Untitled Texas Attorney General Opinion ( 1944 )

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OFFICE OF THE ATTORNEY WERAL OF TEXAS
i AUSTIN
Thlr Department h6
methi r0r 0p~rri0n 00n04m43
7047b, whioh prorideuj
. . . provldod thut miy other pro-
vision herein to the '&an is processed
nd the ‘realdue
to the same gaa-
and from vhloh
o of such gas
088 value of
8tiv4drr0m
04 porron or oonoern ir both produoer of
regaling plant, ~01 the tax loorue on
of all produoh, based upon the wslue
uo h lm rtiation gsrol%ne, aolveat8, do.,
It shoulb be noted rt the outset that the tax levied
bi A&i010 7047b ir 8.aevemnoe tax. Thin statute oontains the
rowmg language; "Them 18 horoby 14vi4d en ooaupation tax
on'tho business or oocypation of produoins aa vithln thir State.
...A tax &al;1 be pdd by oaoh roduoor on
godud~~~~. ,a&va~4r7to5~-?Z-i3t okht?iit%%?:e.. .
---
BonoriableQ44rg4 H, Sheppard, page 2
The r4oyoling pro~lslon of the st4tute merely provides
the method of detamlnlng the nurrk4tvalue of th4 original gas
ar Davis Ino. V* St4t4 180 S.W. (al) 429, 433. only
E4-i thereoi Is taxed, not’tho roflnor.
In order to xi1~lorst4nd pro$erlr the into&ion o? the
Th4 tirqt ~r4o~ollngplant4 v4r4 oonstruotedand put into
operatlotiin 1938. Theso first plant8 prOduo4d oondon8ato or dla-
I tlllat4, r&v un?lnish4d pzykduots,vhloh wro Mrkoted to reflaer8.
piua 4per4t4r;8io 'tirs4rQurd that tw 00tud mlqda0-
fur4 ?ti$sh4d produotr, and that the ld@t1&41~inv48tment and
merot 6~n8e.~o4884ry ?or th4 aanufaoturo of those produote
Were jua 7 lfl4d by t&o inoreaso in tholh U&c4t oalu4.' phigzwa8
the,stert 6? *ho, en4r41 $lsaa of o~bl.Lrig plantcr~
tb.pmdqo4 fin-
ished pr6duotr. 'S 444w4 or the war, rloost~'rll4~4lin& *lants
havo.beon rowaped to ppermltthe nmnu?aoturo of a va~$letyo?
produytr.
Th4 wollng plant operitlon oonrIst8 of rorubbing in-
ooming rloh vapora with rbrorptioa'ollat presssgro8 msngLng up
to 2,OOOpouada per ~QUWO lnoh. l%xeprooesred dry gfb814 than
oompre88od and r4turmd to the ?orm4tlon,irhllothe absorption
oll.ooatalnlngthe rooovered heavier uarbuna 14 rtrlpped of
it8 oont4nt in w h.Id"
4r a 84rler 0r rtll 8. S!h4re44~4i4d 0 n-
dqnaato lr than promraod er re?iqed by mciddn aetheda of % 18..
tlllation md'?r&tl+@lqt lnto.8uohpmdyotrr a8 mi1~r41 oil,
bo$nCmd g44olin4,'4a4into but4n4, prop~o ld othano ?r4io-
l
moling p14ntr oan funotlon4ith4r lmd4pod4ntl~ or
In oompleto or pa&l&l Inta~atlon with ref&k&i operations. A
orating lndopend4ntlyof TofUmr7 opemtlon8 does
no
oyol- than 43 zuut1the llqueflablohydrod~bons,vhloh are then
more p1ant
dollrem to a mfiasry for fuH2~1$ treatment.
In +llq platr psrtlill, into&ated rith ~iinery
operationa, th4 ropane-4thano?raotlon m4sfb4 r4turn4d to the
r48ervolr, aad t L mixed butma fraotlon L8 drlltored to a 'ro-
.tia*i7'. Th4 hrcivlorproduot8;hommr, ~a~ roflrml in roflnory
57%
goaorablo ffeorgeIi.Shopp4rd, p4go 3
! ,@pmeat added to the oyoling unit, to yield 4 number Of fiai8bed
; p&UOt*.
