AlTGHNEY GENERAL Honorable Jerry Dellana Opinion No. WW-1435 County Attorney Travis County Courthouse Re: Whether wholesaler6 of Austin, Texas builders supplies may accept resale certificates for pur- chases of building materials, in lieu of the sales tax, from builders and developers, who construct houses on land owned by such developers, such house6 to be sold after- wards to the general public as real estate upon which no Dear Mr. Dellana: sales tax is colleated. You have asked the following questions: “Question 1: Are csrtdrin whole- salers required to accept resale ce%- tifiaates from builders and developers who purchase tangible personal property and then make said tangible personal property a part of the real property that is sold to the general public, or must they collect the tax at the time of sale? “Question 2: Does tha definition ‘Sale for Resale’, Article 20.01 (S) a8 quoted in part ‘Sale for Resale shall mein a sale of tangible person- al:. property to r+ a purchaser who Is purchasing said angible property for the purpose of reselling it in t;eiF- ma1 aourtse of his business a alude builders and developeriY$” In your letter you have set out the following facts: “Builders and developers of homes in thls area are purchaelng tangible personal property, I, elo garbage dis- poaerdl* built-in 8toveBp eto. from wholesalers and submitting certifi- autos of resale of tangible personal . . Honorable Jerry Dellana, page 2 Opinion No. WW-1435 property. In said certificate of re- sale, they speclfically state that it will be resold in their regular course of business; their regular couree of business is sale of real estate. They claim this exemption under Set, (N), Article 20.04, of Section 1, Chapter 20, Title 122A. “The wholesalers, who sell these articles to the bullders,and developers are apprehensive in that Article 20.12, Violations (B) may hold them guilty of a misdemeanor. . . .I’ Articles 20.01 to 20.17, inclusive, Chapter 20, Title 122A, Taxati’bn-General, V.C.S., constitute the Texas Limited Sales, Ex- cise and Use Tax Act. All reference to articles hereafter dls- cussed will be to the Limited Sales, Excise and Use Tax Act, un- less otherwise shown. Article 20.02 reads In part as follows: “ThePe Is hereby Imposed on each separate sale at retail of tangible personal property made within this State a limited sales tax at the rate of two per cent (2$) of the sale price of each Item or article of tangible pereonal property when sold at retail in this State. .: “(A) Method of Collection and Rate of Limited Sale8 Tax. The tax hereby Imposed shall be collected by the retailer from the consumer. II.‘, . “(C) Limited Sales Tax Permit Ap- plication. (1) Every person desiring to engage In or to conduct business as a seller within this State shall file with the Comptroller an appllca- tlon for a permit for each place of business. Honorable Jerry Dellana, page 3 Opinion NO. WW-1435 “(D) Limited Sales Permit Ii- suances. After compliance with paragraph (C) of thb$ Ai?t&clie.by the applicant, the Comptroller shall grant and Issue to each ap- plicant without charge a separate permit for each place of business within the State. A permit shall not be assignable and ahall be va- lid only for the person in whose name it Is Issued and for the trans- action of business at the place de- signated therein. It shall at all times be conspicuously displayed at the place for which Issued. “(F) Presumption of Taxability: Resale Certificate. For the pur- pose of the proper admlnistratlon of this Chapter and to prevent eva- sion of the limited salea tax It shall be presumed thatall gross receipts are subject to the tax un-, tll the contrary 1s established. The burden of proving that a sale of tangible personal property is not a sale at retail is upon the person who makes the sale unless he take8 from the purchaser a certificate to the effect that the tangible pro- party ia purchased for the purpose of reselling, leasing or renting it, “(0) Effect of Resale Certlfi- oate. The resale aertifloate re- lievee the seller from the burden of proof only If taken In g&d faith from a person who 1s engaged In ths business of selling, leasing or rent- ng tangible personal property A resale certificate may be nlvei by a purchaser, who at the tse of pk- chasing the tangible personal pro- perty, Intends to 0411, leas8 or rent It In tho regular course of business or lo unable to ascertain at the tlma of purchase whether the Honorable Jerry Dellana, page 4 Opinion No. WW-1435 tangible personal property will be resold, leased or rented or ~111. be used for some other purpose.” *(Em- phaais added). sali( gHrty;;;a;;d Contents of Re- . (1) The certificate shall: kir ~es````da% ii? dress of the purchaser. (b) Indicate the num- bar of the permit, if any, isauad to