Untitled Texas Attorney General Opinion ( 1947 )

. -r-
Honorable George H. Sheppard
Comptroller of Public Accounts
Austin, Texas Opinion Wo, P-253
Re: The a plicability of
the 1,# sales tax to
a sale by a new car
dealer to a used car
dealer.
Dear Mr. Sheppard:
You have requested the opinion of this Depart-
ment based upon the following fact situation:
"A manufacturer of motor vehicles
sells a motor vehicle to an authorized
new car dealer. After the sale is made
the authorized new car dealer sells the
car to a used car d~ealer, operating in
some other Dart of the State of Texas,
and the used car d~ealer resells thjs I
car to an individual who is required to
pay a 1% sales tax."
Your first question is:
"Will it be necessary for this used
car dealer to register the car and pay a
1% sales tax before offering the car for
sale or d~oes this used car dealer have
the same right to sell a new unregistered
car as a first sale, even though he does
not hold a contract with any manufacturer
to sell new cars?"
The pertinent parts of Chapter 184, Article
VI, Acts of the 47th Legislature, 1941 (codified as
Article 7047k, Vernon's Civil Statutes) follows:
"Sec. 1. (a) There fs hereby levied
a tax upon every retail sale of every
motor vehicle sold in this State, such
tax to be equal to one (1) per cent of
Hon. Geo. H. Sheppard, Page 2 (V-253)
the total consideration, paid or to be
paid to the seller by the buyer, whSch
consideration shall include the amount
paid or to be paid for said motor ve-
,hicle and all accessories attached
thereto at the time of the sale, whether
such consideration be in the n~ature of
cash, credit, or exchange of other pro-
pe rty , or a combination of these.
I, D . s
“Sec. 3 (a) The term ‘sale or
‘sales’ as herein used shall Include in-
stallment and credit sales, and the ex-
change of property, as well as the sale
thereof for money, every closed transactfon
constituting a sale. The transaction whereby
the possession of property is transferred
but, the seller retains title as security
for the payment of the price shall be deem-
ed a sale.
tail ‘%~, The term ‘retail sale’ or sre-
’ as herein used~ shall include
all sales of motor vehicles except those
whereby the purchaser acquires a motor ve-
hicle for the exclusive purpose of resale
and not for use.
YZec. 5. The taxes levied in thfs
Article shall be collected by the Assessor
and Collector of taxes of the county fn
which any such motor vehicle is first reg-
istered or first transferred after such a
sale; the Tax Collector shall refuse to ac-
cept for reqistration or for transfer any
motor vehicle until the tax thereon is paid.
. . . I,
It will be noted that Section 5 supra, re-
quires the 1% sales tax to be collected by the Tax
Collector of the County in which the motor vehfcle is
first registered or first transferred after such sale,
Therefore the statutes which qovern the registration
of the motor vehicle must be considered in oarrf materia
with the statute imposing the sales tax.
Hon. Geo. H. Sheppard, Page 3 (V-253)
The "Certificate of Title Act", codified as
Article 1436-1, Vernon's Penal Code, (Acts 46th Legis-
lature, 1939, p0 602) has been construed by the Supreme
Court of Texas in the case of Motor Investment Co. v,
Knox City, 174 S-W, (2d) 482, which involved a fact sit-
uation somewhat similar to the one above stated,
The pertinent parts of the Court's opinion are
here quoted:
"Ford Motor Company manufactured an
automobile and sold it in ~due course to
Boling-Duggan, a partnership, a dealer in
Dallas, and delivered the manufacturerss
certificate along with the automobile, On
March 7, 1940, Boling-Duggan sold the ve-
hicle to R. M. Hedrick, taking, a chattel
mortgage lien for $770 of the sale price,
Boling-Duggan delivered the manufacturer's
certificate to its vendee Hedrick at the
time of the sale, but did not note thereon
the above lien0 Hedrick purchased the auto-
mobile for the purpose of converting it into
a fire truck and reselling it to a consumer.
After having so converted it, Hedrick, on
the 30th day of April, 1940, for a valuable
consideration sold and delivered the automo-
bile to the City of Knox City. At that time
said automobile had not been previously reg-
istered with nor licensed by the State Hfgh-
way Department of the State of Texas, D e 0
"The Certificate of Title Act, Article
1436-1, VernonPs Penal Codes was enacted by
the Legislature of this State in 1939 to less-
en Andy prevent the theft of motor vehicles,
and the importation into this State of and
traffic in stolen motor vehicles, and the
sale of encumbered motor vehicles without dis-
closure of existing liens, The pertinent
provisions of the Act are as follows:
"'Sec. 4. The term 'Owner' includes any
person, firm, association, or corporation other
than manufacturer, importer, distributor, or
dealer claiming title to, or having a right to
operate pursuant to a lien on a motor vehicle
after the first sale as herein defined, a 0 o
Hon. Geo. H. Sheppard, Page 4 (V-253)
"'Sec. 7. The term 'First Sale'
means the bargain, sale, transfer or
delivery within this State with intent
to pass an interest therein, other than
a lien of a motor vehicle which has not
been previously registered or licensed
in this State.
