Court Opinion

ID: 4133305
Source: CourtListenerOpinion
Date Created: 2017-02-18 01:36:22.202597+00
Date Added: 2024-06-11T14:37:39.833112
License: Public Domain

ORNEY           GENERAL
                                       OF%-EXAS
                                    AI[~~TIN, TEXAFS     78111
       JOHN    Ii.RILL
    ATTORNEY    GENERAL

                                             July27, 1973

               Mr. Ivan Williams, Executive.Director
               Texas AmusementrMachine Commission
               1411 West -Avenue,.HichmondBuilding
               Suite--2‘d0
               Austin, Texas 78711
                                             Opinion No. H- 73
                                                   Re:    The meaning~:of.Article~l3,1Z;
                                                          Taxation-General, V.A.T.C.S.,
                                                          governing taxation of coin-
                                                          operated machines-in lightof
                                                          Thompson v. Calvert.,.
                                                                               489 S.W.3d
95 (Tex:c:.-Sup.
                                                                        1972)

               Dear Mr. Willia@.t-
                    Article~l3.17;~~Title>122A, Taxation-General, Vernon's
               Annotated Civil Statutes-(1969)',is a.'comprehensiveregula-
               tion of certain coin-operated machfnes.and.%n part is directed
               at.prev&nting.persons.fn,businesses dea,lingin those machines
               from hqving concurrentfinancial interests in certain alco-
               holic be,verage,businesses,lSection 8*(1.):
                                                         of,,Arti.cle
                                                                    13.17
               provides:
                            "No person shall"Gngage-in business to
                            manufacture$ own:;buy; se~l~l,.oor
                                                             rent,.
                            lease, :trade*;lend,.or.furnish to an-
                            other,-.or-repefr~.maintain,service,
                            transport-within,the state;.'store,-.or
                            import-;‘
                                    a*music:coin-operated machine
                            or a &cil;l;-~~or.
                                           pl,ga,wrecoin-operated
                            machhe with-out. a :iicenseT
                                                       .$ssuedun-
                            der.this-'article;"

1              Section,23(1) .of thersame article in -part provides:
                             "It sha&l ]be unlawful ,for a:.personwho
                            has .a financi&~:iaterest~%n-.a.business
                            required:-%0Id. at 99.
      On the.,-other*hand,;-,
                           the deckion:cannot.%be read to allow
an ABC'permittee,to own"an:-unlimitedaumberof machines* Beyond
some point.the ownership of a %arge :quanG.ky*:af, machines ,could
not properly-be viewed as incideatak~.to.thedistincfive -busi-..
ness of sel*Ung alcoholic beverages:for on-premises consumption.
.The Thornson-rationa&e prevents-the,use;of Ian alcoholic beverage
perm+I.
      .t..as,qsubterfuge *for engaging*-iq$he.-vendingbusiness,
The chance of-sucht&a-clande,stine"vending:business" being
started-would*.presumably:  be greater 5n the case ,of an ABC per-
mittee who owned a-large number?of -vending machines in his ~only
place of business licenaed,torxserve'  alcoholic beverages on-
premisesor -in.the case-~of-  an-ABC permittee-.who-ownedboth
a large number-of -businesses‘so licensed and :a large number
of machinesb;':Aocordingtly;the-total,number-of machines owned..
by an ABC permibtee:xnd~:the~  number-af machines ~t.each place-
of busJ.ness:"are-reEevant.criteria:-in-:determ~n~ngwhether Sec-
tion.27(l) is applicable.xtosuch ypermittee.
      If-the.Commi;ssionfound,\thata'tavern-operator were sellingr
                           and,-therebyengaging inksome activity
 leasing,Lxenting,*~buying~~
beyond--mereownership of,*hismachines,:-a:presumption would appro-
priately.exist.that:-hewas engaging,+n-..the vending "businessN1
This conclusion--wouldseem;-to~be>;true,:regardlessof the number
of machines.:owned,by.She:..rindividual
                                     sinoe:,the'*'incidental"
.J.imdtation.~was
                applied only with -respect to those who "merely
,own'!their -machines.

