RNEY GENERAL 

CD EXAS 

Honorable Robert S. Calvert 

Comptroller of Public Accounts 

Capitol Building 

Austin, Texas 

Opinion No. M-83 

Re: Whether corporations created 

for the purpose of providing 

TV cable services are required to pay the gross receipts 

tax provided by Article 11.02, 

Title 122A, Taxation-General, 

Dear Mr. Calvert: V.C.S. 

You have requested the opinion of this Office on the 

above captioned question. Section (1) of Article 11.02, Title 

122A, Taxation-General, Vernon's Civil Statutes reads, in part, 

as follows: 

"(1) Each individual, company, corporation, or association owning, operating, managing 

or controlling any telegraph lines in this State, 

or owning, operating, controlling or managing 

what is known as wireless telegraph stations, 

for the transmission of messages or aerograms, 

and charging for the transmission of such messages or aerograms, shall make quarterly, on the 

first days of January, April, July and October 

of each year, a report to the Comptroller, under 

oath of the individual, or of the president, 

treasurer, or superintendent of such company, 

corporation, or association, showing the gross 

amount received from all business within this 

State during the preceding quarter, in the payment of telegraph or aerogram charges, including the amount received on full rate messages and 

aerograms, and half rate messages and aerograms, 

and from the lease or use of any wires or equipment within the State during said quarter, . . . 

Said individuals, companies, corporations, and 

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Honorable Robert S. Calvert, page 2 (M-83) 

associations, at the time of making said report, 

shall pay to the State Treasurer, and there is 

hereby levied upon said individuals, companies, 

corporations, and associations, an occupation 

tax for the quarter beginning on said date, -a.' 

We think that a determination of whether corporations which 

provide TV cable service are subject to the provisions of Article 

11.02 requires a detailed examination of the facts. The following 

is an excerpt from one of the briefs submitted in connection with 

this request. 

'IE. Stratford Smith' in his March 7, 1967, 

position paper entitled Legal Status of Communit 

Antenna Television Systems Undmeral -----+ and S ate 

ming Statutes, writeszomn this connection: 

1) t 

. . . 

"'A community antenna television system is a 

facility utilizing a receiving antenna or antennas, 

connection wire, cable or relay facilities and associated equipment, for the reception by subscribing members of the public of the signals of one or 

more broadcast stations. 

"A community antenna is, as the term implies, 

a master television receiving antenna erected and 

designed to service a community, or such part thereof as is practical to serve, or as may have a requirement for the service. It is technically and 

functionally analogous to the master antenna systems 

installed in apartment houses and hotels to permit 

service to part or all of the apartments, rooms, or 

suites by means of a single antenna system. Generally, community antennas are found in areas where, 

because of the interaction of topographic or geographic or structural conditions, and technological 

and economic factors, reception of television signals 

1. Former executive secretary and general counsel of the 

National Community Television Association, Inc., and 

now senior partner, Smith, Pepper, Shack & L'Heureux, 

1101 17th St., N.W., Washington, D.C. 20036. 

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Honorable Robert S. Calvert, page 3 (M-83) 

by conventional antennas is either: (1) nonexistent, (2) of unsatisfactory quality, or 

(3) possible only with the aid of costly, tall 

and sometimes unsightly roof-top antennas or by 

means of antennas placed on high elevations or 

other suitable locations. For example, distance 

from originating stations, intervening obstacles 

such as mountains or high buildings, poor ground 

conductivity or seasonal and other changes in 

atmospheric conditions can often impair or make 

impossible good television reception. Where such 

conditions prevail a master community antenna is 

erected at a suitable loca,tion, usually on a high 

elevation or the top of a very tall tower erected 

for that purpose, where reception of the signals 

of the desired stations is available in sufficient 

field strength to produce good quality pictures. 

“A coaxial cable or other type of antenna 

lead or run extends from the antenna to the’area 

of community to be served where connection is made 

with coaxial or other wire distribution lines 

which, in turn, serve the individual subscriber 

“house drops. ’ The antenna lead and distribution 

cable facilities are generally supported on electric power or telephone utility poles for which 

rentals are paid under contract with those companics, In a few cases these facilities are placed 

underground or on privately owned poles. Easements 

and right-of-way to use streets and alleys are 

generally obtained from the municipal governments. 

In a limited number of cases these are exclusive 

rights, but for the most part are not. 

“‘Describing the technical function of a 

community antenna system generally, the signals 

received from the distant stations, as well as 

from local stations in many instances, are received at the master antenna and passed through 

amplifying equipment at that point and at appropriate locations along the antenna run and distribution trunks. This procedure is employed to maintain adequate signal strength for the signals to 

pass through the system to the television receivers 

in the home, and to produce acceptable or better 

pictures on those receivers. . . . 

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Honorable Robert S. Calvert, page 4 (~-83) 

11 I 

0.. 

