,,..

TEIEATTORNEYGENERAL
OFTEXAS

WILL WILSON
A’XTORNEY GENERAL Ausnni 1s. We
October 6, 1960

HonorableRobert S. Calvert OpinionNo. w-949 Comptroller of Public Accounts Capitol Station Re: Constitutionalityof Austin, Texas occupation tax as levied by Art. 19.01 (8),H.B. 11, 3rd C.S., 56th Leg. Dear Mr. Calvert: (Title,l22-A,R.C.S.)

You have requested that we advise you upon the constitutionality of Art, 19.01 (8),H.B. 11, 3rd C.S., 56th Leg. (Title 122-A,R.C.S.), which reads as follows:

"Nine and Ten Pin Alleys. From every person, firm, association of persons, or corporation,owning or operating for profit every nine or ten pin or other alley, by whatever name called constructedor operated upon the principle of a bowling alley, upon which pins, pegs, balls, rings, hoops, or other devices are used,& where theplayer thereof does not or is not re uireno make aa.Ud=i~-~ causin -+-- an e ec r cal connecmn of a; nature or kind before suchgame m & actually commenced, there shallbe collected an annual tax of Ten Dollars for each track or alley." (EmphasisaidAil;))

We understand that a contentionhas beenmade by certain taxpayers that this article is violative of,Secs. 1 and 2 of Art. VIII, Constitution of Texas,l and that you desire our opinion upon the question so that you can determine a proper assessment of taxes upon this group. Our conclusion is that the questionedprovision is not violative of the cited constitutional limitations. For clarity in discussionWhere set out a brief review of the events culminating in this request:
The emphasizedportion of ,Art.lg.01 (8) above excludes from the tax machines sometimesreferred to as "coin-operated
1Sec. 1: "Taxation shall be equal and uniform.

. . ."
Sec. 2: "Alloccupation taxes shallbe equal and uniform

upon the same class of subjectswithin!,the limits of the authority levying the tax;. a .Honorable Robert S. Calvert, Page 2 OpinionNo. WW-949

bowlingmachines."2 Prior to February of 1958, an occupation tax was levied upon owners of suchmachines under the provisions of Arts. 7047a-2 et seq.,V.C.S., levying a tax on certain coin-operatedmachines. These provisions insofar as here material were carried over substantially intact as Chapter 13 of the new Title 122-A, from which we quote the following definition:
"The term ~skillor pleasure coinoperatedmachines'means every coinoperatedmachine of any kind or character whatsoever,when suchmachine or machines dispense or are used or are capable of being used or operated for amusement or pleasure or when suchmachines are operated for the purpose of dispensing or affording skill or pleasure, or for any otherpurpose other than the dispensing or vending of 'merchandiseor music' or 'service'exclusively,as those terms are defined in this Chapter. The following are expressly includedwithin said term: marble machines, marble tablemachines,marble shooting machines,miniature race trackmachines, miniature footballmachines.miniature golf machines,miniature bowling-machines,and all other coin-

operatedmachines which dispense or afford skill or pleasure." (Bnphasisadded.) Article 13.02 declares the amount of tax to be levied, from which we quote:

"(1).

. . . "(b) A fee of,Sixty Dollars ($60) shall be paid on each 'skillor pleasure coinoperatedmachine' where the coin, fee or token used, or which may be used, in the operationthereof is one of the value in excess of five cents (5qi)or represents a value in excess of five cents (54)."

2These machines are ordinarily from 10 to 20 feet in length. The player deposits a coin, usually a dime, which activates themechanism for play. At the far end of themachine pins are automatically spotted,whi.chthe player attempts to knock down with the small balls provided.. Scoring is by means of an electric scoreboardeither on or near themachines.. -

