The Attorney General of Texas
JIM MATTOX November 23, 1983
Attorney General
Supreme Court Building Mr. W. S. McBeath Opinion No. JM-g6
P. 0. Box 12546 Administrator
Austin. TX. 76711.2546 Texas Alcoholic Beverage Commission Re: Whether the decision in
5121475-2501
Telex 9101674-1367
P. 0. Box 13127, Capitol Station United States v. State of Texas,
Telecopier 512/475-0266 Austin, Texas 78711 695 F.2d 136 (5th Cir. 1983)
prohibits application of
gallonage tax to sales by Texas
714 Jackson, Suite 700
wholesalers to military instal-
Dallas, TX. 75202.4506
2141742-6944
lations
Dear Mr. McBeath:
4624 Alberta Ave., Suite 160
El Paso, TX. 79905.2793
You have requested an Attorney General Opinion on the status of
9151533.3464
the $2.00 gallonage tax imposed by sections 201.02 and 201.03 of the
Texas Alcoholic Beverage Code. In your request, you asked for
-01 Texas. Suite 700 guidance in administering this tax j.n light of the recent denial of
Weston, TX. 77002.3111 petitions for writ of certiorari in United States V. State of Texas,
7131223.5666 Gal. 695 F.2d 136 (5th Cir. 1983). Your question is essentially as
follows:
606 Broadway, Suite 312
Lubbock. TX. 79401.3479 Has the decision of the Court of Appeals for
6061747.5236 the Fifth Circuit as a matter of law effectively
created an exclusion from the Texas Gallonage Tax
on sales made by Texas Wholesalers for facilities
4309 N. Tenth. Suite B
McAllen, TX. 76501-1665
operating on military installations?
5121662.4547
The United States Court of Appeals focused its analysis in -..
United
States V. State of Texas on the Supremacy Clause of the United States
200 Main Plaza, Suite 400
San Antonio, TX. 76205.2797
Co"stitutio". The court stated that the Supremacy Clause is
5121225-4191 implicated only where the United States Congress exercises a granted
power. The Court went on to state that in those instances the federal
law will preempt the operation of any corresponding state legislation
An Equal Opportunity/ where there is an actual conflj.ct between the state and federal
Affirmative Action Employer
legislation.
In determining whether or n~ot the Texas Alcoholic Beverage
Commission's enforcement of the "three tiers" (manufacturing tier,
wholesaler tier, and retailer tier) regulatory scheme outlined in the
Texas Alcoholic Beverage Code conflicted with the Department of
Defense's alcoholic procurement regulation, the Court of Appeals
employed a two stage analysis. The first step questioned whether the
p. 407
Mr. W. S. McBeath - Page 2 (JM-96)
Department of Defense's alcohol procurement regulation was within the
exclusive domain of the Federal Government. The Court observed that
if it did determine that United States v. State of Texas involved
purely a federal concern, then the Supremacy Clause would preempt "all
state regulation that would vitiate the impact or intent of the
federal regulatory scheme." The Court's second step addressed a
conflict between a state and the federal government where Congress did
not exercise plenary power. In this situation, the Court pointed to a
traditional analysis that required balancing of federal and state law.
The Court cited Castlewood International Corporation v. Simon,
596 F.2d 638 (5th Cir. 1979), cert. granted, 446 U.S. 949, judgmt
vacated and remanded, 626 F.2d 1200 (5th Cir. 1980) as an example of a
Twenty-first Amendment case that involved the traditional analysis
requiring balancing of federal and state law. In Castlewood, the
Court said there was no zone of exclusive federal authority and under
the balancing process of the two step analysis the Court found no
federal interest of sufficient magnitude to tip the balance against
the state legislation.