CJoliag pl4at8 oompletoly iat4grated vlth r4rin4r7
'.oper4tlon8r etur th nelthrae-prop4n4mlrture to ths form4tloa
48 before, vhll4 the but4no ?r4otlon under g lep4ratloa,
o es in
4rpenslYo rafln4ry 4qulpm4nt rddod to th4 o~oling unit, into
~OlWdl bUtBa4 lJld 18ObUt4Fh4. l'h4bollor ?r40 ion 18 ?urthor
JWfiJJOd i&O a V8riOt~ Of fiJJi8hOd produOt8. See J. I(.F14ltc,
011 k 048 Journal, April 20, 1944~ Duokor 4nd Dottrnroloh, 011
& 048 Journal, &I 11, 19441 Jam48 0. ?eY, fh@ oil !fOOfi~,
pooembor 6, 1943.3
Thor0 are 300,000 or more 0881\% ohomloal Oolqp9Unds
Yhloh me7 oonoolnbly b4 mads from tL hydroosrbona ia gas.
(011 k Oar Jouxzu~l,J4nuaay 21, 1943.) AB Dr. Ouakv Egiorr,
the fOrOmO8t hydr6oorboa pJ'OtB@Jli8t,said,
IIf v4 *tart vith mothane @?i8 eloao, lll or the
known *@hot10 pro&of8 that m4n h48 pruduood in
organlo ohomistry oan be derived. . .I
It vi11 b4 noted that in 411 typo8 0r oyollng plents
4bove mentioned, the init% operation 18 the rooovery Of the
ll~O?l4blO ~OOarbOa8, oalled OOndbMPt4 or dl8till4t4. The
3’4OOtOr4d OOAd M8te 18 fUrthOr pl’OO488Od by di8tilhtiOA and
?raotion4tionIrefining uperetlona) Into the r-1 finished
prodUOt8. At the tia4 0r th4 pagram 0r th4 rnreadmat to Artlole
7047b in 1941, there nr nut l pled ti oper4tloa vhloh turn&
b ut mlng 0th ~ than o o a dea seto , a nd l fo v then more edvanood
$lant4 vhioh obkiaed a prrtlrl r4oov4z7 of the butaao fraotlon.
lb4 lat4greted qollng pl4nt8 nov la operrtlon over the.Stat4
lid 8uoh 4 ?arletiyof pX’UdUOt8, l'4!qlng?rom ~@O~rn.tMte'to the
: .-Eghly r4riaodplroduOt8 msntloned lboY4, vitkrll *tag48 or partial
. 4aaing in botvoon, that iC~18 not Z'448on4bZ$~tio be inisrred that
th4 bgi8&Jt~,iJttOndOd to bariethe tu trpon'~th4 ylue or the
, .&rid or rsriaed produot.
.. -
"~ A 4lmllar ~U48tiCUI he8 4ri84n in 84v4r41 juri8diotioa8,
inolud@g TOIA~, In r4gard to vhother the prUdUO4r~ vho UpeMt48
l 0411, Should pa)’ ayoytJ1t7 mtaers oa the brm.4 or th4 mark& ralus
; 0r,gea e8.p8, or ao,the b4818 -Oroert4ln produOt8 whioh ho menu-
f~OtUE4~fl'omtha -8. A roooat Tezaa 0184 la DurOlgeF 011 k
~fiJJeri48, -0. 1 . -1 1 Dr ill* CO., lt 61.) ln 9.u. (2d)
321~;by the supP4me Court. ti that ~680 gasrmiu 488igIWd t0 Den-
/ Oigor a working interest in the leas4 in
it84if Ba ovomldZag rglty 48 fOiiOW8J
MtBiM 68 pa2’t Of th4 ouaalderatlon?OT
.rhallbe eatltl4d to r0001~4 one~tweatyroupt+
I',
5: th4 oil, gae, oaslngh44d gag, 4n& other'mln4r418produoed, aaved
;I md Ii%Srketsd 4t iiheprev811+ prlO4 paid by m4jOr OOmpaai48 . . .