Honorable Robert S. Calvert, Page 3 OpinionNo. WW-949

On February 10, 1958, a rather cryptic judgmentwas entered by the Justice Court, Precinct 1, Place 1, Dallas County, Texas, in Cause No. 59286, in which one Fred Weeks had been chargedwith displaying a "ShuffleAlley" without a valid license. Apparently the license referred to was that authorized to be issued by the Comptroller'sOffice to evidence pa ent of the coin-operatedmachine tax under the thenArts. 70 7a-2 et seq.,V.C.S. r This judgmentheld the defendantnot guilty of the allegedmisdemeanor "for the reason that,the devices alleged in the complaintswere not in the scope and are not coveredby Article 7047a-2 toArticle 7047a-18,R.C.S., also known as the Texas Coin Operation (sic.)Machine Tax Law, as the offenses alleged do not come under the specifications of the Law being machines and instrumentsnot covered under this Law." Following this statement,a bit of dictum is indulged In, stating that "If any Tax at all is to be collected it shouldbe for an OccupationTax and not under the present Texas Coin OperatedMachine Tax Law." Apparently in observance of this judgment and as a result thereof, owners of suchmachines were, from that time, considered taxableunder the provisions of Art. 7047, Section 36, the predecessor of the presently questionedArt. 19.01(8), which subdivision then read as follows:

"Nine and Ten Pin Alleys. From every person, firm, association of persons, or corporation, owning or operating for profit every nine or ten pin or other alley,by whatever name called, constructedor operated upon the principle of a bowling alley, upon which pins, pegs, balls, rings, hoops or other devices are used, there shallbe collected annual tax of Ten Dollars ($10) for each track or alley, provided, however, that said tax shall not exceed One Hundred Dollars ($100) in any such year. Acts 1917 'p.385; Acts 1943, 48th Leg., p. 654, Ch. 372, & 1." This subdivisionwas expressly repealed by Sec. 7(b) of the new Title 122-A,being replacedby Art. 19.01 (8). Comparing the two provisions it will be seen that they are identical,except that (lj the exclusionary language in questionwas added, and (2) the limitingproviso at the end of the sectionwas removed. Your specific question, reiterated, is whether or not the Insertion of this exclusionaryclause now- ,

Honorable Robert S. Calvert, Page 4 OpinionNo. WW-949

renders theprovision obnoxious to Sees. 1 and 2 of Art. VIII, Constitutionof Texas, and thereforevoid.3
It has long been the settled rule in this State that the Legislature is vested with wide discretion in the classificationof occupations for thepurpose of taxation. The landmark cases in this area are Texas Company v. Stephens, 100 Tex. 628, 103 S.W. 481 (1907)and H t C 10T 433, 110 S.W.2d 896 (1937). Sacrificin~ampviif~~~etr;m ?or "t$ sake of brevity, we will forego extensive quotation from these authorities. It is sufficient to state that this legislative discretionwill only be questionedwhere the classification is clearly arbitrary. Looking at Art. 19.01 (8) as independentand new legislation, we think it evident that the Legislaturewas well within its discretionarybounds in classifyingnine and ten pin alleys for taxation, and only taxing thereunder that class of devices "where the player thereof does not or is not or is not required tomake a coin deposit causing an electrical connection." As said in the Stephens case, supra:

"Themere fact that discrimination is made'proves nothing against a classificationwhich is not, on its face, an arbitrary,unreasonable or unreal one." However,,webe,lievethat there is a further justification of this provision as it now exists. As stated,until February

3It appears from your request and from subsequent conferences that the taxpayers involvedput forth the followingproposition: If, as they contend,Art. 19.01(8) is unconstitutional,,its companion repealer provision, repealing the originalArt. 7047, Section 36, also fails, thereby leaving the originalprovision in full force and effect. Authorities are cited in support of this theory. In view of our decision,we deem it unnecessary to discuss this contention further than to here set it out. We do point out, however, that their view presupposes automatic re-establishmentof the original status quo; that is, that your office will continue to classify themachines in question as falling within the definition of "Nine and ten pin alleys" instead of within the definition of "skillor pleasure coinoperate'd

machines.". -

HonorableRobert S. Calvert, Page 5 OpinionNo. WW- 949

of 1958 the class of coin-operatedbowlingmachines described above were consideredas and taxed as coin-operatedmachines. Such action received the implied approval of the Legislature, through acquiescence. Associated Indemnity Corp. v. Oil Well Drilling Co., 258 S.W.2d 523;aff'd. 153 Tex. 153, 264 S.W.2d 697 (1953);Texas & N.O.R. Co. v. Railroad Commission, 145 Tex. 541, 200 S.W.2d 626 (1946). However, when an abrupt changewas made in that year, and such devices were suddenly considered taxable as "Nineand Ten Pin Alleys," the very next session of the Legislature found it necessary to further clarify their intent in this area. Since the coin-operatedmachine tax provision had already long contained language including "miniaturebowlingmachines," the Legislature apparently felt that any further clarification should be made by language specificallyexcluding the group of devices under consideration from the scope of the nine and ten pin alley tax. The result was the addition of the questioned clause in Art. 19.01(8), not as an exceptionprovision, but rather as an indication that it did not intend the class 'nine and ten pin alleys" to include the devices described.

