Hun. Robert S. Calvert

Comptroller of Public Accounts Capitol Station Austin, Texas Opinion No. S-128

DeAr Mr. Calvert: Re: Applicability of the State Prize and Award Tax tothe “What’s My Name” conGest. YOUrequest the opinion of this office on the question contained inyour letter,of,May 3, 1954, and supplement thereto dated June 2, 1954, which respectively are as follows:

“TheeWaples-Platter Company of Fort .Worth, ,Texas; recently held a **contest** known as ‘What’s My Name’

. Inorder to participate inthis contest itwas necessary that a person purchase White Swan coffee inorder to obtain the slip contained in each can of coffee, which slip had to accompany each entry blank. The winners were awarded various prizes. I called onthese people for the State Prize &Award tax as levied byArticle ,7047f. The Waples-Platter ,Company contends that the tax did not accrue as totax these prizes and awards would be aburden in Interstate Commerce.

“Attached is a letter from this Firm outlining their r,easons for believing the tax did not apply on the ‘What’s My Name’ contest. Also attached is a list showing the medium used inadvertising this contest. Iwill appreciate your opinion as .towhether or not the State Prize &,Award tax accrued on the prizes given in connection with this contest. To my knowledge there is no litigation pending that would have any bearing on this question.”

“Iwish to supplement my request for an opinion dated May 3, 1954. This **request** was in connection with the liability of the State Prize & Award ‘Tax on awards given by the Waples-Flatter Company of Fort Worth, Texas, ina contest known as *What’s My Name.”

“The contestants in the contest purchased the White Swarrcoffee, a product ofWaples-Flatter Company, from retail **outlets.** The retail outlets inturn had purchased the coffee from Waples-Flatter Company, ,Would the customers of the retail outlets be considered as patrons ofWaplesPlatter Company?.-

Hon. Robert S. Calvert, page 2 (S-128)

“Your opinion on this additional question to my previous **request** of May 3will be appreciated.?

Inorder to answer your question as to the liability of WaplesPlatter Company of Fort Worth for the State Prize Tax imposed by Article 7047f, Vernon’s Civil Statutes, **we must**  answer two questions. First, is the incidence of this tax violation ofthe commerce **clause** of the Federal Constitution? Second, are the participants inthe contest “What’s My Name,” sponsored by Waples-Platter, patrons ofthat business enterprise within the purview ofthe taxing statute7 We shall answer these questions inthe order inwhich we have stated them.

The advertising of this contest by Waples-Platter was primarily through the medium of radio, television and newspaper advertisements Concededly, some of these broadcasts and newspapers r,eached beyond State boundaries. This fact, however, does nat compel the conclusion that this tax is laid upon inters,tate commerce. The tax is not for the privilege ofadvertising the contest by means of radio, television andnewspaper advertisements, but for the privilege of awarding the prizes. Ifthe tax was upon the privilege of using these mediums in advertising the contest, then interstate commerce might be involved. The incidence ofthe tax is upon the awarding ofthe prizes to the successful participants, which is purely a local incidence taking place atFort Worth and within the State. We therefore conclude that the awarding ofthe prizes by Wapies-Platter in the manner present here innoway contravenes the commerce clause ofthe Federal Constitution.

Passing now to the second question as towhether the participants inthe contest are patrons Of Waples-Platter, it is necessary to determine the legislative intent inthe use ofthe word “patrons” inthe taxing statute. This **statute** reads inpart as follows:

“(a) Every person, firm or corporation conducting a theatre, place of amusement, or any business enterprise in connection with the operation of which a prize in theform of money or something ofvalue is offered or given to one or **more** patrons of such theatre, place ofamusement, or busi- .ness enterprise, and not given toall patrons thereof paying the same charge for any certain service, commodity, or entertainment, shall make averified monthly report on the twenty-fifth day of each month tothe Comptroller of **Public** Accounts of the State of Texas, showing the amount of money so given in prizes, and the value of all prizes or awards so given in connection with such business during the next preceding month.

“(b) There is hereby levied a tax equal to twenty per cent (20%) ofthe value of all such money, prizes, and awards given inconnection with th.eoperation of each and all of the foregoing business enterprises, and at the time

,,.
Hon. Robert S. Calvert, page 3 (S-128)

of making the report to the Comptroller of Public Accounts, the owner or operator of any such business shall pay to the State Treasurer such tax upon the total amount of money, prizes, and awards so given during the next preceding month.

. . ,* (Emphasis added.)

The statute does not define the word “patrons,” hence we may look to the generally accepted meaning of this word as commonly used. Webster’s New International Dictionary, among other connotations ofthe word patron, defines it inthis language: ‘patron - one who supports a commercial enterprise.”

Itseems quite obvious to us that the participants in the contest in making purchases ofWhite Swan Coffee which, as we understand, is exclusively processed by Waples-Flatter, lend support toWaplesPlatter, thebusiness enterprise which awards the prizes, All participants inthe contest, whether successful or unsuccessful, lend support’to Wbples-Platter, the business enterprise, in making purchases ofWhite Swan Coffee. A participant, in ordqr toqualify for the contest, must purchase a can ofWhite Swan Coffee inorder to obtain the entry blank necessary for entering the contest. Itis not an important factor that the selection of successful contestants is entrusted by Waples-Flatter to a professional organization in Chicago which specializes in selecting successful contestants such as involved here.

You are therefore advised that from the information submitted byyou, upon which this opinion is based, Waples-Platter Company is subject to and should pay the prize tax imposed by this statute upon the value of the prizes. SUMMARY

A bus.iness enterprise awarding prizes inTexas to successful contestants, who are patrons of such business enterprise, is subject to the State Prize 81Award tax imposed byArticle 7047f, V.C.S. Even though the contest is open to residents of other States and is advertised through advertising mediums located in other States, the imposition of the tax by the State of Texas in these circumstances is not an unlawful burden on interstate comme~rce inviolation of theFederal Constitution.

Purchasers of aproduct through retail outlets are

‘patrons” of the man~ufacturer or processor of the product within the meaning of that term inArticle 7047f. APPROVED BY: W. V. Geppert Taxation Division JohnAtchison Reviewer Yo,urs very truly, JOHN BEN SHEPPERD

BYAttogiJjjlJ

. . AssistantHon. Robert S. Calvert, page 4 (S-128)

Mary K. Wall Reviewer Robert S. Trotti First Assistant John Ben Shepperd Attorney GeneTal