Untitled Texas Attorney General Opinion

                                  June   23,   1952


        Hon. CokeKR. Stevenson, Jr.             Opinion Ho. v-1471
        Administrator
        Texas Liquor Control Board              Re: Legality of a Texas
        Austin, Texas                               wholesale grocery
                                                    concern'8buying vhis-
                                                      key   from   a Bev York
                                                      dlstributlngcorpora-
                                                      tion for sale under
                                                      customs bona to a
                                                      foreign veeeel vithout
                                                      securing a Texas liquor
        Dear Mr. Stevenson:                           license or permit.
                        Your recent letter makes the follovlng request for
        an opinion:

                       "Morris,Sewall and Company, Inc., Is a
                  Texas corporationvlth Its prlnclpal office In
                  Houston, Texas'.'It ovna Gordon, Sevall and Com-
                  pany of Houston, Texas, a trade name. Neither
                  Morris, Sews11 and Company, Inc., nor Gordon,
                  Sevall and Company hold any kind or oharacter
                  of license or permit provided for by the Texas
                  Liquor Control Act.
                        "During the month of July, 1951, Gordon,
                  Sevall ana Company purchasea 135 case0 of as-
                  sorted brands of vhlskles from Rational Distil-
                  lers Products Corporation,120 Broaavay, Rev
                  York,  Kev York.  This whiskey vas delivered In
                  customs bond about August 6, 1951, and since such
                  time Gordon, Seas11 and Company has sold a portion
                  of the whiskey. Hatlonal Dietillers Products Cor-
                  poration holds a Bon-residentSeller's Permit as
                  provided for in.Sectlon15 l/2 A of Article   I of
                  the Texas Liquor Control Act. The liquor sold
                  by Gordon, Sewall and Company was sold by It un-
                  der customs bond to a ahlp flying a foreign flag
                  at the Houston Port.
                       "Section 4(a) of Article I of the Texas
.   ’             Liquor Control Act provides as follows: 'It shall
                  be unlawful for any person to . . . sell, . . .
                  solicit orders for, take orders for, . . . . any
Hon. Coke R. Stevenson,pege 2 (V-1471)


    liquor in any wet area vlthout first having
    procured a permit of the class required for
    such privilege.'
         "Houston Is a vet area. It Is our opinion
    that Gordon, Sewall and Company violated the
    above Section even though the vhlskles were In
    customs bond and vere not lwlthlnthe boundar-
    ies of the State of Texas' for certainly they
    solicited an order for the vhlskey or did ‘take
    an order' for the liquor sold. It Is further
    our opinion that the title to the liquor, al-
    though It was In customs bond, passed from Ha-
    tional Distillers Products Corporationto Gordon,
    Sevall and Company of-Houstonand that such com-
    pany further violated the above quoted section
    In that It sold a portion of the whiskey although
    it did not actually have the physical possession
    of the whiskey.
         "Section 15 l/2 A (1) provlaes for a Bon-
    resident Seller's Permit and sets out the prlvi-
    leges for the holder thereof. Said Pay;g;mr    (1)
    of said section provides as follows:        - -
    resident Seller's Permit shall be required of all
    dlstlllerles . . . vho sell liquor to the holders
    of permits authorizingthe Importationof liquor
    Into Texas,regardlessof whether such sales are
    made within or without the State. Such permit
    shall authorize the holder thereof to:
         "'(a). Sollclt or take orders for liquor
    from only the holders of permits authorlsed to
    Import liquor Into this State; . . .I
         "It Is fkrther our opinion that the Boa-
    resident Seller, Rational Dlstlllers Corporation,
    In taking the order for the 135 cases of whiskey
    from Gordon, Sewall and Company violated the above
    quoted sections for the reason that Gordon, Sevall
    and Company nor the parent corporationhad any
    permit or lloense which vould authorize the Impor-
    tation of liquor into Texas.
         "It Is further provided In Paragraph (f) of
    Paragraph (4) of said Section 15 l/2 A that '(4).
    It shall be unlawful for any person holding a-
    Non-residentSeller's Permit, or for any offlaer,
    director, agent or employee thereof, . . . to:
Hon. Coke R. Stevenson, page 3 (v-l471)


          " 1(f). Sollalt or take orders for
     liquor Lrom any person not authoriced to :
     import liquor Into Texas for ,thepurpose
     of resale.'
          ". . ,.