We have been referred to several cases holding attempted classificationfor tax purposes unconstitutionalunder Sets. 1 and 2 of Art. VIII of the Constitution. We have likewise found many cases upholding questioned classifications. These are all, in effect, specific applications of the rule expressed by the Stephens and Cooper cases. Although each would bear in some degree upon the present question, a review of them would unduly len then this opinion. that Art. 19.01 78) As stated,we believe is a sound exercise of legislativediscretion and not obnoxious to the cited constitutionalsections.

A supplement to your original request herein has recently been received by us, containing two further questions. The first such question is as follows:

"I

. Can two or more coin operated machines that are bolted together, boarded together, or connected in any likemanner, having separate coin chutes and eachmachine operating individually, operate under one license or will each machine be required to have a license?" Chapter 13 of Title 122-A clearly contemplatesa tax upon each coin-operatedmachine within its scope. The license referred to, of course, signifiespayment of the tax (Art. 13.06). To allow evasion of the tax by so frail a subterfugeas bolting or boarding together two or more of thesemachines would beHonorable Robert S. Calvert, Page 6 OpinionNo. WW-949

a mockery of the plain legislative intent. You are therefore advised that, under the situationdescribed in your question,each machine ~~111 be required to have a license.

Your second supplementaryquestionmakes the inquiry
"2

. Does the Attorney General Opinion No. S-122 and No. V-986 apply to the revision of the coinmachine law now found in Chapter 13 of 122A-'TaxationGeneral'?" OpinionNo. V986 (1950)held that a coin-operated electric scoreboardused to score suffleboardgames is not "servicecoin-operatedmachine" and that the "owner" theretf is required to pay the o'ccupation tax under Articles 7047a2--7047a-18 (now Chp. 13, Title 122-A),V.C.S. You are advised that this Opinion is still applicable to the present law. OpinionNo. S-122 (1954)held that coin-operatedmachines which are installed solely as services to customers of various business establishmentsare "service coin-operatedmachines," within the definition of that term as used in Arts. 7047a-2 and 7047a-4 (nowArts. 13.01 (6) and 13.03, Title 122A,)V.C.S., and thereforenot subject to tax. Of course, any machine which dispenses service only and not merchandise,music, skill or pleasure is specificall machine tax (Art.,l3.03 3 exempted from the coin-operated ; however, this would, in every case, be a question of fact. Even in situations similar to that prompting OpinionNo. S-122 there could exist widely varying circumstances,which would determinewhether suchmachines as discussed thereinwere being furnished solely as services or whether they were for the ,purposeof dispensing "skillor pleasure." Therefore, in the absence of a particular fact situation,we are unable tomake a categorical statement concerning the applicability of OpinionNo. S-122. ,SUMMARY

Art. 19.01 (8),H.B. 11, 3rd C.S., 56th Leg. (Title 122A,R,C.S.) is not violative of the provisions of Art. VIII, Sees. 1 and 2, Constitution of Texas. When two or more separate coin-operated machines, subject to the tax imposedby Chp. 13, Title 122A, are joined together by somemethod, each machine is stillHonorableRobert S. Calve?.+, Page 7 OpinionNo. SJW-949

required to have a license evidencing payment of the tax. Attorney General's OpinionNo. V-986 is still applicable to the provisions of Chp. 13, Title 122A; Attorney Oeneral's Opinion No. v-986 may be applicable to specific situations arising under this Chapter.
Yours very truly,

WILL WILSON Attorney General of Texas

JRI:cm
APPROVED:
OPINION COMMITTEE: W. V. Geppert, Chairman Martin DeStefano Elmer McVey Iola Wilcox

REVIEWED FOR THE ATTORNEY GENERAL By: Leonard Passmore