Hon. George H. Sheppard Opinion NO. o-1382
Comptroller of Public Re: Whether suit club award is
Accounts taxable under’Article 7047f,
Austin, Texas Revised Civil Statutes.
Dear Sir:
We are in receipt of your letter of September 2,
1939, wherein yoursubmit to us the ,followlngfact situation:
“The operator of the club agrees to deliver
one $25.00 suit’of clothes to a club member after
he has paid the operator $2.50 per week for ten
:consecutiveweeks.
‘IOna certain day of each’week for ten weeks
all club members who .havepaid the $2.50 weekly
payment to the club operator are entitled t,o;
‘par-
ticipate in a drawing of names or numbers’whichis
held to determine the winner of a credit equal to
the unpaid balance the member owes for the $25.00
suit he is buying. If the winner has paid one
weekly payment of $2.50, a credit of $22.50 (or
the unpaid balance he owes for a suit,)is awarded
to him. The second week some member is awarded a
$20.00 credit or the balance he owes for a suit,
and so on, until ten credits of,various amounts
have been awarded, one each week for ten weeks.”
You request our opinion as to whether or not the
awards thus made‘are subject to the twenty per cent tax levied
by Article 7047, Revised Civil Statutes of Texas.
‘SeotionA and the first .sentenceof Section B of Ar-
title 7047f, Revised Civil Statutes, read as follows:
“(a) Every person, firm, or corporationcon-
ducting a theatre, place of amusement, or any busi-
ness enterprise in connectionwith the operation of
which a prize in the form of money or something of
value is offered or given to one or more patrons
of such theatre, place of amusement or business
enterprise,and not given to all patrons therecf
Hon. George H. Sheppard,Page 2
paying the same charge for any certain service,
commodity,or entertainment shall make a veri-
fied monthly report on the kenty-fifth day of
each month to the Comptrollerof Public Accounts
of the State of Texas, showing the amount of money
so given in prizes, and the value of 611 prizes
or awards so given in connectionwith such busi-
ness during the next preceding month.
"(b) There~is hereby levied a tax equal to
twenty per cent (20s) of the value.of all such
money, prizes, and awards given in connectionwith
the operation of each and all of the foregoing
business enterprises,and at the time of making
the report to the Comptroller of Public Accounts,
the owner or operator of any such business shall
pay to the State Treasurer such,tax upon the total
amount of money, prizes, and awards so given dur-
ing the next preceding month."
An examination of the facts in'this case discloses
that each requirementof the statute is met such as to mature
the tax. The prizesis given in connectionwith the operation
of a business enterprise. Such prise is in the form of some-
thing of value. It is given to a patron of the place of busi-
ness and it is not given to all other patrons paying the same
charge. The first winner received a $25.00 suit for $2.50.
He thus received an award which otherspatrons paying $2.50 do
not receive. Our answer to your question, therefore, is that
the tax is clearly due.
You also inquire as to whether tax liabilitywould
be affected if no drawing is held to determine the winner of
the award ,butinstead the operato- of the club arbitrarilyse-
lects the member he wishes to receive the award each week.
Our answer to this question is that tax liability would not be
affected. The manner of making the award is immaterial. The
statute does not require that the person receiving the award
be selected by chance in order for the tax to be due.
APPROVBD SEP 7, 1939 Yours very truly
/s/ Gerald C. Mann ATTORNEY GBNBRAL OF TEXAS
ATTORNEY GENERAL 0% TEXAS By /s/ Glenn R. Lewis
APPROVED: OPINION COMMITTEE Glenn R. Lewis, Assistant
BY: BWB, CHAIRMAN
GRL.:F'L,vb