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 SW3d
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:-%0;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
Untitled Texas Attorney General Opinion
Combined Opinion