the pur- chaser. (c) Indicate the gener- al character of the tan- gible personal property sold, leased or rented by the purchaser in the regu- lar course of business. ~(2) The certlfi’cate shall be substantially in such form as the Comptroller may prescribe. “(I) Liability of Purchaser Giving Reeale Certificate. If a purchaser who give6 a resale certificate makes any use of the tangible personal property other than retention, demonstration or dls- play while holding It for sale, lease or rental In the regular course of business, the use shall be taxable to the purchaser as of the time when tba tangible personal property la first no used, and the sales price of tha tangible perronal property to hz ahall be deemed the measure of the I) YJ) Resale Certificate; Commingled Fkw~ible Goods. If a purchaser gives a resale oertlflcate with respect to the purchase of funglble goods and Honorable Jerry Dellam, page 5 Opinion No. WW-1435 thereafter commingles these goods with other funglble goods not so purchased but of such slmllarlty that the identity of the constituent goods In the commlng- led mass cannot be determined, sales from the mass of commingled goods shall be deemed to be sales of goods covered by the resale certificate until a quan- tity of sllch goods equal to the quan- tity of the goods so commingled has been sold.” Article 20.01 reads In part as follows: I,. . . “(S) Sale for Reeale. ‘Sale for Resale’ shall mean a sale of tangible personal property to any purchaser who Is purchasing said tangible personal property for the purpose of reselling It In the normal course of his busl- ness. A sale for resale shall Include a sale of tangible personal property to a purchaser for the sole purpose of that purchaser’s renting or leas- ing said tangible personal property to another personr, but not If incl- dental to the renting or leasing of real estate a” Article 20.04 reads In part as follows: ,I. . . “(19) Sale for Resale: Leasing or Renting. (1) There are exempted from the taxes Imposed by this Chapter the re- ceipts from all sales for resale, leasing or renting. (2) .Howevar, If a per- son purchases tangible personal property for the purpose of leasing or rent+ Honorable Jerry Dellana, page 6 Opinion No. WW-1435 lng it to another person, and if he later sells It by means of an occasional sale before he has collected and paid to this State as much tax on the rental or lease charges as would have been due and payable to this State had he not pur- chased the tangible person- 41 property for the pur- pose of so renting and leas- ing it, he shall, at the time of his occasional sale of said tangible personal property include In his re- oelgts from taxable sales the amount by ,whlch his purchase price exceeded the amount of rents collected by him on said tangible per- sonal property. (3) Where a lessor makes a retail sale of leased tangible personal property to a lessee of that tangi- ble personal property un- der an agreement whereby certain rental paymanta are credited @gainst the purchase prlce,of the tan- gible personal property, he need not collect or pay any tax on the sale price to the extent that he has collected and paid on such rental payments a” ~Artlole 20.12 reads In part as follows: Penalty for Engaging in BUA!!S as Seller Without Permlt. A perron who engages In business a8 a retailer In this State wlth- out a permit or permits or after a permit has been suspended, and each officer of any corporation which so engages In business, 1s Honorable Jerry Dellana, page 7 Opinion No. WW-1435 guilty of a misdemeanor, and such person shall upon conviction be fined not more than Five Hundred Dollars ($500) for each c’onvlc- tlori. Each day of such operation shall constitute a separate of- fense. “(B) Penalty for Improper Use of Resale Certlflaate. Any person who gives a resale certificate to the seller for property which he knows, at the time of purchase, la purchased for the purpose of use rather than for the purpose of re- sale, lease or rental by him in the regular course of business Is guilty of a misdemeanor, and such person shall upon conviction be fined not more than Five Hundred Dollars ($500) for each conviction. n(D) Penalty for other Vlola- tlons 0 Any violation of this Chap- ter, except as otherwkee provided, is a misdemeanor, and any person shall, when found guilty of such violation, be fined not more than Five Hundred Dollars ($500) for each violation. ” The limited sales tax is Imposed on each separate sale at retail In Texas of tangible personal property. Xhe tax Is lm- osed on the consumer and collected by the retailer. Art. 20.02 PA). Where the purchaser of tangible personal property Intends to resell or lease the same as tangible peraonal property, he may give a resale certificate to the retailer In lieu of paying