Can Texas waive the bingo prize fee on small prizes, or can the charity pay it instead?

Texas AG Opinion DM-0062: The Bingo Prize Fee on Small Stakes

Plain-English summary

The Texas Alcoholic Beverage Commission, which then regulated bingo, asked several questions about the new three percent fee on bingo prizes, focused on small-stakes games where many winners take home only 50 cents or a dollar. A 1991 enactment had added section 19b to the bingo statute (article 179d), requiring a licensed organization to collect a fee of three percent of each prize's value and remit it like the gross receipts tax.

On the first question, whether "instant bingo" is a "bingo game" under the statute, the opinion declined to decide. Whether a particular game fits the statutory definition (a game of chance in which prizes are awarded based on designated numbers or symbols on a card matched to randomly selected numbers or symbols) is a fact question outside the opinion process. The opinion noted it did not need to resolve it, because the fee question applied to any small-stakes bingo game.

On the second question, the commission could not waive the fee on prizes of a dollar or less. The opinion relied on a line of prior opinions holding that an administrative body waiving a fee it is required to collect amounts to a suspension of the laws, which only the Legislature can do, barred by article I, section 28 of the Texas Constitution. The complaint that collecting tiny fees costs more than they bring in did not change the result.

On the third question, whether the organization could pay the fee itself, the answer was technically no. Because the fee is computed on the total prize, an organization that paid the fee would increase the prize, which would generate still more fee (a $100 prize paid with fee becomes $103, triggering another 9 cents, and so on). But for small prizes the math works out: the fee on a 50-cent prize is the same as the fee on a 52-cent prize, so a charity could award a 52-cent prize, hand the winner 50 cents, and remit 2 cents to the state. So while the organization could not literally pay the fee, it could slightly raise the face amount of small prizes to reach substantially the same result.

Currency note

This opinion was issued in 1991. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Texas bingo regulation moved from the Alcoholic Beverage Commission to the Texas Lottery Commission, article 179d was recodified into the Occupations Code, and the prize-fee provisions have changed since 1991. Verify current law before relying on anything here.

Common questions

Could the state waive the bingo prize fee on very small prizes?
Under this 1991 opinion, no. The opinion held that waiving a fee the agency is required to collect is an unconstitutional suspension of the laws under article I, section 28, no matter how little revenue the small prizes produced.

Could the charity running the game just pay the fee out of its own pocket?
Not literally. The opinion explained that because the fee is figured on the total prize, paying it would increase the prize and generate more fee. For small prizes, though, the charity could slightly raise the prize's face amount to absorb the fee with the same net result.

How did the small-prize workaround work?
The fee on a 50-cent prize equals the fee on a 52-cent prize. So a charity could set the prize at 52 cents, give the winner 50 cents, and send 2 cents to the state. The opinion noted this only works for small amounts; with larger prizes the math no longer lines up.

Did the opinion decide whether "instant bingo" counts as bingo?
No. The opinion said whether a specific game fits the statutory definition is a fact question it could not resolve, and it did not need to because the fee analysis applied to any small-stakes bingo game.

Background and statutory framework

Bingo was regulated by article 179d, V.T.C.S. Section 19b, added by Acts 1991, 72d Leg., 1st C.S., ch. 5, § 11.031, required a licensed authorized organization to collect a fee of three percent of each prize's value and to report and remit it like the gross receipts tax under section 20. Section 2(2) defined "bingo" or "game." The opinion grounded the no-waiver conclusion in Texas Constitution article I, section 28 (only the Legislature may suspend laws), following Attorney General Opinions O-4631 (1942), O-6444 (1945), and O-6754 (1946), each holding an official could not waive a required fee. A footnote noted that resolving the "instant bingo" definitional question would also involve the meaning of "bingo" when the voters adopted Texas Constitution article III, section 47, which authorizes bingo games.

Citations

Constitutional and statutory provisions:

• Article 179d, V.T.C.S. (statute regulating bingo)
• Article 179d, V.T.C.S., § 19b (three percent fee on bingo prizes)
• Article 179d, V.T.C.S., § 2(2) (definition of "bingo" or "game")
• Article 179d, V.T.C.S., § 20 (gross receipts tax; manner of remitting)
• Tex. Const. art. I, § 28 (only the Legislature may suspend laws)
• Tex. Const. art. III, § 47 (authorizing bingo games)

Prior Attorney General opinions referenced: O-4631 (1942); O-6444 (1945); O-6754 (1946).

Session law referenced: Acts 1991, 72d Leg., 1st C.S., ch. 5, § 11.031.

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/dan-morales/dm-0062
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1991/dm0062.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain — the linked PDF is authoritative.

Office of the Attorney General
State of Texas

DAN MORALES
Attorney General

November 27, 1991

Ms. Jeannene Fox
Acting Administrator
Texas Alcoholic Beverage Commission
P.O. Box 13127
Austin, Texas 78711-3127

Opinion No. DM-62

Re: Collection of fees for small stakes bingo (RQ-219)

Dear Ms. Fox:

You have requested our opinion on several questions regarding the collection of fees for certain games of small stakes bingo. You indicate that

[i]n addition to bingo games played on hard cards and disposable paper cards, bingo players also play instant bingo. . . . Most of the winners on instant bingo cards are $.50 or $1.00 winners.

