Hon. T. M. Trimble First Assistant State Superintendent of Fublia Instruction Austin, Texas
Dear Sirr Opinion 'No. O-5677 Re: Are State and Federal excise stamps onhand in a liquor store subject to sohool taxes? piehave your request for opinion on the above question. YOU attach to your request, and in explanation thereof, a letter to you from Mr. George M. Waddill, & 81nsss hhnager of theAmarillo Publio Schools. The pertinent parts of said letter are as followsg

Vn the case of I..E. L. Sales Company, Inc. of Amarillo, Texas the tax equalization board raised the valuation ofmerchandise and other assets rendersd by the above Company8 and in protesting the raise of said values, L.h. L. Sales Company insists that certain items are not subject to taxation as follows:

"1
. State Excise Stamps, part attached towhiskey and wine and part loose stamps.
. . . . . . . .$2,164.91

'"2.Additional Federal.::'xoise Tax. effective Nov. 1st. 1942. &lled separately from the cost ofwhiskey and wine and 0. P.A. did not allow amarkup at that time on this tax.
. . . . . . . . . . . . . . . . . $1,70:;.64
"This Company is in the wholesale liquor business and takes the position that the above two items are not subject to tax since they represent taxes paid.
"Our equalization board took the position that these amounts represent money which has been used to increase the value of themerchandise on the shelf, and that itwould beproper to inolude the cost of the stamps in arriving at the net oost of the arMales orithe shelf.

"F'urther,that those stampswhich were loose and not attached tomerohandise **are** taxable for the reason th?t if the stamps were not on hand, the same **amount**would be represented in cash in the bank,which would be,without question, taxable."Hon. T.M. 'Irimble,page 2 O-5677

As to the powor of the school district to siibjoct. the Fedsra? excise stamps to an advalorem tax we observe as follows:

These stamps oome into existence under the terms of an act of the Congress of the IJr~;ted States pertaining to the collection of the internal revenue taxes imposed by the Federal Government on distilled spirits. 'Theinternal Revenue Code of the Government of the United States setsup an exhaustive and comprehensive method for the coiieotion of taxes on distilied spirits. InsaidAct among other things it is provided that, "Noperson shall transport, possess, buy, sell or transfer any dis,tiliedspirits, unless the immediate container thereof has affjxad thereto a stamp denoting the quantity of distilled spirits oontained therein and ovidwcing paymsnt of all.internal rsvonue taxes imEs-?d on such spirits.- --_- The law further provides in substance that the stampsmentioned shall be issued by the Commissioner to each Collector, upon the requisition of the Collector, and that the issue shall be in such numbers asmay benecessary in the particular Collector's district, and shall be sold by thevarious Collectors to persons entitled thereto upon their making application for stamps and complying fully with the regulations which may be set upunder this law.

When any stamps soprocured are destroyed by fire orwater, ormade useless by erroneous over-printing or cutting before they have been used, the Commissioner under re,gulationsapproved by the Secretary may issue new stamps in exchange for the old stamps. And in case the oxbxerof the stamps has no use for them by reason of the discontinuanoe or transfer ofhj.sbusiness, and has on hand quan.titiesof the value of $5.00 or more, and presen-tshj~sclaim within oneyoar aftor tho date on which the stamps wre purchased the Commissioner may refund the value of said unused stamps under regulations approved by the Secretary. 'I'he law furhter provides that every person emptying any container stamped under ths provisions of this law shall at the time of emptying such container destroy the stamp thereon. (See United States CodeAnnotated, Title 26, Chapter 26, Sections 2800 to 5045, inolusive)

The .stampsof the Federal Government, about which you inquire, are a device used by the Federal Government in the collection of its taxes on alcoholj~cliquor. These stamps are evidence of a tax paid to the Federal Government by the taxpayer. They are an instrument, or instrumentality, used by the Federal Government as a part of its system andmethod for the collection of taxes due the Government of the kilited States under the terms of i,tsinternal Revenue Laws.

Itisu;nl~l

settled that the State of Texas, as well as its politics.1subdivi~sionswhich possess taxing powsrs, do not have authority to tax an instrumentality of the United States when such tax operates as a burden upon themeans or sgenoy whereby the Federal Government performs its governmental functions.-- -

Hon. 2'.M. Trimble, page 3 O-5677

‘lie rmFrardthe Federal stamps inquired whoEt by you as f:&llicg within the ruiec lastmentioned, aridyou are therefore advised that the school district cannot assess, levy or colleot any tax on said stamps. (SeeTexas Jurjsprudence, Vol. 40, Section 11, page 24, and cases cited therein)
-4sto the taxability of the liquor stamps of the State of Texas about which you inquire, you are advised as follows:

School districts do not possess an inherent power to tax, as does the State. Schooi distrj.ctsderive their taxing poxers solely from the statutes. {SeeVOL. b7, Texas Jurisprudence, page 990)

The lax scripta of Texas contemplates the collection of an ad vaiorem tax form all personal property of every description whatever. This gelera rule is limited by the principle of law to the effect that ~whenthe State delegates to a looal unit or political.subdivision a power to levy a tax, that the power to levy said tax on property and agencies ofthe State is impliedly reserved from this delegation of power.

The stumps of the 'Stateof Texas about xhich you inquire come intobnilg byvirtue of th+provisions of the Texas Liquor Lontrol Act. ?‘h!sAct is set forth inVernon's Penal Code RS ,lrticle666-l to 666-49, and 667-l to 667-22, il:clusivo. The Texas Liquor Control h-t is Iengthy, 3nd its reproduntiw here :w!u!d wxsime many pages. For the sake of brevity, 'veomit sntt;,?git out .Infull. Xe believe itxi,11suffice to my with reference to thjs Act that B tax is tIhere* imposed by the State of Texas upon the !'i,rs t sale of a11 alcoholic spirits or liquor which is oroducod by f!?eprocess of distil!atinn. 'i~he Actmakes thinstax pa.yable bythe affixing of the stamps to the containor of liquor so taxed. i‘laborntaprov;sions for the issua:!aeof theso stamps and their method of?srtle,c&c., 31-ailadeby the tarms of ths ?'exssiiqwr Control .ict. (;jee?~RIOE’S ~-'o:Is~ ::ode,Artio:es fifi6-%l.t, 666-21‘0,sn3 666-1.5a:l)
A?-, nnalLysisa:lddigest of the verio~txs provisions of the kct ?m!ierdiso,lssio,n disclose that the stamps in ques-tionare "evidence of tho paymnt ofe trx, "w&/or nn apnncy or instrlmental.ityof the !;t?te of‘Texas usnd by :tas ameans in the performance of i,tspovbmmoi?cii? functions of oollsctlng tho tax levied by the ~/Lot on the first sate of alcoholic spirits and liquors above mentioned.--

'don.T.Y. 'Crimblo,~a@ 4 O-5677

A, the Texas Liquor Tax Stamps about which you Inquire are zr! instrurne,nt

ormear;snragency, rutilizodby the State in th- orderly process of the aollnction of taxes imposnd by the tezms of theTexas Liquor Control Aot, it follows that when the State delegated to the school district the power to collect advel.oramtaxes, the power to levy such a tax on said instrument:ilityof the State, as is the liquor tax stamp, was implindly withheld and not granted.

Be are therefore, of the opinion and soadvise you that the school district cannot levy an advalorem tax upon the State Liquor Tax strunps,about which you inquire.

Ey s,/Geo.P. Ala&burn George P. R,lackbura

Assistant