Untitled Texas Attorney General Opinion ( 1948 )

Hon. Geo. H. Sheppard
Comptroller of Publir Accounts
Austin, Texas Opinion No. V-697
Re:. Basis for computation of
occupation tax on produc-
tion of carbon black pro-
duced by Witco Hydrocar-
bon Corporation under con-
tract with Witco Chemical
Company.
Dear Mr. Sheppard:
Your letter request reads as follows:
“I am attaching herewith copy of contract be-
tween Witco Hydrocarbon Corporation, a corpora-
tion of the State of Delaware and Witco Chemical
Company, a corporation of the State of Illinois.
“In view of your Opinion #V-616 please advise
me if Witco Hydrocarbon Corporation would be au-
thorized to deduct the 74% allowed Witco Chemical
Company in arrivmg at the sales price before com-
puting the tax levied under Section 46 of Article
7047, R. C. S.”
We have carefully examined the copy of the enclosed
agreement between the parties. This agreement on its face is
a sales agreement. It purports to sell the carbon black and pass
the title to the purchaser. It provides that the sales price shall
be determined by the amount received by the purchaser. That
is, the purchaser shall pay the seller “a sum equal to the net
price f. o. b. works at which carbon black is sold by Witco (the
purchaser) less 7+% thereof.” Although this method of arriv-
ing at the sales price is unusual, the parties may lawfully en-
ter into such a method.
Article 7047(46), V.C.S., provides that the occupation
tax shall be paid on a certain percentage of the market value
of the carbon black produced or manufactured. It defines “market
value” as: follows:
HOn. Gee, H. Sheppard, Page 2 (V-697)
“The market value of a particular type or grade
of carbon black shall be the average sales price of
that type or grade of all bona fide sales made dur-
ing the month on which the tax is being paid less the
cost of packing, freight and cartage.” (Emphasis
added)
We have no way of determining whether or not under
the contract in question a “bona fide sale” has been made. This
is a fact issue to be determined by your department. If you find
that a “bona fide sale” has been made, then the tax is to be com-
puted on the net price f. o. b. works at which the carbon black is
sold by Witco Chemical Company, less 7;s thereof, and less
cost of packing, freight and cartage. If such sale is not “bona
fide,” but merely entered into as a subterfuge to evade full pay-
ment of the tax, then the tax should be computed on the net price
f. o. b. works at which the black is sold by Witco Chemical Com-
pany, less packing, freight and cartage.
SUMMARY
The submitted contract between Witco Hydro-
carbon Corporation and Witco Chemical Company on
its face is a sales agreement. If this is a “bona fide”
sales agreement, the occupation tax on the carbon black
produced and sold under such agreement should be
computed on the net price f. o. b. works at which the
carbon black is sold by Witco Chemical Company, less
7;s thereof and less the packing, freight and cartage.
If this sales agreement is not “bona fide,” but merely
entered into as a subterfuge to evade full payment of
the tax, then the tax should be computed on the net
price f. o. b. works at which the carbon black is sold
by Witco Chemical Company, less packing, freight and
cartage. Art. 7047(46), V.C.S.
Yours very truly
APPROVED: ATTORNEYGENERALOFTEXAS
W. V. Gcppert
Assistant
WVG/JCP