September 2, 1959

Honorable Roberts. Calvert OPINION NO.w-694 Comptroller of Public Accounts Austin, Te,xas Re: Correct definition of "Articles made of precious metals" and proper valuation of suchmetals and "precious or semi-precious stones"

Dear Mr. Calvert: for purpose of tax imposed by Art. **20.06** a, H.B. 11, 3rd C.S. 56th Leg. 'You'have.posed.severalquestions, regardingArt. **20.06 3**  **-ZL** of H.B. 11,.3rd, C.S., 56th Leg.,'whichis quoted as follows:'

'Precious or semi-preciousstones; all articles made of fur on the hide or pelt; articles made of precious metals. There is hereby levied and shallbe imposed upon the sale,.distributionor use In this State on al1 articles commonly or commer?lallyknown as lpreciousor semi-precious stones'; all articlesmade of fur on the hide or pelt; articles made of preciousmetals; having a value in excess of Twenty-five excise'tax equivalent to three the retail price forwhich any sold."
You specificallyask: 1. Is the tax on preciousmetals limited to metals so defined in the trade or industry, I.e., gold, silver, platinum, and all metals having a comparable or higher value? 2. Does this mean that the tax shallbe levied only upon pure gold or pure silver? 24 karats, Gold Is composed of

Anything less than this is c~onsldered an alloy. The Federal Trade Commissionprohibits the use of the unqualified gold in advertisingunless it is 24 karats.Hon. Robert S. Calvert, page 2 (w-694)

3. If QuestionNo. 1 is decided in favor of taxlng'~ other than the precious metals, what will be the dividing line? 10 karat gold which is less than one-half? 14 karatswhich Is barelymore than onehalf? 4. Are articlesmade of non-preciousmetal but coatedwith a precious metal to be taxed? 5. Is sterling silver to be taxed? Silver Is composed of 1000 parts fine. Sterling silver Is .925 fine and Is defined as an alloy of silverby all standards, Including federal law (U.S. Stamping Law, Webster's Dictionary,etc). 6. Whe~n

anarticle Ismade of part pure gold or pure silver, and the ~::lue of the pure gold or pure silver. is lens t.'>;;;:

$25>butthe aggregate value of the article is more than 25, is this Item to be taxed? Example:a cha~rm made of pure gold worth less than $25 but containing a semi-preciousstoneworth less than $25, the aggregate value being $40. ~Whattax, If any? Another example would be where~ ah Individualhas a charm and purchases three separate 'stones to'be attached thereto. The aggregatevalue'of 'thestones,beingover $25but each stone.havinga value of less than $25.
"It Is interesting to note that the Legislature in drawing this Sectionprovided 'fora tax on articles commonly or commerciallyknown as precious or semi-precious stonesbut Imposed a tax on articlesmade of precloubmetals. This implies that the tax on p~reclous orseml-precious stones is a tax on the stones themselvesand not to the articles to which they are attached. The question is, therefore,whether or not a watch which is made of stainless steel,having 12 diamonds each of a value of less than $25, that is Itselfworth $250, shall be taxed. If so, what portion?" >, QuestionsRelating to "PreciousMetals"
In construingcivil statutory enactments, "The ordinary signification shall be applied to words, exceptwords of art or words connectedwlth'aparticular trade or subjectmatter, when they .shall

have the significanceattached to them by experts In such art or trade, with reference to the subject matter." (Bnphaslsadded) particle10, Sec. 1, V.A.C.S.Hon. Robert S. Calvert, page **3** (w-694)

The meaning attributed t,o"preciousmetals" by the trade or industry-accordswlth'the commonor ordinsry meaning of the 'term,as reflectedby Webster'snew International Dictionary (2nd Rd.):

"Precious metal&: The uncommon and highly valuable metals, esp. gold, silverand patinum."