have to-be,.madewithfn the limits,.ofr-thecourt'sdecision
and-thisopinion.~ Nevertheless.,we consider the following
factors relevant-to'-de-terminkq~whetheran ABC ,permittee
                            p. 327
Honorable Ivan Williams, page 5    tHT73)

 who owns one or more vending machines is engaged in the "busi-
 ness of dealing in:coin-operated machines" or whether the
 ownership of the machine or machines is "purely incidental"
 to the primary business of serving alcoholic beverages on-
 premises, thereby exempting that business from Section 27(l):
  (1) The numberof machines in each place of business; the
 number of places of businesses owned by the ABC permittee;
 and the total number of machines owned by the ABC permittee
 at all of his.places of business .combined; (2) Whether such
 person is.engaging:in any .transactionsconcerning his machines
 beyond mere ownership of them; (3) Some comparison, if possi-
 ble, of revenues attributable to .salesof alcoholic.beverages
 and revenues attributable to coin-operated machines; (4) A
 comparison of-floor space attributable to ,the sale and con-
 sumption of alcoholic beverages,with the floor space attri-
 butable to the use of coin-operated machines;- (5) Whether
 the tavern containing the amusement machines was open during
 hours in which'it could not legally sell alcoholic beverages;
 and (6) A comparison of the ABC permittee's capital invest-
 ment in amusement machines with his total capital investment,
 We are not in a position to assess the'administrative'diffi-
 culties of establishing and enforcing any set of criteria,
'Of,course, the Commission may use other criteria which it feels
 are rea'sonablyrelevant to applying the rationale of the Thompson
 decision,
                                 ,
      Turning to your seconc'question, it..is,ouropinion that
 the Cominissioii
                does have'the power to ‘regulate-thenumber of
machines .an'ABC permittee may ,own and use at his place of
 business. The purpose of Article 13,17 as expressed in Section
 1 thereof 'is:   "             :

          -"fT]oprovide comprehensive-regulation of
          music ahd skill'& pleasure -coin&operated
          machines and businesses dealing in these
          machines, and to prevent persons in these
          businesses from having certain‘concurrent
          financial interests in, or unauthorized
          financial dealings with, certain alcoholic
          beverage businesses,,'     '
     Where an agency is obligated by statute to effectuate the
express purpose of the act, authority reasonably necessary to

                      Article 13,17, Section 4 makes this grant
of power expressly:

                             PO 328
 Honorable Ivan Williams, page 6   (H-73)

              "In addition to its existing powers,
           the,. . ; Commission mayi-for the pur-
           pose of administerinq this Article,
              "(1) prescribe all necessary.regu-
           lations . . . ."
      Even if;the ABC permittee owns-vending machines -purely
 incidentally to:.his;business,-'
                                in:order.to..:determinewhether.
 his aJnership-:Qf..machine~;.is-:'prPger-;~.~e,
                                           .Commi.s,sion
                                                       ,hasI.ign-
 plied,authority to.obaerYe:.*his:
                                 operation and -to.request re-
 ports. .Sin.cethe=Commissionl.is::duty-bound'to.regulate the
 vending,industryl;:
                   &t ,necessarkPy.has.*the.authority to deter-
 mine who should be licensed--under-Article.93.17.The li-
 censing power would:.bealmost,meaninglass %f the Commission
 did not'also havetheTauhority.-to determine whether a ta-
 vern operator-'sownershkp..aqd:-
                                use of<%cohn-operatedmachines
 is incidental-to--:hisbuainesis!:Ln
                                   orderlto implement the
T;g?      decision. .:Thus~,the,,regulations.envisioned by your
      ,,_,
        qu+tion, would-;be':necessaryfor 'the,implementation of
 the Thompson.,decision.
   .r. The Commission may-not+',of,course;r*makeregulations which.
 are contraFy to,.or:beyond.the$r statutory ;authorization. All-
'state.Insurance..:Co4v;“.State Board.--of:
                                         Iasuaance.;:;.~~,Ol.
                                                        SW2d T‘JT-
 (Tex. Civ. App:,.-.:Austin
                          1966, writ ref'd n.r.e.f The-requla:',
 tions promulgated.by'the~~Commissfonmust'also be sufficiently
 explici-tto.inform those.bound:,by%hem what conduct will consti-
 tute a violatfon;-~'.RakIroad-Commi-ssion.-v;
                                             Ft. Worth and:.D.C.
           161.SHLd,:56a.1~(Tex..
                              Civ, 'App.,cAustin 1942, writ
 $ll:o,*;m;)-*. .-_
                  S%ntie-ti
                          'violation'of,'-So&ion27(l) renders'the
 violator liable‘to-the!penal provisions'of Section 27(S), the
 rules promu&$atedtwith-respect-to Section->27(1)must.meet the
 strict:s,tanda,rdqlo-fj.~de-f~niteness-
                                    applicable to Enal statutes.
          "No one'may"bs requ%redr.atthe.peril of
          life, liberty or property'to'speculate
          as
          ---to: the.meanfng.
                       _'_ - of--penalstatutes.
          All are entitled_to be informed as to
          what, the>State commends.or forbids."
          Lanyetta v;New Jersey,;+386,U.S*451,
               (1939).
Lack ,of spe‘cE~d-~ty:~;wi-~l.render
                                %he.rules void: as violative of
theadue process clause .ofthe-Fourteenth Amendment of the U..S.
Constitution.&;Gonna~~~:v.;.-GenPr~l.=Construction:Go,;
                                                      269 U. SI
385,,391 (&925).

