Hon.    T.   M.   Trimble
First Assistant
State Superintendent        of
Fublia Instruction
Austin, Texas

Dear Sirr                              Opinion 'No. O-5677
                                       Re: Are State and Federal excise
                                            stamps on hand in a liquor
                                            store  subject to sohool taxes?

          pie have your request for opinion on the above question.  YOU
attach to your request, and in explanation thereof, a letter to you
from Mr. George M. Waddill, & 81nsss hhnager of the Amarillo Publio
Schools.  The pertinent parts of said letter are as followsg

              Vn the case of I..E. L. Sales Company, Inc. of
       Amarillo, Texas the tax equalization board raised the
       valuation of merchandise and other assets rendersd by
       the above Company8 and in protesting the raise of said
       values, L. h. L. Sales Company insists that certain
       items are not subject to taxation as follows:

             "1 . State Excise Stamps, part attached to whiskey
       and wine and part loose stamps. . . . . . . . .$2,164.91

             '"2. Additional Federal. ::'xoiseTax. effective Nov.
       1st. 1942. &lled separately from the cost of whiskey
       and wine and 0. P. A. did not allow a markup at that time
       on this tax. . . . . . . . . . . . . . . . . . $1,70:;.64

             "This Company is in the wholesale liquor business
       and takes the position that the above two items are not
       subject to tax since they represent taxes paid.

             "Our equalization board took the position that these
       amounts represent money which has been used to increase the
       value of the merchandise on the shelf, and that it would
       be proper to inolude the cost of the stamps in arriving at
       the net oost of the arMales ori the shelf.

             "F'urther, that those stamps which were loose and not
       attached to merohandise are taxable for the reason th?t if
       the stamps were not on hand, the same amount would be re-
       presented in cash in the bank, which would be, without question,
       taxable."
Hon. T. M. 'Irimble, page 2              O-5677




          As to the powor of the school district to siibjoct.the Fedsra?
excise stamps to an ad valorem tax we observe as follows:

          These stamps oome into existence under   the terms of an act of
the Congress of the IJr~;tedStates pertaining to the collection of the
internal revenue taxes imposed by the Federal Government on distilled
spirits. 'The internal Revenue Code of the Government of the United
States sets up an exhaustive and comprehensive method for the coiieotion
of taxes on distilied spirits.    In said Act among other things it is
provided that, "No person shall transport, possess, buy, sell or trans-
fer any dis,tilied spirits, unless the immediate container thereof has
affjxad thereto a stamp denoting the quantity of distilled spirits oon-
tained therein and ovidwcing   paymsnt of all. internal rsvonue taxes im-
Es-?d on such spirits.-
                  --_-

          The law further provides in substance that the stamps mentioned
shall be issued by the Commissioner to each Collector, upon the requisi-
tion of the Collector, and that the issue shall be in such numbers as may
be necessary in the particular Collector's district, and shall be sold
by the various Collectors to persons entitled thereto upon their making
application for stamps and complying fully with the regulations which
may be set up under this law.

            When any stamps so procured are destroyed by fire or water,
or made useless by erroneous over-printing or cutting before they have
been used, the Commissioner under re,gulations approved by the Secretary
may issue new stamps in exchange for the old stamps. And in case the
oxbxer of the stamps has no use for them by reason of the discontinuanoe
or transfer    of hj.s business, and has on hand quan.tities of the value of
$5.00   or more,  and presen-ts hj~s claim within one yoar aftor tho date on
which the stamps wre purchased the Commissioner may refund the value
of said unused stamps under     regulations approved by the Secretary.   'I'he
law furhter provides that every person emptying any container stamped
under ths provisions of this law shall at the time of emptying such con-
tainer destroy the stamp thereon.       (See United States Code Annotated,
Title 26, Chapter 26, Sections 2800 to 5045, inolusive)

          The .stamps of the Federal Government, about which you inquire,
are a device used by the Federal Government in the collection of its
taxes on alcoholj~c liquor. These stamps are evidence of a tax paid to
the Federal Government by the taxpayer.   They are an instrument, or in-
strumentality, used by the Federal Government as a part of its system
and method for the collection of taxes due the Government of the kilited
States under the terms of i,ts internal Revenue Laws.