The Federal government levies a retailers excise tax bn articlesmade of or ornamented,mounted or fitted with reciousmetals or imitationsthereof. **26** U.S.C.A. Sec. 001 (I.R.C. 1554). In reference to the tax, the following departmental constructionhas been issued:

"The term preciousmetals~includespatinum, gold, silver, and othermetals of similar or higher' value; The term 'Imitationsthereof" includesplatings and alloys of suchmetals." Title **26** c.F.R., added.) Sec. 320.33 (l&4 Rd.) (emphasis

It Is apparent that the term "preciousmetals" has a, clearly defined and well establishedmeaning. Had the'legislature intended to extend the scope of the tax beyond such metals, it could easilyhave used language appropriate to the purpose. The same is true regardingplating. The tax is imposed on articlesmade of precious metals; such language negatives any Intent to tax articles "coated"with or made "In part" of preciousmetals. Questions concerning whether a revenuemeasure extends to particular objects are to be strictlv construed aaainst the tax and in favor of the taxConstruction, 17~S.W. 2d 160 (Tex. Public Service Co. **7;** Sutherland, Ch. b7, Sec. 6701.
From the foregoingdiscussion, it is apparent that questions No. 1 and 2 must be answered in the affirmative and questions 4 & **5** answered in the negative; having affirmatively answered questions 1 & 2, it is unnecessary to answer question **3.** Questions concerningvaluation
Your fifth questionpresentsproblems concerning proper valuation of certain articles.,7.?

. : ; .,:2d Hon. Robert S. Calvert, page 4 (W-694)

Article 20.06 f of H.B. 11 imposes an excise tax On.the sale,~ distribution or use of "all artlcles commonly or corn:' mercially'knownas 'preciousor semi-precious stones'...having a value in excess of Twenty-five Dollars.

. . ."(emphasis added). Again, had the legislature intended to levy the tax upon the sale or use of stoneshaving an aggregate value in excess of $25, or had it intended to levy the tax on articles containing or made of stoneshaving an aggregate value in excess in excess of $25,'itwould have employed languageappropriate to such purpose. Since the leglslature failed to employ such language,but Instead used language clearly evidencing the contrary, It follows, as you have correctly stated, that "the tax on precious or semlprecious stones is a tax on the stones themselves and not the articles to.which they are attached." Consequently the answers to the questions concerning such stones are apparent. Where an individualpurchases stones to be attached to a charm, the tax is on any stonehaving a value in excess of $25, but is not levied on the stoneshaving less than such value. Likewise, no tax is imposed on a watch containing 12 stones each of a value less than $25;however, if any such stone had a value In excess of $25,, the tax would apply to such stone. The tax on preciousmetals Is on articles made cf preciousmetals. Since the legislaturedid not levy the tax on articlesmade "inpart of" or "coated or plated with" precious metals,,it Is obvious that before an article Is taxable It must be made principally of precious metals. Consequently, if an article 1s maae OS purergold and pure silver, the tax Is on the aggregate value. But, where-e article is made of gold or silverplated non-preciousmetal, or gold or silver alloy, no tax attaches regardless of the aggregate value of the article or the Individualvalue of the gold and/or silver used in such article. But the addition of another item such as a diamond to a pure gold ring does not defeat the tax. ~SUMMARY

The,term "articlesmade of precious~metals" as used In Art. 56th Leg., 20.06 + of H.B. 11, 3rd C.S.

means articles made of gold, silver, platinum or:metals of similar or higher value of combinationsthereof, and does not include articlesplated with suchmetals or alloys, I.e., combinationswith non-preciousmetals.Hon. Robert S. Calvert, page 5 

### (w-694)

precious or semi-precious The tax Imposed on stones is levied on individual stones of a value In excess of $25.; tax on precious metals Is upon articlesmade of such metals, or combinat3.ons

thereof,having a value in excess of $25.
Yours truly
WILL WILSON Attorney General of Texas

,Assistarit

Attorney General
OPINION COMMITTEE:
Geo. P. Blackburn, Chairman ‘3. C. pads, Jr.
James R. Irion III Marvin Thomas
REVIEWED FCB THE ATTORNEY.GERERAL ,~ By: W. V. Geppert