          "Your valued opinion Is requested on
     the follovlng questions:
          "A. Can the holder of a Non-resident
     Seller's Permit, Issued by the Texas Liquor
     Control Board, take an order for liquor from
     a person or corporation which Is not author-
     ized to Import the liquor Into Texas for
     resale?
          "B. Can a person who Is not the holder
     of any kind or character of permit or license
     under the Texas Liquor Control Act sell, so-
     licit an order for, or take an order for the
     sale of any liquor regardlessof whether or
     not the liquor Is In customs bond or 'not In
     TexasI?"
          Your request is accompaniedby an affidavit of
an officer of the grocery concern which we assume to cor-
rectly state the facts applicable to your request. The
affidavit recites:
           "My name Is J. F. Henderson. I am Vice
      President of Gordon, Sevall dcCompany, Post
      Office Box~2553, Houston, Texas. Gordon,
      Sewall & Company Is B trade Nazi?only owned
      by Morris, Sewall & Co., Inc., a corporation
      existing under and by virtue of the lavs of
      the State of ,Texaswith Its principal office
      In Houston, Texas. Morris, Sewall & Co., Inc.,
      is a vholesale grocery company. Gordon, Sewall
      & Company Is the wholesale marine division of
      the grocery company and supplies groceries to
      vessels at Gulf Coast ports. Gordon, Sevall
      & Company endeavors to handle a complete stock
      of ship stores and so representsto vessels
      stopping at Gulf Coast ports.
           "During the month of July, 1950, the bf-
      flclals of Gordon, Sevall & Company concluded
      that in order to attract business to the several
Hon. Coke R. Stevenson, page 4   (v-1471)
                                                          -?


    Gulf Coast ports and particularlythe port'of
    Houston, It would be necessary for Gordon,
    Sews11 & Company to handle a complete line of
    liquors. It was found, upon careful lnvestlga-
    tlon, th8t all vessels, and particularlythose
    flying foreign flags, purchesedtheir entire
    bill of supplies from a marine supplier where
    liquors also could be purchased. It Is custom-
    ary for marltIme contractswith foreign vessels
    to contnln a provision that liquor vi11 be served
    as a beverage to members of the crew, and for
    that reason It Is required that foreign vessels
    purchase liquor. Prior to July, 1951, because
    vessels flying foreign flags could purchase
    liquor from a bonded warehouse,a great percent-
    age of purchases m8ae by foreign vessels vas made
    at the port of New Orleans, which port for many
    years has had a bonded liquor warehouse. In an
    effort to C8pttWe a portion of such foreign trade
    and to encourage such vessels to do business in
    the State of Texas and Gulf Coast ports, Gordon,
    Sewell & Company decided to handle liquors.
         "By order dated July 20, 1051, Gordon,
    Sewall & Company purchased from National Pistil-
    lers Products Corporation,120 Broadway, New York
    5, New York, 135 cases of whiskies of several
    varietiesand grades. This pWCh8Se V8S made by
    mall direct to Nation81 Distillers Products Cor-
    poration at the New York address given above. No
    person, firm or corporationIn Texas vas approached
    by Gordon, Sevsll & Company In connectionvith the
    purchase of such liquor. N8tlOIU31Distillers
    Products Corporation is a large liquor distributing
    corporationwhich handles liquor for consumption
    in the United States but vhlch has a depsrtment
    known as Its 'ExportDepartmentl,which department
    handles orders for liquor destined for export only.
         "NationalDistillers Products Corporation
    shipped the requested 135 cases of liquors by rail-
    rO8d under Custom Bond, by the terms of which ar-
    rangement the railroad was obligated to see that
    such liquor so sold vas not received by an unau-
    thorized person, thet Is, one not under Custom Bond
    himself. When said shipment of 135 cases of liquors
    was received in Houston, the same was held by t'?e
    railroad and it notified the United States Custom
    House of the arrival of such aht'jxnent.The Customs
  ,