"' . . .
"'Sec. 9. The term 'Mew Car' means
a motor vehicle which has never been the
subject of a first-sale.
./r. .I
. . .
't7Sec.' 19. The term 'Dealer' means
any person purchasing motor vehicles for
resale at retail to owners.
"' . . .
"'Sec. 27. Before selling or dispos-
ing of any motor vehicle required to be
registered or licensed in this State on any
highway or public place within this State,
except with dealer's metal or cardboard li-
cense number thereto attached as now provid-
ed by law, the owner shall make application
to the designated agent in the county of his
domicile upon form to be prescribed by the
Department for a certificate of title for
such motor vehicle.
"1. . .'
"Section 27 of the Act is the section
which requires the procurement of a certif-
icate of title as a condition precedent to
the right to transfer a motor vehicle. By
the ternis of that section such certificate
of title is required for motor vehicles 'ra-
quired to be registered or linensed in this
State, on any highway or pubi% plane within
thisState'. . . .
1( . . .
.
Hon. Geo. R. Sheppard, Page 5 (V-253)
"Moreover, under said Section 27,
it is only an 'owner? of a motor vehicle
that is requirrd to register such vehicle
and secure a certificate of title therefor
before selling the same. The tern towner,p
as defined in Section 4, excludesmanufac-
tures and dealers, and includes only those
claimin? title 'after the first sale.' The
Act divides sales of Automobiles into two
classes, namely ?first sale' and 'subsequent
sale.' The term 'first sales'means a trans-
fer of a vehicle which has not previously
been registered (Sec. 71, as distinpuished
from a 'subsequent sale,' meanin? a transfer
after a vehicle has been registered or should,
in law, have been registered (Sec. 8)" Read-
ing the Act as a whole, we think it clear
that every transfer of a motor vehicle, re-
gardless of the number thereof, from manufac-
turer to dealer, dealer to dealer, and from
dealer to 'owner,s as define-the Act,
constitutes a 'first sale,s and that it is
not necessary that the vehicle he recs=ed
and a certificate of title thereto obtained
as a condition precedent toTbe valrdfty of
such 'first sale,'" IEmphasis added)
In view of the foregoing construction of the
law it is not necessary for the used car dealer to reg-
ister the new car and since the motor vehicle was ac-
nuired by him for the "exclusive purpose of resalev', it
is exempt from the motor vehicle retail sales tax under
the provisions of Section 3 (b), Article 71347k, supra.
Your second question is:
Would~ it make any difference i~f the car
bought by the used car dealer from the ori,ginnl
nuthorived nevl car dealer was a secondhand car:"
It is presumed that the secondhand motor vehicle
is a 'Used Car" as d~efined by Section 10, Article 1436-1,
Vernon's Penal Code, as follows:
"The term 'Used Cars means a motor ve-
hicle that has been the subject of a first
” .-
Hon. Geo. H. Sheppard, Page 6 (V-253)
sale whether within this State or else-
where."
This sale constitutes a "Subsequent Sale as
defined in Section 8, Article 1436-1, Vernon's Penal
Cod~e, as follows:
"The term 'Subsequent Sale' means
the bargain, sale, transfer, or delivery
within this State, with intent to pass
an interest therein, other than a lien
of a motor vehicle which has been register-
ed or licensed within this State or when
it has not been required under law to be
registered or licensed in this State."
Nevertheless, the "Used car" being acquired
by the used car dealer for the "exclusive purpose of
resale", the transaction is exempt from the pa,vment of
the l$ quoted retail sales tax under the provisions of
Section 3 (b) of Article 7047k, supra.
SUMMARY
A new motor vehicle acquired from the
manufacturer by a car dealer, who in turn
sells the vehicle to a used car dealer, need
not be registered under the provisions of
the "Certificate of Title Act", Article 1436-1,
Vernon's Penal code, and is not subject to the
1% motor vehicle retail sales tax, (Article
?047k, Vernon's Civil Statutes) when acquired
by the used car dealer for the "exclusive pur-
pose of resale". Motor Investment Co. v. Knox
City, 141 Tex. 530, 174 S.W. (2d) 482. A
"Used" car sold by a "New car" de-ler to a
"Used Car" dealer who acquires it for the "ex-
elusive purpose of resale", is exempt from the
1% retail motor vehicle retail sales tax. Art-
icle 7047k, Sec. 3 (b).
Yours'very truly,
Edd ATTORNEYGENERAL0
@qgy&J&
ATTORNEYGENERAL BY
C. K. Richards
CKR/lh:jrb Assistant