Untitled Texas Attorney General Opinion

THEATTORNEYGENERAL
OF T‘EXAS
AUSTIN ~LTEXA~
WILL WILSON
A-I-I-G- GENEIIAL July 8, 1960
Honorable Robert S. Calvert Opinion No. !dN-876
Comptroller of Public Accounts
Capitol Station Re: When a "first sale"
Austin, Texas of gasoline within
contemplation of the
Motor Fuel Tax Law
occurs under a con-
slgnment for the pur-
Dear Mr. Calvert: pose of sale.
You request our opinion as to whether the taxable "first
sale" of motor fuel occurs upon delivery of the fuel into the
storage tanks of a retail dealer or upon withdrawal by him of
the fuel from such storage tanks under terms of a form of
contract submitted with your request.
The kind of transaction under consideration is within the
scope of Articles. 9.01, 9.02 and 9.03 of what Is commonly
known as the Motor Fuel Tax Law (Ch. 9, H.B. 111 56th Leg.,
3rd C.S., 1959, same being Ch. 9 of Title 122A 'Taxatlon-
General" of the Revised Civil Statutes of Texas).
The pertinent portions of the above statutes are:
"'First sale' shall mean, except as
otherwise provided herein, the first sale
or distribution in this State of motor
fuel, produced, refined, compounded, imported
into, of;otherwise acquired in said State;
. . . . Art. g.Ol(lO).
"'Distribution' shall mean and Include
any transaction other than a sale, in which
ownership or title to motor fuel, . . .
passes from one person to another." Art.
9.01(5).
"'Distributor' shall mean and Include every
person who refines, distills, manufactures,
produces, ,or compounds motor fuel or blending
materials In this State:,.. .or in any other
manner acquires or possesses said products,
for the purpose of making a first sale, distri-
bution zr use of said products ,ln this State;
. . . . Art. 9.01(h).
Honorable Robert S. Calvert, Page 2 Opinion No. ww-876
"'Dealer' shall mean and includeevery
person other than a distributor who engages
in the business in this State of distributing
or selling motor fuel within this State." Art.
9.01(7).
"Art. 9.03 Reports (1) Every distributor
who shall be required to collect the tax levied
by this Chapter upon the first sale or dlstri-
bution of motor fuel In this State, . .shall
.remit. .the amount of such tax required
Eo'be collecied. . .and at the same time, such
distributor shall make anddeliver to the Comp-
troller. . .a report. . . .'
The contract under consideration in its controlling portions
provides that the Distributor (called Seller in the contract)
may make deliveries of gasoline into the underground tanks of a
retail seller (called Dealer in the contract),
.at such time, day or night, as ma
be convenient for Seller, and shall Fi--+L
ave
rights of ingress to and egress from said
place of business and unrestricted access to
Dealer's tanks for the purpose of making such
deliveries and for the purpose of gauging
tanks, reading pump meters and inspecting all
equipment used in connection with the storage
and dispensing of gasoline. Dealer hereby
authorizes Seller to do any and all things
necessary and proper to preserve Its gasoline,
including, without limitation, locking the
fill-pipe caps leading to the tanks and re-
taining custody of all keys thereto. Seller
authorizes Dealer to withdraw such gasoline
from the tanks solely by means of the computer
pumps located at Dealer's place of business.
Title to such gasoline shall remain vested in
Seller until and unless the same shall be pur-
chased by Dealer. Gasoline shall be deemed to
be purchased and title thereto shall pass from
Seller to Dealer as the gasoline passes through
and Is recorded on the meters of the computer
pumps.
"2, Gasoline delivered and stored by Seller
hereunder shall be in the custody but not the
possession of Dealer and Dealer shall exercise
ordinary care in protecting the same from loss,
damage or destruction. Dealer shall Immediately
Honorable Robert S. Calvert, Page 3 Opinion No. ww-876
notify Seller of any defective condition
of the pumps, meters, tanks, pipe lines,
locks attached by Seller or any other
condition which may affect the safety of
Sellerls gasoline. Dealer agrees thatxe
shall withdraw gasoline from the tanks only
by means of the computer pumps and shall
keep locked all computer pumps when neither
he nor any of his employees is present on
the premises. The quantity of,gasoline N-
chased by Dealer shall be determined from a
reading of the meters on the computer pumps
and all gasoline withdrawn from the tanks
whether by Dealer or third parties shall be
deemed to have been dellvered'to and pur-
chased by Dealer. Dealer agrees that he
will not tsmoer with the meters on such
pumps and wliI not permit third parties to
do so. Dealer shall maintain daily a detailed
record of all gasoline purchased by him, such
record to be made aval1abl.efor inspection by
Seller at any time and shall render a full
accounting to Seller at such times and in such
manner as Seller may require for all gasoline
purchased Dealer shall pay Seller on
igrnandfor gasoline purchased at the price
set forth in. . . .