The Court distinguished United States v. State of Texas from the
Castlewood type of Twenty-first Amendment case by categorizing United
States v. State of Texas-within a class of cases ihat included Colliru
v. Yosemite PLL
ark and
~~ Currv Company, 304 U.S. 518, (1938); Unitec
States v. Tax Commission of Mississippi,
~~~~~ 412 U.S. 363, (1973);
United States v. Tax Commission c,f Mississippi, 421 U.S. 599, (1975)
("Tax Commission II"). By the Court's analysis, these cases belonged
to the category of cases where the Federal Government occupies a zone
of exclusive authority. The Court in the second Tax Commission of
Mississippi case held that the Twenty-first Amendment conferred
no power on a State to regulate - whether by
11ce*s1*g, taxation, or otherwise - the
importation of distilled spirits into territory
over which the United States exercises exclusive
jurisdiction.
This construction is buttressed by the court's language in United
States V. Texas:
the state may not, in any manner, regulate the
distribution or consumption of alcoholic beverages
on a federal enclave in the absence of an
agreement between it and the federal govern-
ment . . .
Id.. at 137, n. 1.
p. 408
Mr. W. S. McBeath - Page 3 (~~-96)
Citing the Yosemite Park and Tax Commission of Mississippi cases,
the Court declared that the Federal Government as a sovereign, absent
voluntary relinquishment, exercises exclusive jurisdiction over
federal enclaves such as United States Armed Forces facilities and
that regulation in these enclaves is an incident of sovereignty.
The Court applied its exclusive zone of federal jurisdiction
theory in United States v. State of Texas and decided that the subject
matter of United States v. State of Texas is within the exclusive
domain of the Federal Government. Therefore, the Court reasoned that
the Supremacy Clause of the United States Constitution preempts all
state regulation that would "vitiate the impact or intent of the
federal regulatory scheme."
The "federal regulatory scheme" in question in United States v.
State of Texas is the Department of Defense's alcohol procurement
regulation 32 C.F.R. section 261.4(c). The intent of that Department
of Defense regulation is to insure the purchase of alcoholic beverages
by the United States Armed Forces "in such a manner and under such
conditions as shall obtain for the Government the most advantageous
contract, price, and other factors considered." The Court's decision
in United States V. State of Texas holds that this Department of
Defense regulation preempts any state law which would prevent the
United States Armed Forces' facilities from obtaining for the Federal
Government "the most advantageous contract, price, and other factors
considered."
Under the Court’s reasoning in United States v. State of Texas
(especially given its reliance on the Tax Cormnissionof Mississippi
cases) the $2.00 gallonage tax imposed by the Texas Alcoholic Beverage
Code would be an invalid exercise of state regulation-by-taxation on
the importation of distilled spirits into territory over which the
United States exercises exclusive jurisdiction. Furthermore, under
United States v. State of Texas, the Department of Defense's alcohol
procurement regulation controlling the purchase of alcoholic beverages
for resale on military installations preempts any state law which
would prevent the United States Armed Forces from obtaining for the
Federal Government "the most advantageous contract, price, and other
factors considered." The imposition of the $2.00 gallonage tax
arguably prevents the United States Armed Forces from obtaining for
the Federal Government "the most advantageous contract, price, and
other factors considered." Therefore, it is our opinion that the
$2.00 gallonage tax of sections 201.02 and 201.03 of the Texas
Alcoholic Beverage Code cannot be imposed on sales of distilled
spirits between Texas wholesalers and military installations of the
United States Armed Forces located in Texas.
p. 409
Mr. W. S. McBeath - Page 4 (JM-96)
SUMMARY
The decision in United States v. State of
Texas, 695 F.2d 135 (5th Cir. 1983) prohibits
imposition of the $2.00 gallonage tax provided by
sections 201.02 and 201.03 of the Texas Alcoholic
Beverage Code on sales of distilled spirits by
Texas wholesalers to military installations
located in Texas.
Attorney General of Texas
TOM GREEN
First Assistant Attorney General
DAVID R. RICHARDS
Executive Assistant Attorney General
Prepared by Charles A. Gruber
Assistant Attorney General
APPROVED:
OPINION COMMITTEE
Rick Gilpin, Chairman
Jon Bible
Colin Carl
Susan Garrison
Charles Gruber
Jim Moellinger
Nancy Sutton
p. 410