Case Information
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OFFICE OF THE ATTORNEY GENERAL OF TEXAS
AUSTIN
GERALD C. MANN ATTORNEY GENERAL
Honorable Gee. H. Sheppard Comptroller of Public Accounts Austin, Texas Dear Sir: Opinion No. 0-5311 He: Does the transportation of kerosene distillate and notog fuel constitute the class of oil pipeline companies as defined in Chapter 4, Title 122, wheh amendments, Tax on Intensible Assets?
Your request for an opinion on the above matter has been received and carefully considered. We quote from your request as follows: "He: Stratton Pipe Line Corporation "The above corporation was incorporated in Texas August 30, 1940. They are empowered to operate as an oil pipeline company under Chapter 15, Title 32, R. C. S. 1925. Their principal business is the transportation of distillate and/or hydroearbone extracted from natural gas. They operate a dodbly line of approximately 418 miles from the field to their terminal at Corpus Christi, Texas; one line being and one line . A copy of their letter is herewith enclosed for your information. "They have filed a report, under protest, and state that they are not and have not at any time engaged in the transportation of oil. They transport the motor fuel and kerosene distillate
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Honorable Geo. H. Sheppard, Page 2
from four natural gas reeyelins plants. The pro- dueers of these produsts pay the tax as provided for in Article 7047 B and the residue is retumed by the reoyoling method to the sime gas producing formation underlying the land from which the gas is produced. Juring the year 1942, they trans ported barrels on which they charged tariffs in the amount of . This plpoline has all the aspects of an oil pipeline, in as much as it is separately incorporated. It has a superintendent, and pays federal transportation and income taxes on its net income. "The main problem here, is whethor or not the transportation of kerodene, distillate and motor fuel constitutes the class of oil pipeline com-panies, as defined in Chapter 4, Title 122, with Amendments, 'Tax on Intangible Assets. . . ."
In addition to the facts stated by you, we have aheoked the oharter of this oorporation in the offiee of the leoretary of state and find the purpose thereof, as stated in said oharter, to be as follows: "2. The purpose for which it is formed is to store, transport, buy and sell oil, gas, salt, brine and other mineral solutions, ineluding the privileges and powers granted by and authorized in Chapter 15, Title 32, Revised Civil itetutes of Texas, which is hereby adopted."
You state that the producers of the produsts traneported by this company have paid the taxes provided for in Article 7047b. This article provides for an occupation tax on producers of natural gas and, as amended by the Aots of the 47 th Leghalature in 1941, page 269, Chapter 184, Article II, Section 1, said article provides that: "Where gas is processed for its liquid hydroo carbon content and residue gas is returned by reoyoling methods to the same gas-producing formation underlying the land from which the gas is produced, the taxable value of such gas ahall be three-fifths (3/5) of the gross value of all products extracted, separated and saved from such gas."
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We also understand that the producers of the products transported by this company have not paid the taxes provided for in Article 7057a, which levies an occupation tax on oil produced within this state, Section 2 of which was amended by the Acts of the 47th Legislature in 1941, page 269, Chapter 184, Article I, Section 1.
It is the opinion of this department that said company is not subject to the provisions of Chapter 4, Title 122, of the Revised Civil Statutes of Texas, and in support of this conclusion we direct your attention to the following:
The statutes under which this company was incorporated contain the following provisions: Article 1495 is in part as follows:
"This Chapter embraces corporations created for the purpose of storing, transporting, buying and selling oil, gas, salt brine and other mineral solutions and liquified minerals; and the production of oil and gas. (As amended Acts 1935, 44th Leg., p. 296, ch. 110, 2.1.)"
Article 1496 is in part as follows:
"Such corporations shall have power:
"1. To store and transport oil, gas, brine and other mineral solutions and liquified minerals, and to make reasonable charges therefor. (As amended Acts 1935, 44th Leg., p. 296, ch. 110, 3.)"