Bingo is regulated by article 179d, V.T.C.S. A recent legislative enactment added section 19b to the statute to provide for the imposition of fees on bingo games. That provision states:

Sec. 19b. (a) An authorized organization licensed to conduct bingo shall collect a fee from each person who wins a prize in a bingo game.

(b) The fee imposed by this section is three percent of the amount or value of the prize.

(c) A licensed authorized organization shall report and remit the fee imposed by this section at the same time and in the same manner as the gross receipts tax under Section 20 of this Act.

Acts 1991, 72d Leg., 1st C.S., ch. 5, § 11.031, Vernon's Sess. Law Serv. at 184.

You first ask whether "instant bingo" constitutes a bingo game for purposes of article 179d. "Bingo" or "game" is defined in section 2(2) thereof as

a specific game of chance, commonly known as bingo or lotto, in which prizes are awarded on the basis of designated numbers or symbols on a card conforming to numbers or symbols selected at random.

Whether a particular game described as "instant bingo" falls within the definition in section 2(2) requires the resolution of factual issues that cannot be addressed in the opinion process.[1] We need not address any specific game, however, since the question you raise about taxes is relevant to any bingo game with small stakes.

You also ask whether the Alcoholic Beverage Commission may waive the fee on bingo prizes of $1.00 or less. You state that organizations that conduct small stakes games complain that the cost of hiring additional workers to collect the fee from small stakes bingo winners would be in excess of what it would cost the organizations to pay the prize fee themselves and would bring the state a very small amount of revenue.

A number of prior opinions hold that a waiver of fees that an administrative body is required to collect constitutes a suspension of laws, in contravention of article I, section 28, of the Texas Constitution. In Attorney General Opinion O-4631 (1942), for example, the State Board of Hairdressers and Cosmetologists sought to waive the required payment of license renewal fees for those individuals who were called into military service. In Attorney General Opinion O-6444 (1945), the State Board of Barber Examiners asked whether it might exempt registered barbers from payment of renewal fees during their tenure in the armed forces. In Attorney General Opinion O-6754 (1946), a county clerk sought permission to waive the $1.00 marriage license fee for members of the armed forces. In each case, the attorney general replied that the official was without authority to waive the particular fee because of article I, section 28. Likewise, we are here compelled to conclude, regardless of the amount of revenue obtained from the imposition of fees on winnings in games of bingo, that the Alcoholic Beverage Commission is not empowered to waive or exempt the fee imposed on any prize.

Finally, you ask whether the organization that conducts the bingo game may itself pay the fee. The answer to this question, theoretically, is "no," as the following example will demonstrate. Suppose a bingo player wins $100.00. The statute assesses the fee on the total prize, and, if the organization paid the fee on $100.00, the total prize would be $103.00, thus necessitating the collection of an additional 9 cents. In other words, when the fee is paid by the organization, the amount of the fee must be added to the value of the prize, which, in turn, generates an additional fee to be paid. However, for small prizes, such as those about which you inquire, this problem is avoided. We use as an example a bingo prize worth 50 cents. The total value of such a prize could be transformed into a prize of 52 cents without generating any additional fee. In this example, the winner receives 50 cents and the state 2 cents. Likewise, a prize of one dollar could be transformed into a prize of $1.03, with $1.00 going to the individual and 3 cents to the state. This procedure works with small amounts because the fee on prizes of 50 cents is the same as the fee on prizes of 52 cents, and the fee imposed on prizes of $1.00 is the same as the fee imposed on prizes of $1.03. Thus, adding the fee to the amount paid to the winner does not increase the amount of fee owed on the total prize. With sufficiently large prizes, however, the principle breaks down.[2] Thus, in answer to your third question, it is our opinion that while the organization may not itself literally pay the fee on prizes of 50 cents and $1.00, it may slightly alter the amount of the prizes awarded to achieve substantially the same result.

SUMMARY

The Alcoholic Beverage Commission may not waive the three percent fee for small prizes awarded in games of bingo. Although the organization conducting the bingo game may not itself pay the fee, it may achieve substantially the same result for small prizes by slightly altering the face amount of the prize awarded.

Very truly yours,

DAN MORALES
Attorney General of Texas

WILL PRYOR
First Assistant Attorney General

MARY KELLER
Deputy Assistant Attorney General

JUDGE ZOLLIE STEAKLEY (Ret.)
Special Assistant Attorney General

RENEA HICKS
Special Assistant Attorney General

MADELEINE B. JOHNSON
Chair, Opinion Committee

Prepared by Rick Gilpin
Assistant Attorney General

[1] A resolution of this question would also require us to explore the meaning of "bingo" as that term was understood by the voters at the time of the adoption of the provision of article III, section 47, of the Texas constitution authorizing bingo games.

[2] With a three percent fee, the principle breaks down at a point between $5.00 and $6.00. The fee on a $5.00 prize is the same as a fee on a prize of $5.15, but the fee on a $6.00 prize is not the same as a fee on a prize of $6.18.