Hun. Robert S. Calvert
Comptroller   of Public Accounts
Capitol Station
Austin, Texas
                              Opinion No. S-128

                              Re:   Applicability of the State Prize and Award
DeAr Mr.   Calvert:                 Tax to the “What’s My Name” conGest.

              YOU request the opinion of this office on the question contained
in your letter,of,May   3, 1954, and supplement   thereto dated June 2, 1954,
which respectively    are as follows:

              “Thee Waples-Platter   Company of Fort .Worth, ,Texas;
      recently held a contest known as ‘What’s My Name’.         In order
      to participate  in this contest it was necessary   that a person
      purchase White Swan coffee in order to obtain the slip con-
      tained in each can of coffee, which slip had to accompany       each
      entry blank.   The winners were awarded various prizes.         I
      called on these people for the State Prize & Award tax as
      levied by Article ,7047f. The Waples-Platter     ,Company con-
      tends that the tax did not accrue as to tax these prizes and
      awards would be a burden in Interstate Commerce.

              “Attached is a letter from this Firm outlining their
      r,easons for believing the tax did not apply on the ‘What’s My
      Name’ contest.    Also attached is a list showing the medium
      used in advertising   this contest. I will appreciate your
      opinion as .to whether or not the State Prize &,Award tax
      accrued on the prizes given in connection with this contest.
      To my knowledge there is no litigation pending that would
      have any bearing on this question.”

              “I wish to supplement my request for an opinion
      dated May 3, 1954.     This request was in connection with
      the liability of the State Prize & Award ‘Tax on awards
      given by the Waples-Flatter     Company of Fort Worth, Texas,
      in a contest known as *What’s My Name.”

             “The contestants    in the contest purchased the White
     Swarrcoffee,    a product of Waples-Flatter    Company, from
     retail outlets.   The retail outlets in turn had purchased the
     coffee from Waples-Flatter      Company,    ,Would the customers
     of the retail outlets be considered    as patrons of Waples-
     Platter Company?
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Hon. Robert      S. Calvert,   page 2 (S-128)




                 “Your   opinion on this additional question   to my
      previous     request   of May 3 will be appreciated.?

               In order to answer your question as to the liability of Waples-
Platter Company of Fort Worth for the State Prize Tax imposed by
Article   7047f, Vernon’s   Civil Statutes, we must answer two questions.
First,  is the incidence of this tax violation of the commerce    clause of the
Federal Constitution?      Second, are the participants  in the contest “What’s
My Name,” sponsored by Waples-Platter,         patrons of that business  enter-
prise within the purview of the taxing statute7      We shall answer these
questions in the order in which we have stated them.

               The advertising   of this contest by Waples-Platter       was prima-
rily through the medium of radio, television      and newspaper advertisements
Concededly,    some of these broadcasts     and newspapers      r,eached beyond
State boundaries.    This fact, however, does nat compel the conclusion            that
this tax is laid upon inters,tate commerce.      The tax is not for the privilege
of advertising   the contest by means of radio, television       and newspaper
advertisements,    but for the privilege of awarding the prizes.         If the tax was
upon the privilege of using these mediums in advertising           the contest, then
interstate   commerce    might be involved.    The incidence of the tax is upon
the awarding of the prizes to the successful      participants,    which is purely a
local incidence taking place at Fort Worth and within the State. We there-
fore conclude that the awarding of the prizes by Wapies-Platter             in the
manner present here in no way contravenes         the commerce       clause of the
Federal Constitution.

               Passing now to the second question as to whether the partici-
pants in the contest are patrons Of Waples-Platter,      it is necessary to
determine    the legislative intent in the use of the word “patrons” in the tax-
ing statute.   This statute reads in part as follows:

               “(a) Every person, firm or corporation    conducting
      a theatre, place of amusement,    or any business enterprise
      in connection with 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 busi-
     .ness enterprise,   and not given to all patrons thereof paying
      the same charge for any certain service,     commodity,   or
      entertainment,   shall make a verified monthly report on the
      twenty-fifth  day of each month to the Comptroller    of Public
      Accounts of the State of Texas, showing the amount of
      money so given in prizes, and the value of all prizes or
      awards so given in connection with such business during the
      next preceding month.

               “(b) There is hereby levied a tax equal to twenty
      per cent (20%) of the value of all such money, prizes, and
      awards given in connection with th.e operation of each and
      all of the foregoing business enterprises,  and at the time
                           ,,
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    Hon. Robert     S. Calvert,   page 3 (S-128)



         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 during the next preceding
         month. . . ,* (Emphasis   added.)

                 The statute does not define the word “patrons,” hence we may
    look to the generally   accepted meaning of this word as commonly    used.
    Webster’s   New International   Dictionary, among other connotations   of the
    word patron, defines it in this language:    ‘patron - one who supports a
    commercial    enterprise.”

                    It seems quite obvious to us that the participants          in the con-
    test in making purchases         of White Swan Coffee which, as we understand,
    is exclusively     processed    by Waples-Flatter,     lend support to Waples-
    Platter,  the business enterprise         which awards the prizes,      All partici-
    pants in the contest, whether successful          or unsuccessful,    lend support’to
    Wbples-Platter,       the business    enterprise,  in making purchases        of White
    Swan Coffee.      A participant,    in ordqr to qualify for the contest, must pur-
    chase a can of White Swan Coffee in order to obtain the entry blank neces-
    sary for entering the contest.         It is not an important factor that the selec-
    tion of successful      contestants   is entrusted by Waples-Flatter        to a profes-
    sional organization       in Chicago which specializes     in selecting    successful
    contestants    such as involved here.

                   You are therefore advised that from the information submitted
    by you, upon which this opinion is based, Waples-Platter    Company is sub-
    ject to and should pay the prize tax imposed by this statute upon the value
    of the prizes.

                                        SUMMARY

                   A bus.iness enterprise    awarding prizes in Texas to
         successful    contestants,   who are patrons of such business
         enterprise,    is subject to the State Prize 81 Award tax imposed
         by Article    7047f, V.C.S.   Even though the contest is open to
         residents   of other States and is advertised    through advertising
         mediums located in other States, the imposition of the tax by
         the State of Texas in these circumstances       is not an unlawful
         burden on interstate      comme~rce in violation of the Federal
         Constitution.

                  Purchasers  of a product through retail outlets are
         ‘patrons”  of the man~ufacturer or processor   of the product
         within the meaning of that term in Article   7047f.

    APPROVED        BY:                        Yo,urs very    truly,

    W. V. Geppert                           JOHN BEN SHEPPERD
    Taxation Division

    John Atchison
    Reviewer                               BY AttogiJjjlJ
                                                    .    .
                                                  Assistant
Hon. Robert    S. Calvert,   page 4 (S-128)




Mary K. Wall
Reviewer

Robert S. Trotti
First Assistant

John Ben Shepperd
Attorney GeneTal
