Untitled Texas Attorney General Opinion ( 1946 )

Hon. George Ii. Sheppard ~OpinianHo. o-?L4!j
Comptroller of ore:, @ether cost of elletiz-
Public Aocounts lag caxbom black ahouEd be
Austin, Texas alas-sad as paok$ng expense In
arr$olng at market va&utefor
Dear Sir1 tax purposea.
Your letter of September 17, 1946 requests our opln-
ion on the above quest Ion.
From the faots given,, it appears that Continental
Carbon Company produoes and manufaoturea *Class B” carbon
black as defined in Oubd$risioa 46 of Article 7047, V.4.C.S.
Such statute levies a.tax of 5.2$ ,*of the value of all such
carbon black produced or manufactured vhere the market value
is in excess of four (W.) cents per pound;” The statute de-
fines market value as the average sales price ‘less the cost
of packing, freightis and oartagrs?’
The statute further staterr
“The term ‘carbon blaok’ as herein used
includes all black pigment produced In whole
or in part from natural gas, oaslng-head gas
or residue gas by the impinging of a flame
upon a channel disk or plate, and the tax here-,
in imposed shall reach all products produoeni in
such manner. I’
Your letter encloses a dlagxam showing the various
steps used by Continental Carben Company Za the production
and sale of its product. Qa t~he burner house, the impinging
M?Gnfe$ame burning natural gas deposits black upon a moving
The black Is soraped off is put through an air sep-
arator ;or removal of foreign subs Eanuas and then Is driven
through a %lcro-pulver%Br to insure fineness.
At this point, acoording to the information furnished,
the black is in a fY.ne, pewdery form, ailnllar to ordinary soot
and now has all the hyelcal characteristics aec9ssary for com-
mercial use. About ,F $ or the pmduot &s actually sold in this
form. However, it cannot be shlppb3d in bulk but must be care-
fully packed In neosasarily bulky paokages., : It has been dis-
covered that by agltatl.mg this product :%n a rotating, horizontal
Hon. George II. Sheppard, page 2 (O-7145)
drum, it would be converted into pellets. In this form, the
black can be shipped Fn bulk in covered hopper cars, and,
because of its density, in smaller sized bags. The change
effected by pelletizing is simply to change the shape of the
black for economy and convenience in shipping and ultimate use.
No chemical change takes place. About 95% of the product is
shipped in this manner. _,,_,,, 4~
“. If ,:t.he ~exp,ense ‘of pelletlzlng is a “cost of packing”,
,then,~%&sr::the. termsof the statute, it is properly deduct-
ibl-e fromthe salesprloe in determining the market value of
the carbon black for taxpurposes. We think such deduction is
proper.
Instate v’. Parsons,. 27:S.W..1102 (MO.) the court
quoted from Keith v. State, 8 So. 353 (Ala.), as )ollowsr
,.:,~.%he ~,term ato paokl, ~‘i.n its, ordinary signifi-
cationi ,,especially w.hen used in reference to car-
: riage, means to place ,together and prepare for
+ taansportat ion. .. i u
,.: .,
The pelle&i.ng ,op~eration::app,&rs clearly to be part of the
preparation for transportation. It :is not a part of the manu-
facturing process. A study of the tax statute convinces us
that it was the intention of the Legislature to base this pro-
duction tax on the market value of the finished product to be
determinediby sales ‘price less packing and shipping cos c . We
th~ink the psoduct,ion or manufacture of the finished product,
suitablezfor commercial us,e,.. is complete immediately prior to
the pelletizing ,.pr,ocess. ”
. :. .’.Th,e‘above question is accordingly answered in the
affirmative.
Yours very truly
APPROVED.:O’CT 10,’ 1.9%6 .’ ATTORIWY GENERAL OF TEXAS
/s/‘.Grover Sellers; ``~
’
ATTPRREYGE@ER&‘OF TEXAS . ~. By /s/ J. Arthur Sandlln
J. Arthur Sandlin, Assistant
APPROVED:OPII$I,& CO~MBITTEE
BY: .,. ,jiVG~;,X!HAIRMti
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