the tax. With respect to the purchase of tangible personal pro- perty, which the purchaser Intends to lease, note this language from Art. 20.01 (S): M 0 e 0 A sale for resale shall Include a sale of ,tangible person- al property to a purehaser for the sole purpose of t,hat purchaser’s renting or leasingsaid tangible personal property to,another perso& Honorable Jerry Dellana, page 8 Opinion No. Ww-1435 but not if incidental to the rent- ing or leaelng of real estate.” ~phasle addep. Thus, If a person uho operates a bed rental business wants to purohase from the,manufacturer or distributor a bed, such per- son Is entitled to give a resale certificate for the purchase of the bed. The State will receive its tax from the customer who renta the bed, which tax will be collected by the operator of the bed rental service, and remitted in his quarterly tax returns. Rut if the bed Is purchased by the operator of an apartment house, In order to furnish an apartment, which will be rented as real estate, there will be no sales tax to collect from the tenant. Hence, the operator of the apartment house is the ultimate consumer of the bed so purchased, and must pay the sales tax to his supplier. lhe first sentence In Art. 20.01 (S) reads as follows: “‘Sale for Resale’ shall mean a sale of tanalble oersonal oro- perty to any gurchaser who Is pur- chasing said tangible personal pro- art for the purpose of~‘reselllng !w n the normal course of business.N i?fmphasia addeg. This clearly contemplates that the tangible personal pro- perty purohaaed for the purpose of resale must be resold In the form of tangible personal property, In order for the purchaser to be authorized to execute a resale certificate and deliver the same to his supplier In lieu of paying the tax. If a person purchases a garbage disposal unit to Install In a house which he owns, with the Intention of afterwards sellln$ the house, such a peraon clearly does not Intend to resell “It (the garbage dls- posal unit) to anyone. He Intends to sell a house, whloh is real estate. To hold that a person who Is In the business of con- structing houses on his own land, with the Intention of selling . such houses to the general public, may claim the privilege of us- ing a Sale for Resale Certificate upon the purchase of a garbage dlspoeal unit to be Installed In such house, would be to hold that such person is not In the busMess of selling houses, but instead Is in the business of selling lumber, nails, bathtubs, plumbing fixtures, shingles, electrical wiring, etc. Where a person purchases tangible personal property In the form of? aonntruotion material to build or repair his own house, and such person performs his own construction. work, he gets no axamption from the sales tax. He is neither an exempt person, 1 Honorable Jerry Dellana, page 9 Opinion No. WW-1435 nor are the construction materials exempt products, for neither Is listed in Art. 20.04. If a person owns his own land, and contracts with another to construct a building thereon, such contractor becomes the ultimate consumer of the products so con- sumed in construction, If the contract is let as a lump sum contract I) Attorney General’s Opinion No. ``-1258. If the con- tract Is In the form of a split bid, the tax Is paid either by the contractor or the owner of the building, depending on which one of them furnishes the materlals~ to go into the building. Art. 20.01 (T). To hold that all these classes of persons must pay the salee tax, but that a developer who builds houses on his own land for resale may In effect become exempt from the tax by urje of a Sale for Resale Certificate when he purchases builder’s supplies, Bnd thereafter collects no tax at all from his customer on the ground that,his customer Is purchasing real property and not tangible personal property, is to reach an absurd reault. “The court will never adopt a construction that will make a sta- tute absurd or ridiculous, or one that will lead to absurd conclu-. slons or consequencea, if the lang- uage of the enactment is susceptible of any other meaning.,” 39 Tex. Jur., Statutes, Sec. 118, page 222. Paragraph (Q) of Art. 20.02 reads ,in part as follows: “Effect of Resale~Certlflcate, The resale certificate rel%eve& the seller from the burden of proof on- ly If taken in good faith from a- person who Is engaged In the business. of selling, leasing orrenting tant: 1 personal property. ‘D 0 .