Untitled Texas Attorney General Opinion ( 1966 )

Honorable Joe Resweber Opinion No. C-764
County Attorney
Harris County Re: Whether Motor Vehicle
Houston, Texas Retail Sales and Use
Tax ia due and payable
on the transfer of vehi-
cles from a wholly-owned
subsidiary corporation to
Dear Mr. Resweber: its parent corporation.
By letter of August 30, 1966, you request an opinion
of this office on the following question:
"Is the Motor Vehicle Retail Sales
and Use Tax due when a wholly-owned sub-
bLlti.hl'!,
%n3zwYaiLon transfers title to
a motor vehicle to a parent corporation,
when there is no merger and both corpo-
rations continue doing business?"
The fact statement accompanying your opinion request
states, among other information, the following:
I8 Certificates of Title to six-
teen (i6j automobiles, together with the
possession of said automobiles, were trans-
ferred from Starfire Petroleum Marketing
Comwv, a wholly-owned subsidiary of
Signal Oil and Gas Company, to Signal Oil
Company, It further appears that the
accountin records of Starfire indicate
that $32,869.98 is owed by Signal to
Starfire for the transfer of said auto-
mobiles. The accounting records of
Signaj;indicate the same indebtedness.
. . .
Article 6.01, Title 122A, Taxation-General, Vernon's
Civil Statutes, provides for the imposition of a tax upon
the transfer of automobiles as follows:
"(1) There is hereby levied a tax
upon every retail sale of every motor
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Honorable Joe Resweber, Page 2 (C-764)
vehicle sold in this State, such tax to
be equal to two per cent (2s) of the total
consideration paid or to be paid for said
motor vehicle.
"(2) There is hereby levied a use tax
upon every motor vehicle purchased at retail
sale outside this State and brought into this
State for use upon the public highways by any
person, firm or corporation who is a resident
of this State or who is domiciled or doing
business in this State. The tax imposed by
this subsection shall be equal to two per cent
(22) of the total consideration paid or to be
paid for said vehicle at said retail sale.
The tax shall be the obligation of and be paid
by the person, firm or corporation operating
said motor vehicle upon the public highways
of this State.
"(3) There is hereby levied a use tax
in the sum of Fifteen Dollars ($15) upon any
person making application for the initial
certificate of title on a motor vehicle which
was previously registered in his.name in any
other State or foreign country. It is the
purpose of this subsection to impose a use tax
upon motor vehicles brought into this State by
new residents of this State.
"(4) There is hereby levied a tax in the
sum of Five Dollars ($5) upon any transaction
involving the even exchange of two (2) motor
vehicles which tax shall be paid by each party
to the transaction.
"(5) There is hereby levied a tax in the
sum of Ten Dollars ($10) upon any person who
makes a gift of a motor vehicle to another
person which tax shall be paid by the donee.
"The taxes levied by or under this Chapter
shall be in addition to any and all license
fees and taxes levied by or under any other
law of this State."
The terms "sale" and "retail sale" are defined in
Article 6.03, Title 122A, Taxation-General, V.C.S. as follows:
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Honorable Joe Resweber, Page 3 (C-764)
"(A) Sale. The term 'sale' aa herein
used shall include installment and credit
sales, and the exchange of property as well
as the salethereoffo? money, ever- closed
transaction constituting a sale.
----kEES-
action whereby the possession of property is
transferred but the seller retains title as
security for the payment of the price shall
be deemed a sale.
"(B) Retail Sale. The term 'retail sale'
as herein used shall include all sales of motor
vehicles except those whereby the purchaser
acquires a motor vehicle for the exclusive
purpose of resale and not for use." (Emphasis
added.)
From the facts stated above, the corporations involved
in the transfer of the vehicles are separate entities. Inter-
national Order of Twelve Knights and Daughters of Tabor v.
Florida, 91 S.W.2d 404 (Tex. Civ. App. 193b, no writ hiat .1,
The contention that sales between an affiliated company
and its parent company, wherein it is claimed that such trans-
actions are in fact not sales. have been before the courts manv
times. One of the most recent cases is the case of Washington"
Sav-Mor Oil Co. v. State Tax Commission, 364 P.2d 440, (Wash.
Sup.Ct. lgbl); the Court said:
"No authority is cited sustaining the
position that the court should 'lift the
corporate veil' in a case of this kind. Our
research reveals that the courts which have
considered the question in like cases have
consistently refused to do so. These cases
are all set forth in an annotation entitled
'Sale by wholly owned subsidiary to parent
corporation, or vice versa, as within retail
sales tax, or similar statute', appearing in
64 A.L.R. 2d 769. This volume was published in
1959, and our research has revealed no subse-
quent cages dealing with the subject."
The writer of that annotation says:
'Since a wholly owned subsidiary is
generally incorporated or acquired by the
parent corporation for the purpose of ad-
vantageously carrying on some phase of the
parent corporation's activities or business,
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Honorable Joe Resweber, Page 4 (C-764)
the courts have been reluctant to disregard
the separate legal entities of the parties
merely to grant relief from sales, or similar,
taxes at the expense of the State or its sub-
division. Thus the contention that because
the wholly owned subsidiary and the parent
corporation are so closely integrated. sales
by the one to the other does not constitute
'sales' within the meaning of the sales tax,
or similar statute has been rejected by the
c0urts.I'
The Court called attention to the leading case in
matters of this nature, name1 Superior Oil Co. v. Depart-
ment of Finance, 36 N.E.26 35t', Sup.Ct. Illinois (1941).
The Court continued, in the Washington case,
"The appellant asks us.to disregard its
separate existence, not in order to prevent
fraud or injustice, but in order to Rain an
advantage. This we cannot do. The legisla-
ture has not seen fit to exclude transactions
between affiliated corporations, and we find
in the facts of this case nothing which would
justify the judicial engrafting of such an
exclusion upon the statute."
We find no facts present in the situation presented
that would justify excluding the sales mentioned from the
clear provisions of the statute, and, therefore, answer your
question in the affirmative.
SUMMARY
The Motor Vehicle Retail Sales and
Use Tax is due and payable on the transfer
of motor vehicles from a wholly-owned
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Honorable Joe Resweber, Page 5 (C-764)
subsidiary corporation to its parent
corporation, there being no merger of
such corporations and both corporations
continue in business.
Yours very truly,
WAGGONER CARR
Attorw era1 of Texas
Assistant
GCC/fb:lr
APPROVED:
OPINION COMMITTEE
W. V. Geppert, Chairman
Pat Bailey
John Fainter
James McCoy
Mario Obledo
APPROVED FOR THE ATTORNEY GENERAL
BY: T. B. Wright
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