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 RKc/rt