       Hon. Coke R. Stevensorr-,
                              page 5 (V-1471)
*./i

           House Issued a vrltten release of such~shlp-
           ment to the railroad and such release vas
           deliveredby the Customs House to the railroad.
           A truck and driver, both under Custom Bond
           Issued by the Unltea.StatesCustoms House, se-
           cured said shlment of 135 cases of liquor from
           the railroad ana delivered the same to a Custom
           Bond liquor warehouse at 102'San Jacinto,Houston,
           Texas. When the shlgnent of liquor arrived at
           such address, 8 representativeof the United
           States Customs House carefully checked each case
           of liquor, unlocked the warehouse, and placed
           Said liquor In such warehouse.
                "Such warehouse Is located on property
           ovnea by Gordon, Sews11 & Company but vas built
           by Gordon, Sews11 & Company according to plans
           and speclfic8tIonsprescribedby the United
           States Customs House and under the supervision
           of a representativeof the United States Customs
           House. Gordon, Sewall & Company has no key to
           such warehouse,theonly such key being held ex-
           clusivelyby a representativeof United States
           Customs House.
                 "Since receipt of such liquor on or about
           August 6, 1951, Gorpdon,Sewall & Company has
           s0ia 20 cases.   At the times sales have been
           made and prior thereto, Gordon, Sews11 & Company
           notified the United States Customs House of 8
           sale of such liquor. The Customs House sends a
           representativeto the warehouse, and such repre-
           sentativeunlocks the same, checks out the lj.quor,
           ascertains that It Is loaded on 8 Custom Bonded
           truck  operated by a Custom Bonded driver, and
           such representativeaccompanies such truCklO8dof
           liquor to the vessel at the port. The representa-
           tive of the Customs House then checks the liquor
           aboard ship and seals It. Gordon, Sew811 dtCom-
           p8ny pays the Customs House representativeon 8
           per dlem basis. No employee of Gordon, Sevall &
           Company, except an employee under Custom Bond,
           ever handles the liquor, and It Is handled only
           8t such times and pl8ceS as directed by a repre-
           sentativeof the United States Customs House and
           handled only under his actual, personal supervl-
           slon. Gordon,Sewall& Company cannot move liquor
           outside of Harris County, Texas.
                    .,.,




                                                              . .. .
Hon. coltaR. Stevemon, page 6 (V-1471)
                                                                       ,.-
                                                                         .
                                                                       : ,I

          The wwer of the State to resulate the u8ssafze
of liquor through Its territory In co&erce vas eitpresky
affirmed In Gartlidge v, Ralnex 168 F.2d 841 (C.A. 5th
Cir..1948.cert. den. 335 U.S. 685) and authorities there
cited: Whether the State may prohibit such passage Is 8
moot question since none of the statutes to which you refer
attempt to prohibit such traffic. They are regulatory
measures designed merely to limit the prosecution of the
liquor business In Texas to persons authorized by Texas law
to engage therein. Certainly the State m8y regulate the
handling of liquor In the territory of Texas regardless of
whether Its ultimate intended destination Is outside of
Texas. Otherwise the State would be hamstrung by an immu-
nity from regulation bssed,solely on the nebulous conse-
quence of an asserted Intention to move the product to
another jurisdiction. Nor Is the State required to rely
on the Federal Government to see that none of the liquor
Is so handled within its territory 8s to thwart Its own
policy In regard to domestic traffic.
          In the Instant situation the methods prescribed
by the Treasury Department for an 8CCOUnting for the shlp-
ments passing through Texas have no direct relation to the
domestic policy of the State in regard to the liquor traffic.
The sole purpose of such regulations is to see that the Fea-
era1 tax Is paid. The regulations are designed to guarantee
that such liquor.is not diverted into domestic channels un-
der conditions as to vhlch Federal taxes would be due but
not psld. The Federal statutes 8nd regulations offer only'
Incidental protection to the State's local liquor policy.
The consequences of violation of the Federal Internal reve-
nue regulations are not Intended 8s a vIndic8tiOn of the
State public lav and have no relation to the policy of the
State 8s to the penalties Imposed on offenders of the IOC81
policy.
          As 8 means of regulating the traffic In liquor
In Texas the State has prohibited the physical handling of
liquor for commercialpurposes vlthin its territory except
by licensed persons.  Not only is the physic81 handling
lImIted to such persons,but activities In Texas Incidental
thereto are also limited to licensed persons. Your ques-
tions relate primarily to the requirement of a license for
acts Involving something less th8n actual physic81 posses-
sion of the liquor In Texas territory. The licenses are
required of those who solicit and take orders for liquor
In the territory of Texas. Certainly the persons affected
are subject to the regulatory jurlsdktlon of the State.
The statutes are clear and unambiguous and we are Impelled
to construe them according to their-.terms.
    -   ..