579
gaor4ble thorgo H. Sh4pp4ml, p4g4 4
1’
+ the proprrtle8 above d48OribOd fro0 and dear of operating
et108 I?, 68 uid vh4a produoed, ravod 4~d mrk4t4d. . ."
At th0 tiB4 Of th4 688igJJMJJtit ~48 knanr th8t th4
@lo whloh h4d be4a drlll4d produood oaly avert 868, ur4 th4t
' wr4 -8 no merkotla the vlolalty et thet tlaefor 8woeb -8.
pgaoigor 4r4ot4d 4a 4xpon8lv4 pleat on th4 le484d pr4mi808 for
a4 pPrpO84 Of 8@gW8tbg ths #48 intO at8 OUIJ&WJJOJIt *X%8.
ff14@4lf4* ~thMU#lth.PlUAt,Vh4M ltV48 8OpNWtedBt
4onalderrblol~OJJ84 intO th484 O~tJJlWt8t &4801ill4,&48-011,
dl8tilht4, kOrO*eaO, bukw, prepeao, 8&d re8idW gJI8. m888iii
g WdmAOig 4fo r rUJlOOUUatb& OOntenbbg that it MI la titl4 d
$o be paid 1 24th of the (To88 Z’4OOipt8 of 411 prOhot mu&40~-
tuJ-d*- de m8 produoed 4a the pZ'4ai848. .Tliooourt hold
that Wader the oontmot Burplill ~48 nut 4Atltled to hw4 the
intO 8OPL4 0-J’ 006LWditf, but -8 b UUJJd
to lOOOp g t
8 48 it V48 th.a beiry produoed ?rom the
rho Court 84ldJ
#I? Daa&4r ver not requlrod W’th4 oontraot
t0 rOfiJJ4 the Oil 80 pCOdUO8d, .w Vht pFWi8iOJJ
theroof ia it ~roquired 80 343%e any or the other
pl’OdUOt8 l14m4d therelat ~OlWTO~, I.? IOU 4? the
b
i f$Utd~r~tiH$ be,M?iMd, t0 at'.?inaruti84r4 th4y
‘.bk vimf & the variUU8 &5r408 Of iJttkJr4~iOa, Of ‘OJOi~
llnt8 vlth mfineriO8, l8 point !:&ylt~ebOvO
jh4 8Upl'omoCOurt 18 PIOat
QU48ttbJllJ
pZW8eat4d w ~~l'4QIO8ti
p.J?tiJ$t
in ,thoO;arsi;%~%~~
I'.
At
this point v4 iiah to Pal fapr i
7057a, VhiOh 14v1.8 U 4OOU@iOJJ tU ‘4JJ gir
iC, iJJ w 2'4~OOt8, WlOgOW to h’tiOk0. 7
.1nii8 8 tax Of '4.125 per OMt Of th4 mulbt
y It h8 JJeverbeon ooateAd4dth4tthem4lk4tv4li4 thbCofIIro-~'.
f4md t0 inOhd6d th4 MU4 Of th4 fini8h4d pr4dUOt8 rO?iZ#d
fMm aaid oil.
m th4 aSO HO? mri8, ma v.-skt4, l&.&v, (2d) 429,
th4 V88 made tht
OOJJtontiOJJ if &tiOlO 7047b 18 OOA8trWd 48
? lm aa OOUupBtiOa Sax On the ooollpatlOnOi%'&i.atn(j liQuida
g4s, it 18 tiol4tive o? Seotlon 35 or Art1014 III or the
COn8tltutloa,vhloh prOvido8J :
'HO bill l 4 + 8hl1 O&kin mOl'0thU OM sub-
joot,.whiohah411 be 0~Fe88ti in it8 titb, l F F"
Of thi8 tho OOU& raid:
580
think th4 Aot 18 JJOt 8UbjOOt t0 Shl8 objao-
hydrooerbon OOnteJJt
liid the MIldU4 yr f6
by ~%egOibg BOthOdS t0 th4 8-4 -I-pMdUOiJJg ?OFW-
t1oJlpndorlylq'ths lllndfmm vhl4h the 48 18 pro-
duoed, the taxable vale O? ruoh 68 8l~f1 k th%%e
fifth8 Of the gr088 V4iUO Of en ft&O) pmUOt8 OX-
tluoted, 86~PBt6d and 84v4d ?Z'Om8uoh w8,' but
suoh quoted provl8loa m6roly pIPOvId the m&hod Of
18 a rLnri oon8lde~tlon vhloh ve virh to ldvaaoo.
