The Attorney General of Texas
December 27, 1978 I---‘.’-..I..-,,. ._-. -.-. -.-_ _-__
JOHN L. HILL
Attorney General
Honorable Jackie L. Vaughan
Executive Director
Texas Amusement Machine Commission Re: Application of Amusement
‘7600 Chevy Chase Drive, Suite 402 Machine Tax in licensing require-
Austin, Texas 78711 ments to machines located on
certain military installations.
Dear Mr. Vaughan:
You have sought an opinion on the authority of the Texas Amusement
Machine Commission to regulate and tax the machines on the four federal
bases over which Texas and the federal government have concurrent
jurisdiction. You state that the machines are either leased or owned by the
nonappropriated fund instrumentalities, the Army and Air Force Exchange
Service.
Coin-operated machines are regulated under chapter 13 of Title 122A,
Taxation-General, V.T.C.S. Article 13.02 provides:
(1) Every ‘owner’ . . . who owns, controls, possesses,
exhibits, displays, or who permits to be exhibited or
displayed in this State any ‘coin-operated machine’
shall pay, and there is hereby levied on each ‘coin-
operated machine’, as defined herein in Article 13.01,
except as are exempt herein, an annual occupation tax
of $15.00.
(2) Provided that the first money taken from each
coin-operated machine each calendar year shall be
paid to the owner to reimburse the payment of that
year’s annual occupation tax levied above and those
levied by any city or county. No owner shall agree or
contract or offer to agree to contract to waive this
reimbursement either directly or indirectly. No owner
shall agree or contract with a bailee or lessee of a
coin-operated machine to compensate said bailee or
lessee in excess of fifty percent (50%) of the gross
receipts of such machine after the above reimburse-
ment has been made. . . .
P. 5142
Honorable Jackie L. Vaughan - Page 2 (H-1307)
There are provisions for record keeping, licensing, and registration. Tax.-Gen.
arts. 13.10, 13.17.
It is the view of the Department of Justice that these federal instrumental-
ities are constitutionally immune from state taxation and regulation.
The United States Supreme Court has determined that a state sales tax on
liquor bought with nonappropriated funds by a post exchange located on a
concurrent jurisdiction base was unconstitutional. U.S. v. Tax Comm’n of
Mississippi, 421 U.S. 599 (1975). On this authority it is our opinion that the
provisions of chapter 13 are unenforceable against post exchanges which own coin-
operated machines. See McCulloch v. Maryland, 4 Wheat. 316 (1819); Johnson v.
Maryland, 254 U.S. 51-20); 32 C.F.R. S 554.6 (1977).
We turn now to the applicability of chapter 13 to persons who lease machines
to post exchanges. Generally, the states have authority to tax and otherwise
regulate the conduct of contractors who do business with the federal government.
Paul v. U.S., 371 U.S. 245 (1963); Penn Dairies Inc. v. Milk Control Comm’n, 318 U.S.
-James v. Dravo Contracting Co.,vee Leslie
Miller, Inc. v. Arkansas. 352 U.S. 187 (1956). However, state law must yield to the
extent It confl icts with’federal law. .U.S.~Const. art..6, cl. 2; Paul v. U.S., m;
Leslie Miller, Inc. v. Arkansas, m; 32 C.F.R. S 554.6 (1977).
Federal regulations provide:
Procurement.
(b) Exchange procurement will be conducted on the basis
of full and free competition to the maximum extent
practicable, and consistent with the immunity of exchanges
from State regulations and control. Award will be made to
that responsive and responsible contractor whose offer is
most advantageous to the exchange, price and other factors
considered.
32 C.F.R. S 554.9(b) (1977). In that Texas law restricts the lessee to a maximum of
50% of the gross receipts and designates the first $15.00 as reimbursement it
conflicts with section 554.9(b) and is unenforceable. See
- Standard Oil Co. It.
Johnson, 316 U.S. 481(1942).
Attorney General Opinion H-110 (1973) in which it was said that your
commission’s jurisdiction is complete with respect to nonappropriated fund
activities on property not ceded to the United States is overruled to the extent it is
inconsistent.
P- 5143
Hono