Article 7105 of said Chapter 4, Title 122, as amended by the 47th Legislature, 1941, page 269, Chapter 184, Article XIII, Section 1, in which amendment no change was made affecting the matter here under consideration, is in part as follows:
"Each incorporated... oil pipe line company, and all common carrier pipe line companies of every character whatsoever, engaged in the transportation of oil, doing business wholly or
*4 Honerable Geo. F. Sheppard, Page 4 in part within this state . . . and every other individual, company, cor poration, or association doing business of the same oharecter in this state, in addition to the ad valorem tazes on tangible properties . . . shall pay an annual tax to the State, beginning with the first day of January of each year, on their intangible assets and property, and local taxes thereon to the counties in which its business is carried on."
Aytiole 7057a, Section 1(5), of the Hevised Civil Statutes, defines oil as follows: " (5). "Oil" shall mean oruice oil, or other oil taken from the earth, regardless of gravity of the oil."
So far as we have been able to aaoortuin oil is considered to be a different mineral product from gas, or the 11 quid hydrosarbonz produced from gas, in fact Article 7047b of the Hevined Givil atatutes, hereinabove referred to, contains a proviaion that "all liquid hydrooarbona that are recovered from gas by means of a separator or by other non-ascountable methods shall be taxed at the same rate as oil as levied by Aytiole I of this act", thereby clearly showing that products of gas are not oil, at least they are no so considered for tax purposes.
In order to bring this company within the terms of Chapter 4, Title 122, it must be held that it is an "incorporated oil pipeline oonpany" engaged in the tranepartation of oil, or that it is a "common oarrler pipeline oompeny" of some ohareoter engaged in the tranepartation of oil, or that it is "doing business" in this state of the "same oharacter" as one or the other of aait nonoerna.
The intangible tax law was originally passed in 1905. It was anended in 1907 and again in 1933. The 1933 aneondment imorited for the first ti:e the words: "oil pipeline oonpany and all oommon oarrler pipeline oompanies of every ohareoter whatsoever, engaged in the traneportation of oil". This aneondment of 1933 expressed its iegialative intent and purpose in the following provision: "The purpose hereof is to plase all oommon oarrler oil pipe line oompanies under all of the
*5 Fonorable Geo. II. Sheppard, Page 5 provisions of the Intangible Asset Tax laws of this State; and, for the purpose of plecing under said not all taxpayers similarly situated, and to bring about a better classification and a wider distribution of the burdens of taxation, as far as this class of taxpayers is concerned."
In dealing with this statute in a case wherein it was necessary to construe its meaning, the Tastland Court of Civil Appeals made the following holding in the case of Col. Tex Refining Company v. Hart et al., 144 S. :.. (2) 909, writ refused: "In this language the purpose of the not is clearly expressed. It was designed to extend the terms of the intengible tax measure to a strong and growing class of taxpayers who had theretofore escaped this particular type of tax. This class was made up of (incorporated) 'pipe line companies', 'common carrier oil pipe line companies of every character whatsoever' and 'all taxpayers similarly situated', and in ac extending it, it was designed to 'bring about a better classification and a wider distribution of the burdens of taxation, as far as this class of taxpayers is concerned'. "Naturally a common carrier oil pipe line company would carry on the business of transporting oil by pipe lines as its business and presumptively for hire. It would be a revenue producing oonoorn within itself, and as such would readily fall within the class of taxpayers presumably subject to the intangible tax or sought to be subjected to thet tax. "Upon the same principle and for the same reasons, an incorporated oil pipe line ompany would be carrying on the business of transporting oll by pipe line. The business would have as its object a profit or income for the owner, and that would be true whether it was a private or public carrier. The very purpose of its existence and nature of its business at once suggest it was similar in situation (as a subject for taxation) to thet of
*6 the common carrier pipe line company, and, therefore, a proper subject for the application of the intangible tax measure which the Leqielature was seeking to extend to taxpayers 'similarly situated'. It would, therefore, seel logical not only to bring such compenies within the epread of this tax measure, but also to extend the same and distribute it a burden to " " every other individual, company, corporation or association doing business of the same oharacter in this itate'. Art. 7105 . "The section of the atatute just quoted designates a class of persons which would logically fall within the terms of the intangible tax mea sure as definitely as the first two classes disoussed. The provision leaves no doubt as to who would be embraced in its terms. It specifically mentions 'every other individual, company, corpor ation' doing business of the same oharacter, referring, of course, to incerporated oil pipe line compenies and common carrier pipe line companies engaged in the trensportation of oil in this state. In the first place, every such 'individual, cor poration,' eto., would have to be engaged in busi. neas within the itate and that business would have to be of the same oharacter as that being done by the incorporated pipe line company, carrier, eto., that is, engaged in the trensportation of oil as a business, and presumptively for hire. . . ."