           It is u;nl~lsettled that the State of Texas, as well as its
politics.1 subdivi~sions which possess taxing powsrs, do not have authority
to tax an instrumentality of the United States when such tax operates as
a burden upon the means or sgenoy whereby the Federal Government performs
its governmental functions.
--   -




         Hon. 2'.M. Trimble, page 3                O-5677




                   ‘liermFrard the Federal stamps inquired whoEt by you as f:&llicg
         within the ruiec last mentioned, arid you are therefore advised that the
         school district cannot assess, levy or colleot any tax on said stamps.
         (See Texas Jurjsprudence, Vol. 40, Section 11, page 24, and cases cited
         therein)

                   -4s to the taxability of the liquor stamps of the State of Texas
         about which you inquire, you are advised as follows:

                   School districts do not possess an inherent power to tax, as
         does the State. Schooi distrj.cts derive their taxing poxers solely from
         the statutes.  {See VOL. b7, Texas Jurisprudence, page 990)

                    The lax scripta of Texas contemplates the collection of an ad
         vaiorem tax form all personal property of every description whatever.
         This gelera rule is limited by the principle of law to the effect that
         ~when the State delegates to a looal unit or political. subdivision a
         power to levy a tax, that  the power to levy said tax on property and
         agencies of the State is impliedly reserved from this delegation of power.




                     The stumps of the 'State of Texas about xhich you inquire come
         into bnilg by virtue of th+ provisions of the Texas Liquor Lontrol Act.
         ?‘h!s Act is set forth in Vernon's Penal Code RS ,lrticle 666-l to 666-49,
         and 667-l to 667-22, il:clusivo. The Texas Liquor Control h-t is Iengthy,
         3nd its reproduntiw    here  :w!u!d wxsime  many pages.   For the sake of
         brevity, 've omit sntt;,?g it out .In full. Xe believe it xi,11 suffice to
         my with reference to thjs Act that B tax is tIhere* imposed by the State
         of Texas upon the !'i,rst sale of a11 alcoholic spirits or liquor which is
         oroducod by f!?e process of distil!atinn.     'i~heAct makes thins tax pa.yable
         by the affixing of the stamps to the containor of liquor so taxed.
         i‘labornta prov;sions for the issua:!ae of theso    stamps and their method
         of? srtle, c&c., 31-ailade by the tarms of ths ?'exss iiqwr Control .ict.
         (;jee?~RIOE’S ~-'o:Is~::ode, Artio: es fifi6-%l.t,
                                                         666-21‘0, sn3 666-1.5a:l)

                    A?-,
                       nnalLysis a:ld digest of the verio~txsprovisions of the kct
         ?m!ier diso,lssio,ndisclose that the stamps in ques-tion are "evidence of
         tho paymnt   of e trx, "w&/or nn apnncy or instrlmental.ity of the !;t?te
         of‘ Texas usnd by :t as a means in the performance of i,ts povbmmoi?cii?
         functions of oollsctlng tho tax levied by the ~/Loton the first sate of
         alcoholic spirits and liquors above mentioned.
                                                                        --




'don. T. Y. 'Crimblo, ~a@   4           O-5677




           A, the Texas Liquor Tax Stamps about which you Inquire are zr!
instrurne,ntor mear;s nr agency, rutilizod by the State in th- orderly pro-
cess of the aollnction of taxes imposnd by the tezms of the Texas Liquor
Control Aot, it follows that when the State delegated to the school
district the power to collect ad vel.oram taxes, the power to levy such
a tax on said instrument:ility of the State, as is the liquor tax stamp,
was implindly withheld and not granted.

           Be are therefore, of the opinion and so advise you that the
school district cannot levy an ad valorem tax upon the State Liquor Tax
strunps, about which you inquire.




                                            Ey s,/Geo. P. Ala&burn
                                                 George P. R,lackbura
                                                            Assistant