“‘Community antennas are capable of receiving the signals of more than one station 

simultaneously. As a general rule, antenna 

sites are selected where the maximum number of 

nonduplicating and noninterfering television 

channels can be received in sufficient strength 

and quality to produce acceptable pictures. The 

antennas are designed and oriented, when installed, to receive the desired signals and to reject, 

to the extent possible, the undesired channels. 

Electrical interference can be caused by the channels on the cable radiating outside of the confines of the cable into the same oradjacent channels which are being received directly off-theair. In order to minimize such interference and 

permit the compatible operation of CATV systems 

with direct off-the-air reception, the Federal 

Communications Commission has promulgated specific rules and regulations applicable ,to community antenna television systems to limit such “incidental radiation.” Thus, by Order adopted July 11, 

1956, the Commission adopted Subpart D of Part 15 

of its Rules and Regulations applicable to “Incidental and Restricted Radiation Devices,” entitled 

“Community Antenna Television Systems. ‘I ” 

.Let us examine the plain language of Article 11.02. The 

specific individuals, companies, corporations or associations 

subject to this tax are those “owning, operating, managing or 

controlling any telegraph lines in this State, or owning, operating, controlling or managing wha,t is known as wireless tele- 

~~~p~~~i,“h~u~,‘~~~~~~si~~~,“~r~~~~~~~~~~~do~o~e~~~ 

purpose of providing TV cable services are not providing the services above quoted. Rather, the occupation in which such corporations are engaged is an adjunct to the occupation of television 

corporations operating television stations. Therefore, under the 

plain and unambiguous language of the statute, TV cable service 

corporations are not subject to the occupation tax imposed by Article 11.02. 

If we be in error in so grounding our holding, and if the 

statute may properly be subject to construction, the law has long 

been settled in this State that ambiguous tax statutes must be 

373- 
Honorable Robert S. Calvert, page 5 (M-83) 

strictly construed in favor of the taxpayer and that the courts 

will not extend the scope of a taxin 

54 Tex.Jur.2d 166, 167, Taxation, B Jf 

statute by implication. 

1. The authorities in support of the foregoing propositions are legion. Western Union 

Tel. Co. v. State of Texas, 62 Tex. 630 (1884); Philtex Chemical 

Co. v. Sheppard, 219 S.W.2d 1010 (Tex.Civ.App. 199 error ref., 

n.r.e.)* Calvert v. 

App. l&l, error re 

346 S.W.2d 420 (Tex.Civ. 

Comm. v. Bass, 137 

Oil & Refining Co., 

n.r.e.). 

We are aware that this Office has held in Opinions C-702 

and C-702-A (1966) tha,t TV cable corporations are within ,the provisions of Article 1416, V.C.S., which authorizes corporations created for the purpose of constructing and maintaining magnetic telegraph lines to set their poles, wires and other fixtures across 

public roads, streets and waters of this State in such manner as 

not ,to incommode the public. Opinion C-702-A expressly modified 

C-702 in so far as it contained statements to the effect that TV 

cable corporations are public utilities, but adhered to the result 

reached in C-702 on the ground that such corporations are subject 

to regulation and that this regulation was limited to the exercise 

of the police power of the State. 

Various cases are ci,ted in C-702 in which courts have held 

that television transmission is an integral part of the telephone 

and telegraph business regardless of the type of system used, i.e., 

coaxial cable or ordinary telephone wires. These cases were concerned 2ither with the jurisdiction of a State Public Service Commission or with eminent domain problems.3 

Whether a particular State Public Service Commission has 

jurisdiction of regulating the transmission of television broadcasts by wire depends, of course, upon the pcwer of regulation 

granted the Public Service Commission under the State laws. 

The statutes authorizing the extent of the jurisdiction of 

the New York Public Service Commission at the time of the decision 

2. Independent Theatre Owners v. Arkansas Public Service 

a., 235 Ark. bbti, 361 S.W.2d 642 (1962). 

3. Ohio Tel. & Tel. Co. v. Steen, 85 N.E.2d 579 (1949); 

Ball v. American Telephone and Telegraph Co., 227 Miss. 

218, 86 So.2d 42 (1956). 

-374- 
Honorable Robert S. Calvert, page 6 (M- 83) 

in Cerrachi Television Corp. v. Public Service Com'n, 267 N.Y.S. 

2d 969 (Sup.Ct., Albany County, New York, 1960), authorized the 

regulation by the Commission of the business of affording telephonic communication for hire. The court held that a telephone 

company's rental of pole space to the television corporation which 

was engaged in the business of transmitting TV broadcasts over 

wires to customers was not part of the public service performed by 

the company in the business of telephonic communication and, therefore, was not subject to regulation by the Public Service Commission. We quote the following excerpt from pages 972-975 of the 

opinion: 

"The business of the petitioner is of recent origin arising from the rapid expansion of 

the television industry. Patently the picking 

off-the-air standard broadcasts of commercial 

television stations and by amplification transmitting 'the same over wires directly to the household patron is not in any sense telephonic communication. Basically, then, the petitioner's 