“3. .Upon termination of this agreement,
Dealer'shall promptly pay Seller for all gaso-
line purchased from Seller for which payment
has not theretofore been made. In addition,
Dealer w, at the time of such termination,
for cash the gasoline stored by Seller
place of business. If Dealer does
urchase such gasoline, Seller shall have
the right, without notice and without recourse
to legal proceedings, to remove said gasoline
from the tanks and Dealer agrees that he will
not interfere with such removal." (Under-
scoring added)
Other statements in the contract refer to Dealer"as custodian
of gasoline so delivered and stored," to his "custodial liability,"
and to his "anticipated purchases of such gasoline."
We can discern nothing,In the contract contrary to the
above provisions, which would alter the legal status of the
Dealer In relation to the gasoline delivered into his tanks,
nor the occurrence uponwhich the motor fuel tax becomes due.
Honorable Robert S. Calvert, Page 4 Opinion No. WW-876
We are of the opinion that the taxable "First sale"
occurs "as the gasoline passes through and is recorded on the
meters on the computer pumps"--that is, as the retail dealer
withdraws it from the storage tanks for sale to his own
customers.
We do not believe that the delivery of the gasoline by
the party designated inthe contract as Seller into the under-
ground tanks of the retailer, under the terms of this contract,
is a "first sale ' "sale ' "distribution ' or "use" of the
aasoline under a&? of th; statutes here&above mentioned or
under the holding-of State v. City of El Paso, 135 Tex. 359,
143 S.W.2d 366 (1940).
Prior to withdrawal by the retail dealer through his
comwuter wumws we believe he has custody of the gasoline with
the-legal-status of a bailee. Charles k. Stleff; Inc. v. City
of San Antonio, 130 Tex, 594, 111 S.W.2d 1086 (1938).
"Any kind of personal propert may be the subject of
bailment. . *It* 6 Am.Jur. (Rev Ed3 , Bailments, sec. 62, p.
220.
The applicable law we believe is well stated in the case of
Whitehouse Bros. v. S. H. Abbott & Son, 228 S.W. 599 (Clv.App.
9211, wherein at page b01 the Court quoted from a Georgia case:
"On the other hand, if the effect of the
contract is that the property is delivered
from the bailor to the bailee with the under-
standing that the title is to remain in the
bailor, and the bailee does not assume initial
responsibility to pay the purchase price, it
is ordinarily not a conditional sale, but Is
a consignment although the bailee may have the
option of purchasing the goods themselves by
paying a stipulated price, or may have a right
to sell them to other persons upon accounting
to the bailor for a stipulated sum, and though
the baileels compensation in the matter may
depend upon such profit as he shall realize on
the difference between the price at which the
goods are consigned and the price at which they
are sold, and though the bailee may be responsible
to the bailor for the value of such goods as he
may sell on a credit, whether he collects from
the purchasers or not."
Both the Whitehouse case, and the case of Sturm v. Boker mentioned
in the next following paragraph, are cited with approval by the
Supreme Court in the Stieff case (supra).
Honorable Robert S. Calvert, Page 5 Opinion No. ww-876
The distinction applicable to the form of contract under
consideration
. .- as between a contract of sale or return and a
bailment is clearly stated in Sturm v. Boker, 150 U.S. 312
(1893) wherein, at page 329, the Court said:
"An option to purchase if he (the bailee)
liked is essentially different from an option
to return a purchase if he should not like.
In one case the title will not pass until the
option is determined; in the other the property
passes at once, subject to the right to rescind
and return."
The law seems clear and settled that the exercise by a
bailee of his option to purchase goods held by him In that
capacity and to make himself the debtor for them does not alter
his first holding of the goods as a ballee. See also: 8 C.J.S.,
Ba3alments,sec. 3d-e, pp. 2x3-240, and sec. 42, p. 325; 6.
(Rev Ed) Bailments, sec. 37,pp. 198-200; The Law Govern-
Ing'Sales of hoods, Samuel Williston, Vol. 2, (Rev.Ed., 194o),
PP. 306-307.
The party designated in the contract under consideration
as Seller, under the provisions of Art. 9.03 of the Motor Fuel
Tax Laws,Is the Distributor and required to collect and remit
the motor fuel tax and to make the reports required of a distri-
butor under this Article.
SUMMARY
Under the contract in question the taxable
"First sale" under the Motor Fuel Tax Law (Ch. 9,
H.B. 11, 56th Leg., 3d C.S., 1959, same being
Ch. 9 of Title 122A "Taxation-General" of the
Revised Civil Statutes of Texas) occurs upon
withdrawal of the gasoline from the storage tanks
and as It passes through and is recorded on the
meters on the computer pumps of the retail Dealer.
Yours very truly,
WILL WILSON
w
Attorney General of Texas
WEA:cm AHsistant
Honorable Robert S. Calvert, Page 6 Opinion No. W-876
APPROVED:
OPINION COMMITTEE:
Gordon C. Cass, Chairman
J. Arthur Sandlin
Tom McFarling
B. H. Tlmmins, Jr.
REVIEWE.DFOR THE ATTORNEY GENERAL
By: Leonard Passmore