‘( ptasis addedJ e The above quoted sentence from Par. (Q), Art, 20.02, shows the legislative Intent. For a purchaser of tangible personal property to be authorized under th,e Limited Sales, Excise and Use Tax Act to we a Resale Certificate In lieu of oavlnn the tax at the time3 of his purohaeep he’must be “# 0 a &&ag;d 1; the b usinesa of sellin * leasing dfl renting tanglble.persona In the busihess of selling real estafe IiF% 3 orm of lots with housea,aff13.xad thereto is not engaged in the business of selling tannible ,peraonal property, And a Demon engaged In eellinE both lumber at retail and houses as seal eata&-oould we his Resale Certificate only for the ~ Honorable Jerry Dellana, page 10 Opinion No. b-1435 lumber he sells as personal property, In both Arts. 20.01 (S) and 20.02 (5) reference is made to purchasers who Intend to sell or resell “it” In the “normal course of bualness” or “regular course of business.” Such second,,sale or resale of “it” refers to “tangible personal pro- g e r ty lThere is no resale of tangible personal property, or it” as such, In the situation described in your letter. It Is true that theae developers are engaged In a “normal course of buelnese” and a “regualr course of business”, but their business is the sale of real estate, not tangible personal pro- perty. An Exemption Certificate Is used only by an exempt legal entity or exem t organization, which are listed In Paragraph (F), Art. 20.0!. Real estate developers are not listed in this paragraph a Some products are exempt b name, such as food for human consumption (not served a8 meals 7. Some products are exempt> because of taxes which have already been Imposed there- on, such as cigarettes. Some products, without naming them spe- cifically, are exempt becauee of some circumstance which has al- ready occurred with respect to them, such as sales of tangible personal property under contracts executed prior to the effec- tive date of the Act; or occurs at the time of the sale, such ‘as an occasional sale; or are destined to be used in a parti- cular manner In the fu,ture, such aa fuel for a locomotive en- gine e Nowhere In the Act do we Elnd “builders1 Supplies” listed as an exempt prdduct, a6 such, The only time builders’ eupplles aan fall within the Sale for Resale Exemption Is when the sale ia made to a wholesale or retail buildera’ supply es- tablishment, which truly Intends to resell “it” In the form of tangible personal property In the “normal” OP “regular” course of business, and ribt to one who Intends to consume or use It. nn e 9 when the legislative Inten& ascertained, or Is plainly manifest, . :: Is binding upon the courts, and must be given effect if It Is legally possible to do so. To Ignore the legislative ln- tent and give a statute a construction obviously contrary thereto, or to refuse to enforce a statute according to the legislative Intent, when ascertained, Is said by the Supreme Court to be ‘an in- excusable breach of judicial duty’ and ‘an unwarranted Interference with the exercise of lawful legislative authorlty.l” 39 Tex, Jur. 171-172, Statutes, Set, go. . Honorable Jerry Dellana, page 11 Opinion No. WW-1435 In answer to Question No. 1, we hold’. that wholesalers of builders’ supplies, who sell to developers, builders, and lum- ber companies who purchase tangible persona> property for the purpose of Incorporating such tangible personal property Into real property owned by such developers, builders, and lumber companies, such real property to be sold thereafter to the gene- ral public as real estate, must collect the sales tax from such developers, builders, and lumber companies. We answer Question No, 2 by holding that Art. 20.01 (S), of the Limited Sales, Excise and Use Tax Act, which defines “Sale for Ressle”, does not Include such developers, builders, and lumber companies within the meaning of “any purchaser”, since that phraae only includes those who sell “It” In the ‘hormal course of his business”; the word “It” referring to tangible personal property and such developers and builders are not so engaged, but are engaged In the business of selling real estate. SUMMARY Wholesalers of builders’ supplies, who se&l to developers and builders who purchase tarlglble personal property for the purpose of Incorporating such tangible personal property into real property owned by such developers and builders, such real property~to be sold there- after to the general public as real estate, muat collect the sales tax from such developers and builders. Art. 20.01 (S), of the Limited Sales, Excise and Use Tax Act; which defines “Sale for Resale”, does not include developers and builders within the meaning of “any purchaser”, since that phrase only tincludes those who sell “It” in the “normal course of his business”; the word “‘It” referring to tangible personal ``~p``t````~d~“``t”``~l````e``````d````~re ness of selling real estate. Yours .very truly, WILL WILSON Attorney General of Texas Ronorable Jerry Dellana, page 12 Opinion No. UW-1435 Riley Eugene Fletcher Afisletant APPROVED: OPINION COlvMIlvEE W. V. Geppert, Chairman Arthur %n~lln J. C. Davis IWIBiWEDFORTHEATTORNEYffBNl!RAL BY: Leonard Pasemore