             Hon.   Coke   R. Stevetioh/&ge   7 .(V-1471)
I

                       You are therefore advised that the holder of a
             non-resident sellerBs permit may not take an order for
             the ahlrment of llauor Into Texas from a person or corpora-
             tion not authorIsed,toimport liquor Into Texas for resale.
                       You are also advised that a person who 1s~not the
             holder of'any kind or oherecter of permit or license under
             the Texas Liquor Control Aot cannot sell, solicit an order
             for, or take .8n order for the sale of any liquor located In
             Texas, although the liquor,is under the supervisionof the
             United States Treasury Department for the purpose of pre-
             venting the evasion of Federal tax laws.
                          The wholesaler concerned-hash,submItteda brief In
             support of the pr,oposItlon   that the State has no paver to
             regulate or tax liquor vhlch Is In the "stream" of foreign
             commerce; and cites McGoldrIck v Gulf 011 Core
             414 (1939), ana Durln~ v. Valenti, 267 Atip.DIv:'3
             N.Y.S.  385.    The McGoldrla& oase did not Involve liquor,
             8s to which the 21st Amendment to the Constitutionenlarged
             the pcvers of the States to regulate commerce therein. Bar
             are the regulatory provisionsabout vhlch you Inquire an
             attempt to tax the liquor or Its sale;    nor are they In con-
             flict with or Inimical to the Federal regulations under
             vhlch the liquor Is transported,stored, and sold. In the
             McGolarlok case an attempt was m8de to tax the sale of 011
             to foreign-boundships, contrary to a Congressionalregula-
             tion In effect exempting the 011 from taxation.
                        _
                          The During case places a more restrlatea construc-
             tion on the 21at Amendment than that establishedby later
             decisions. See Cartlldue v. Ralneg, SUpr8. The liquor, the
             sale of vhlch It vas contended could be made only under a
             Nev York liquor permit, was located In a so-called "Forelgn-
             Trade Zonen establishedunder the laws of~the United States
             dealing vlth reg'Ul8tlOn   of foreign commerce. Hew~~York, In
             effeot, yielded Its jurlsdlctlonover such sane by author-
             izing the City of Nev York to apply for its establishment
             under Federal    control. Ho such zone Is here Involved, nor
             has such concessionbeen made by Texas. &rely because the
             liquor here Involved was handled In such a way as to be con-
             sistent with Federal rules designed to protect the Federal
             revenues gives It no Immunity from State regulation,nor
              Immunity to those who own it from the State requirementof
             8 license t0 deal in 1iqUOrS.
                                                        .L. ‘:
                                                                 ,.-I *
HOR. coke R. stehmti;~ pge 8 (V-1471)    ',
                                                                      /




         The holder of a Ron-residentSeller's
    Permit under the Texas Liquor Control Act
    may not lavfully take an order for the shlp-
    ment of liquor Into Texas under "austomsbond"
    from~a person or oorporatlonnot authorlsed to
    Import liquor Into Texas for resale, although
    such liquor Is Intended solely for foreign
    commerce.
         A person vho Is not the holder of any
    kind of permit under the Texas Liquor Control
    Act m8y not lavfully sell, solicit an order for,
    or take an order for the sale of liquor loaeted
    In Texas although the 11 uor Is under the super-
    vision of United States a easury offIclals for
    the purpose of preventing evasion of Federal
    tax laws and is Intended for sale only in foreign
    commerce..
APPROVED:                         Your6 very truly,
Mary K. Wall                        PRICE DAHIRL
Revlewlng Assistant               Attorney General
Charles D. Mathevs
First Assistant                   BY

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