(rzrare
botiOa i 9if~mi014 vm 0f th~m~~titutio~ 0r th* skt4 or
9-8 .proridOsthtlt411 tBX48 8h411 b4 “4qtu1 UJd URifOd . s40-
tlm 2 0r aaid Artlole VIII provid48 that "ell 0ooUpatlon %X48
gmii b6 ~QUB~ &ad UJIifOFJII
PpUJJth0 8-4 0x488 Of 8UbjOOt8. ...'
mmr0r.6, I* 18 the duty 0r the omrt4~to pl404 8 ooa8trm~tloa
aa t4xingCt4tUt4th4tvllla4koth4 t4x 6qU4landtuLlr0rla
wg a l nn subjeots Oitbe 8" 01488. It ir obylow th4t 411
~.l'BtCW8or OyOling plPnt8 vho er4 8180 p r uduo 4 r a0r la lr 4 or
fh8 8upO 01688, &Ad it 18 6qUBlly obvloua &l&t oaking &Lop".
44880r, vho 18 elao e r?bfln4r,pay 4 tar boaed ~poa the *a ue or
th4 reria6d produots, BAd peamlttlng the 8irplO pZ’OO4880~ to peT
l tat b484d on the value or the tmrermd ooademat*~V6uld ~6‘
gult la hU'8h insQBliti48 aad oomplste laok or pnLr0miit;J. Evea
.~
. Xa aaawr to your first qwation, thonf4r4~yoU 4r4
advlrwl that it 18 the Opinion Of th18.dwnt tb4t;:in;th4
lltU4tloa there presented, the tu should he b484d upon th6 me&et
741~4 of 3/5thS Of the OOnd4MBt4 Or diat1114te OXtHOteb, 8bpaNt-
ed and 8av4d frcm 8Ucrhgas, aad AOt upon the market valua,~otthe
r4rined, flniahed produot. . .
Your 84OOad QlO8tiUJl1st
If
Uher4 the produoor end the operator or th4 r44y4liag
OhAnt 4r4 nut th4 aam6; huv vi11 the relue of the jjJtr.,)t?
m668UMd
Lo 0omputlJJgthe taxt
581.
gooorable tiorgo H, Sheppard, pago 6
If 18 iAd44d 8trBJagothat, in the thirteen yeerr
94XB8 h48 had 8 @8 tU l k tjJte, OJJlJ
OJW0684 Oo no o r mir
it rg
w8 mohed the l~elh t. OOUrt8. It 18 4tOJl MM 8tmXlg4
vhea p0 ooaslder th4 8ktUti, vhloh o.Ft~i~d~ 18 w mod.1
o? olmltr or oertalaty. hJU4QU4JJtlj, it 18 M8t U&O&l-
&o tbt vheA thlr 0686 maohe th4 Suprem Court the larws
v4r4 not 80 dravn th4t the Cotartoould olerl?y thb intoat of
@JO 8ktUt4.
v4 8 lek Of th4 4480 Of v. RI mri8, IJJO.1; Skto,
160 S.W. (26)t29. There the produoorr ooatnot4d 1~1thD4Irir
to pro0488 th0 868 PNdUOOd, urd t0 l’4- th. reaidw to the
forwtloa fromvhlahIt had bemn kksn, uml in retma pro
MriS OAO-hJiirOf the p8 prodUOt8 01p di8tilbt4 &4it4d tram
suoh @aa, a&l retdning the other one-half or the prOdUOt8.
