                          September 2, 1959

Honorable Roberts. Calvert     OPINION NO. w-694
Comptroller of Public Accounts
Austin, Te,xas                 Re: Correct definition of "Art-
                                   icles made of precious
                                   metals" and proper valuation
                                   of such metals and "precious
                                   or semi-precious stones"
                                   for purpose of tax imposed
                                   by Art. 20.06 a, H.B. 11,
Dear Mr. Calvert:                  3rd C.S. 56th Leg.
      'You'have.posed.severalquestions,regarding Art. 20.06 3 -ZL
of H.B. 11,.3rd, C.S., 56th Leg., 'which is quoted as follows:'
      'Precious or semi-precious stones; all articles
      made of fur on the hide or pelt; articles made
      of precious metals. There is hereby levied and
      shall be imposed upon the sale,.distribution or
      use In this State on al1 articles commonly or
      commer?lally known as lprecious or semi-precious
      stones'; all articles made of fur on the hide or
      pelt; articles made of precious metals; having a
      value in excess of Twenty-five
      excise'tax equivalent to three
      the retail price for which any
      sold."
      You specifically ask:
      1. Is the tax on precious metals limited to metals
      so defined in the trade or industry, I.e., gold,
      silver, platinum, and all metals having a comparable
      or higher value?
      2. Does this mean that the tax shall be levied only
      upon pure gold or pure silver? Gold Is composed of
      24 karats, Anything less than this is c~onslderedan
      alloy. The Federal Trade Commission prohibits the
      use of the unqualified gold in advertising unless
      it is 24 karats.
Hon. Robert S. Calvert, page 2 (w-694)


       3. If Question No. 1 is decided in favor of taxlng'~
       other than the precious metals, what will be the
       dividing line? 10 karat gold which is less than
       one-half? 14 karats which Is barely more than one-
       half?
       4. Are articles made of non-precious metal but
       coated with a precious metal to be taxed?
       5. Is sterling silver to be taxed? Silver Is com-
       posed of 1000 parts fine. Sterling silver Is .925
       fine and Is defined as an alloy of silver by all
       standards, Including federal law (U.S. Stamping Law,
       Webster's Dictionary, etc).
       6. Whe~nanarticle Is made of part pure gold or pure
       silver, and the ~::lueof the pure gold or pure silver.
       is lens t.'>;;;:
                     25 >but the aggregate value of the article
       is more than $25, is this Item to be taxed? Example: a
       cha~rmmade of pure gold worth less than $25 but contain-
       ing a semi-precious stone worth less than $25, the ag-
       gregate value being $40. ~What tax, If any? Another ex-
       ample would be where~ah Individual has a charm and pur-
       chases three separate 'stonesto'be attached thereto.
       The aggregate value'of 'the stones,being over $25 but
       each stone.having a value of less than $25.
           "It Is interesting to note that the Legislature in
drawing this Section provided 'fora tax on articles commonly
or commercially known as precious or semi-precious stones but
Imposed a tax on articles made of precloub metals. This im-
plies that the tax on p~reclousorseml-precious stones is a
tax on the stones themselves and not to the articles to which
they are attached. The question is, therefore, whether or not
a watch which is made of stainless steel, having 12 diamonds
each of a value of less than $25, that is Itself worth $250,
shall be taxed. If so, what portion?"
                          >,
           Questions Relating to "Precious Metals"
       In construing civil statutory enactments, "The ordinary
signification shall be applied to words, except words of art
or words connected wlth'a particular trade or subject matter,
when they .shallhave the significance attached to them by ex-
perts In such art or trade, with reference to the subject
matter." (Bnphasls added) particle 10, Sec. 1, V.A.C.S.
Hon. Robert S. Calvert, page 3   (w-694)