                             p. 329
Honorable Ivan Williams, page 7 (H-73)

     Your third question asks how the.Commission would enforce
such a regulation. We noted,above that.the.Commission has the,
power to require .information'fromtavernowners who own coin?
operated machines. The Commission ,should consider sending
notifications.,of.
                 the rules.it.promulgates to ARC permittees.       ..
Through notification,,required reports'*,and, "spot checks" the
Commission could,determineywhether -any businesses were not com-
plying with Article 13.17. The Commission after such determina-
tion could..
           then notify the appropriate district.or~,countyattor-
neys for.prosecution under:.thestatute.
     Since.the -businesses,that:the,Thompson decision is con-
cerned with are all permittees..ofthe Alcoholic-Beverage Com-
mission, it might-be approprfaterto soliuit..the.assistanceof
that agency.in.some aspects-,ofcthe..enforcementof the Act.
Article 13.17, ,Seotion-6 provides:
         "All'state~agencies.are,directed-to'cooperate
                       .. Commission *in its.investiga-
         with the- . '-.
         tory.-functions-underthis Article, and shall
         prov,ide,
                 it access to-their relevant records
         and reports . . . ."
     Article 13.17, Section,3, provides that the Commission
may institute civil-proceedings through.the Attorney General
against.violators which-would include.5njunctive relief.

                          SUMMARY
         While the criteria for determining.the applica-
    bility of Article 13.17, Section 27fl)kto owners of
    permits'to sell or.serve-alcoholic-beverages for on-
    premises consumption may not:be-*determinedwith exacti-
    tude, it wou,ldnot be,,approprfate.,tozwdefine
                                                 the term
    "incidental" in such,,awaythatwonld Lexclude only a
    very restrictive categoryof.‘tavern owners from the
    purview -of,Section.27(l). Such 'a-restrictiveinter-
    pretation,would not be-in .keepingwSth.-theintent of.
    Article 13.17, as expressed-,bythe Supreme Court, to
    "free the small tavern owner from the -hold of the
    machine industry" because,.suchan -interpretationwould
    result in many .tavernownersbeing:,forced to.lease
    machines from.jthe--vending-industry; Nonetheless, it
    is also inappropriate-.toconclude-that the.owners of
    such permits may"own>>an unlimitednumberof machines.

                            p. 330
 Honorable Ivan Williams, page 8        (H-73)

           The Amusement Machine,CommissionJpossesses the
     authorilzy,-to,promulgate,regu:lat$onsto regulate the
     number>of mach&nes an.owner:.of%a:per&it to sell or
     serve,alcotro-l;itr.
                       .beveragesjfor on-premises consumption
     may ownathis     placeof: business.;::These -rules must not
     go.-beyond.the~~Commia.s~on..'s
                                  .s.tatuttary
                                             a,uthoriz&on
     and-musk-be,sufficiently explicit.to,informthose~~
     persons affeotedrby them what conduct*:will:constitute
     a violation;=-- The Commissfon.~may~.de.termine
                                                   if any busi-
     nesses.are failing to comply-*withArticle 13.17. After
     s.ucha-determination, appropriate civil and criminal
     remedies,iireavailable-to the.-.Commission.
                         d.

                              -Very      truly yours,

                         I/     Attorney General of Texas

DAVID MI.KENDALL; Chairman      -.      -
Opinion Committee    -  '.

                               p. 331