D4ti8 th4JJrrsde8 OOJltlUOtVith th. ~OdUOOM,
vherqpyho pUrohr84d frOm themell of thdr one-Id? iJJtOM8t
la the oond4Jasate Or diatilhto from the #aa. Urdor
thl8 OoatraOt, Dati8 paid the prodwora 1.36 par krrel for
their produot durlnsllay, 1941, rrrd41. for the ren8Forag tlao
laVOlV4diJJ the *tit. %x48 ver 4 paid o n3/ s or lll or the
oondsn84t4 HOOVOWd fX’Om the 668, 006@UtOd 8t tha YduO th4
84A4 48 the prioo paid by D0pi8 to the pl’duoo~, f&i’ 8t 41.36
en&@.44 ger barrels
..
AftOr pUZ'4h48~ th0 O,OZLd4M4tO, ad.8 traA8port.d it
to COlQnl8Cbi*ti, ml'4 ho Sold it'8t pZ'iO.8ww ?Pm $.1.%
to $2.25per bmml. %hhsstat4 8U4dmri8 iOr&&48 00mpUttwi~
et th4 prloe MOOiTOd by him et Corpus Chrirti, ,I048 th4 ooat 4r
truqortation.
produoor *hall b8 e good relthegruwn t-free
fioaPfMUd UJd OOll\uiOn &I M&Wd8 th0 StBtO'B Ohi&
$8r the taxer 1pnd6P thi8 Aot. WhWhV. ?Irp thi8Aot
48.i vhole, UJd UpOOiBl1y vh4A V4 04A8idW th4
de?lAltloA of rnrket t41~* thenia o&Mnml, v4
U-O o~~~vl~~ed that It demoa8trrte8 l olw lo&r-
,
582
Honorable George II.Sheppard; peg4 7
In 4~Mvlmg at thla o4n41~1oa, the Cm furthorOon-
‘sldored portion 0r thl8
the *tat&r requ¶ziJq the purohrrerto
deduot the tUe8 w th4 ~Oh48. PX'iOe, %I4 COul't raid:
.
“Th4 purOh48er 4Oll4Ot8 th4 tU from tho pm-
duoer.by deduoting th4 amount bhweo? from the maeuat
0r the puxwh484 prioe. . lAr 4 edlJJg o fth e p er t0?
th18 8t8tUte 148t 4bOVO rUmti@Xd sXI+B&aWX'bw
plakethe pt~OhaSej! llrble t0 th0 St&O iOF,iBWtCnr
levied W thla Aat
the value ce mp
rwuoor tmrbror.
Ld 008 Mfj OQA+%4lJQJ
pZy tho pmduoclr aae prloe, the kx dw the
atate et that prloe, k44p th4 tax rt theta sloe
SO(p?eglkd a a dth e np I the sta t@ l tU 6e BAOthW
prloe.” (&4#~818 OW8j
vith the 4lk8VOh’ t0 @IOstiOn n Of t$d.JliOn %O. o-3&7, Bad Over-
Z’td48 thrt POrtiOJJOf 8Bid Opinion.
Your third Qieatlon 181
III
tfheo the 04n44aa18 bath roduoer end operator or the
6Wh.00MeW~ h48
?alled to
.ea
p r wideain botion
.,.i? uaJ'prOthJ4erof-y8 8h4u f&t1 to lvdit the
other pdr*imJt to 880ert4la 4 oerreot aamunt due,
Mdt&apm Of 868 8hll b~ii~biO,,.46 UI Bd-
t r 8b4 l'4484Ii4~O'WQB4MO8OS
the rUgid%% %~~O?
totlveo of'the Wmptml
tO8ti(trrfi4B Ubd wit;.
mnorablo ObOr80 8. Sheppard, pI80 8
Th4 vordillgor th4 aktute ir aloar* Aa l plwdu0.~,
me arson or oonoern inquired about In your third question is
Ilab Pl for th. audit fee.
Trurting that this fbllp anevers your lnqulrlea, vo
br.9
Tourr row bulJ,