The meaning attributed t,o "precious metals" by the trade
or industry-accords wlth'the commonor ordinsry meaning
of the 'term, as reflected by Webster's new International
Dictionary (2nd Rd.):
       "Precious metal&:  The uncommon and highly valuable
metals, esp. gold, silver and patinum."
       The Federal government levies a retailers excise tax
bn articles made of or ornamented, mounted or fitted with
 recious metals or imitations thereof. 26 U.S.C.A. Sec.
 001 (I.R.C. 1554).  In reference to the tax, the following
departmental construction has been issued:
       "The term precious metals ~includes patinum, gold,
       silver, and other metals of similar or higher'value;
       The term 'Imitations thereof" includes platings and
       alloys of such metals."
       Title 26 c.F.R., Sec. 320.33 (l&4   Rd.) (emphasis
       added.)
       It Is apparent that the term "precious metals" has a,
clearly defined and well established meaning. Had the'legis-
lature intended to extend the scope of the tax beyond such
metals, it could easily have used language appropriate to the
purpose. The same is true regarding plating. The tax is
imposed on articles made of precious metals; such language
negatives any Intent to tax articles "coated" with or made
"In part" of precious metals. Questions concerning whether
a revenue measure extends to particular objects are to be
strictlv construed aaainst the tax and in favor of the tax-
                                         17~S.W. 2d 160 (Tex.
                                          Public Service Co.
                                         7; Sutherland,
          Construction,                   Ch. b7, Sec. 6701.
       From the foregoing discussion, it is apparent that
questions No. 1 and 2 must be answered in the affirmative and
questions 4 & 5 answered in the negative; having affirmatively
answered questions 1 & 2, it is unnecessary to answer question
3.
                Questions concerning valuation
       Your fifth question presents problems concerning proper
valuation of certain articles.
, 7.? . : ;
.,:2d

 Hon. Robert S. Calvert, page 4 (W-694)


       Article 20.06 f of H.B. 11 imposes an excise tax On.the
sale,~distribution or use of "all artlcles commonly or corn:'
mercially'known as 'precious or semi-precious stones'...having
a value in excess of Twenty-five Dollars. . . ."(emphasis
added). Again, had the legislature intended to levy the tax
upon the sale or use of stones having an aggregate value
in excess of $25, or had it intended to levy the tax on
articles containing or made of stones having an aggregate
value in excess in excess of $25,'it would have employed
language appropriate to such purpose. Since the leglsla-
ture failed to employ such language, but Instead used
language clearly evidencing the contrary, It follows, as
you have correctly stated, that "the tax on precious or seml-
precious stones is a tax on the stones themselves and not the
articles to.which they are attached." Consequently the answers
to the questions concerning such stones are apparent. Where
an individual purchases stones to be attached to a charm,
the tax is on any stone having a value in excess of $25, but
is not levied on the stones having less than such value.
Likewise, no tax is imposed on a watch containing 12 stones
each of a value less than $25; however, if any such stone
had a value In excess of $25,,the tax would apply to such
stone.
       The tax on precious metals Is on articles made cf
precious metals. Since the legislature did not levy the tax
on articles made "in part of" or "coated or plated with"
precious metals,,it Is obvious that before an article Is
taxable It must be made principally of precious metals. Con-
sequently, if an article 1s maae OS purergold and pure silver,
the tax Is on the aggregate value. But, where-e    article
is made of gold or silver plated non-precious metal, or gold
or silver alloy, no tax attaches regardless of the aggregate
value of the article or the Individual value of the gold
and/or silver used in such article. But the addition of
another item such as a diamond to a pure gold ring does not
defeat the tax.
                           ~SUMMARY
              The,term "articles made of precious~metals"
              as used In Art. 20.06 + of H.B. 11, 3rd C.S.
              56th Leg., means articles made of gold, silver,
              platinum or:metals of similar or higher value
              of combinations thereof, and does not include
              articles plated with such metals or alloys, I.e.,
              combinations with non-precious metals.
Hon. Robert S. Calvert, page 5    (w-694)


           The tax Imposed on precious or semi-precious
           stones is levied on individual stones of a
           value In excess of $25.; tax on precious
           metals Is upon articles made of such metals,
           or combinat3.onsthereof, having a value in
           excess of $25.
                                 Yours truly
                              WILL WILSON
                              Attorney General of Texas



                                    ,AssistaritAttorney General
OPINION COMMITTEE:
Geo. P. Blackburn, Chairman
‘3. C. pads,   Jr.
James R. Irion III
Marvin Thomas
REVIEWED FCB THE ATTORNEY.GERERAL    ,~
By: W. V. Geppert