In holding that the Col-Yes Refining Compeny was not an "oil pipeline company", or a corporation doing busi. ness of the "same oharacter", within the meaning of Artioi. 7105, and, therefore, not subject to the tax provided for therein, said Eastland Court of Jivil Appeals called attena tion to the fact that "at the tine (1933) the words 'each * * * oil pipe line company " " of every oharacter whatsoever, engaged in the transportation of oil' were inserted in the intangible tax law, and Art. 7105 took its present form, Art. 6018, R. C. S. 1525, was thea a part of our general atitutes and had been alne 1917." A reference to said Article 6018 above that pipeline carriers which are therein deoiered to be ocmeon carriera are such as transport "orude petroleum" ouly, therefore, the company here under consideration could not possibly come under the terms "common carrier
*7 Honorable Geo. H. Sheppard, Page 7 pipeline company", as set out in said Article 7105. Neither could it come under the term "oil pipeline company" since it does not transport "oil".
We also direct your attention to the fact that the opinion in the case of Col-Tex Refling Compeny v. Hart et al., supra, was handed down on October 11, 1940, and rehearing denied on November 8, 1940, and that thereafter the 47th Legislatute amended Article 7105 in 1941, but that it made no change in said article insofar as the matter here under consideration is concerned. By this amendment said Intangible Tex law was made to apply to each "motor bus company", as defined in the Acts of the Legislature therein referred to, and each "common carrier motor carrier" operating under authority of the Railroad Commission, but said law was not amended so as to include the transportation of products of natural gas such as are here being considered. This evidently was an approval of, or an acquiescence in, by the Legislature of the holding in said opinion, as well as the construction placed upon said law by your department in accepting payment of taxes under Article 7047b, rather than under Article 7057a, the general rule governing such situation being set out in 39 Tex. Jur., sec. 132, pp. 248-251, in the following language: "Doubtless the Legislature, in enacting, amending or repealing a statute, may be presumed to have known facts of common notoriety in the State, as well as any circumstances or conditions affecting or relating to the particular enactment. And it may be presumed that the Legislature 'know', 'had in mind', or 'was familiar with' the 'law of the land', that is, the Constitution, the common law, existing statutes and the effect thereof; also prior decisions of the courts, -at least those of last resort, -pertaining to the subject-matter. "The Legislature is presumed to have understood the meaning of language that it employed, and to have known the construction placed upon the same or a similar statute by the appellate courts and by executive or administrative officers. And it may be presumed, in a proper case, that the Legislature has acquiesced in the construction of a particular set, or that if it had not been satisfied with such construction it would have changed the verbige of the law so as to show a contrary intention.
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Honorable Geo. H. Sheppard, Page 8
This company not being an oil pipeline company, or a common carrier pipeline company, engaged in the transportation of oil, and not being a company engaged in dolog business of the same character, as set forth and described in said artiole 7105, we think it is clear that it does not come within the olans of oil pipeline companies as defined in Chapter 4, Title 122, and amendments.
Trusting that this satisfactorily answers your inquiry, we remain
Very truly yours ATTORNEY GAMERAL OF TEXAS
By Jas. 2r. Bassett Jas. M. Bassett Assistant