business is not 6ubjec.t to the jurisdiction of the 

commission as the statutes are now written. Whether 

such an industry should be regulated is for the 

legislature and not for the courts. 

"The petitioner argues that since the company's 

poles are, by statutory definition, (Public Service 

Law, fi 2, sub. l8), a part of the company's 'telephone line' and since the commission has regulatory 

jurisdiction over all telephone corporations and 

their equipment, the poles and the use of the poles 

by the attachment of the petitioner's facilities are 

subject to the commission's regulation. The petitioner 

argues that since the poles and the attachments fall 

within the regulatory sphere of the commission that 

the commission should assume to regulate the charges 

for the attachment of petitioner's wires thereto. 

"The rental of the pole space by the company 

to the petitioner is not part of the public service 

performed by the company in the business of telephonic 

communication. (Matter of Gamewell Co. v. Public Service Commission of State of N.Y., 8 A.D.2d 232, 188 

N.Y.S.2d 107, leave to appeal denied 7 N.Y.2d 706, 195 

N.Y.s.2d 1027, 162 N.R.2d 754). such a non-utility 

activity of a telephone company is not subject to regulation by the commission. (Matter of Solomon v. Public 

-375.. 
Honorable Robert S. Calvert, page 7 (M-83) 

Service Comm. supra. Matter of National Merchandising Corp., supra j . " 

It is evident that entirely different rules of construction are applicable to statutes pertaining to the regulation of 

television service corporations and their powers of eminent domain, and that these rules cannot'be applied when a tax statute 

is being construed. 

The source of Article 11.02 was Article 7059, V.C.S. Article 7059 was last amended by Acts 1945, 49th Leg., p. 471, ch. 

299, 13 1, and was brought forward unchanged as Article 11.02 in 

the recodification of the tax laws enacted by Acts 1959, 56th Leg., 

3rd C.S.; p, 187, 'ch. 1. The 1959 codification is carried in 2OA, 

Title 122A, Tax.-Gen., V.C.S. Since TV cable corporations were in 

existence'at the time of the last amendment of Article 7059 and at 

the time ~of its being carried forward into Title 122A, it must be 

assumed that, had the Legislature intended to tax such corporations, 

it would have done so. Section 3 of Title 122A, enacted at the 

time of the codification of the taxa',tion statutes, reads as follows: 

"This act shall be construed to make a substantive change in the prior-law only where the 

language of this act manifests a clear intent to 

make such a change." 

In Humble Oil & Refining Co. v. Calvert, 10 Tex.Sup.Ct. 

Journal No. 23, p. 254 (March 15, 1967) the court was concerned 

with the question of whether the Legisliture by enacting Article 

12.02, Title 122A, Tax.-Gen., V.C.S., in 1959 intended to change the 

corporate franchise tax allocation formula with respect to receipts 

from intangibles. The Comptroller’s contention was tha,t Article 

12.02 not only codified Article 7084, but also amended it. The 

court refused ,to sustain this contention. In the course of the opinion the court pointed out that the only difference between Article 

7084 and Article 12.02 was the addition of four subsections which 

specifically allocated certain items to *business done in ~Texas.” 

The court held thaf'these','subsections were'ihsufficient to constiture an amendment as claimed and did not effectuate a change in 

the ambiguous phrase “business done in Texas.” For over forty years 

the Texas -,rule for determining which receipts from intangibles 

should be al-located in Texas had been the “location of payor” test. 

‘The court deemed it of importance that the Comptioller had’ fiist 

asserted the ‘loouunerclal domiciloH test dm 1963,. At page 257 .of 

the opinion, the court quoted Section 3 of Title 122A, above quoted, 

and concluded that in the absence of specific statutory language 

-376- 
Honorable Robert S. Calvert, page 8 (M-83) 

specifying "commercial domicile," the Comptroller was at,tempting~to look outside the statute and outside the common law. 

At page 257, the court said: 

"Section 3, supra, forbids the Comptroller to look anywhere except 'the language of this Act,' and any change must 

there be manifested clearly." 

Your departmental construction of Article 7059 prior to 

the 1959 codification did not include TV cable service corporations as being within the provisions of Article 11.02. As aforesaid, the 1959 codifications made no change in Article 7059, nor 

have you changed your construction thereof to this date. It is 

common knowledge that many TV cable service corporations have been 

in existence for a good many years. Therefore, even if we were 

in error in holding that the plain language of Article 11.02 excluded TV cable corporations from the tax therein imposed, Humble 

precludes any other construction. 

SUMMARY 

Corporations created for the purpose of 

providing TV cable services are not required to pay the gross receipts tax provided by Article 11.02, Title 122A, Tax.- 

Gen., V.C.S. 

rs very truly, 

MMP:ms 

General of Texas 

Prepared by Marietta McGregor Payne 

Assistant Attorney General 

APPROVED: 

OPINION COMMITTEE 

Hawthorne Phillips, Chairman 

W. V. Geppert, Co-chairman 

Ralph Rash 

,John Reeves 

J. Arthur Sandlin 

W. E. Allen 

STAFF LEGAL ASSISTANT 

A. J. Carubbi, Jr. 

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