Can a Texas city require its own license to sell tobacco, on top of the state permit, to crack down on sales to minors?

Plain-English summary

In 1991 the City of Arlington passed an ordinance to keep tobacco out of the hands of people under 18. It required any store selling tobacco to get a "tobacco dealer's license" from the city, and let the city suspend or revoke that license if a store sold to minors; a store that lost its license had to pull all tobacco products off its shelves. Around the same time, the Texas Legislature amended the Tax Code to say that permits to sell tobacco "shall be governed exclusively" by the Tax Code. The Chairman of the House Public Safety Committee asked the Attorney General whether the state law blocked the city's licensing scheme.

The Attorney General concluded that it did. A home-rule city like Arlington starts with broad power to govern itself, and a court will try to read a city ordinance and a state statute so that both can stand. But the legislature can take a subject away from local control, and when it does, that intent has to be clear. Here it was clear. The Tax Code's "governed exclusively" language, plus the legislative history (the senator who introduced the amendment said only the Treasurer's office, not local governments, was to handle these permits), showed the legislature wanted local governments out of the tobacco-permitting business.

The opinion considered, and rejected, the argument that the two systems could coexist because they did different jobs: the state permit is about collecting the tobacco tax, while the city license is about protecting kids' health. The opinion reasoned that the legislature meant to give the state treasurer the sole say over which businesses can sell tobacco, because a second permit system run by cities would confuse and interfere with the state's tax-collection process. So no matter the city's good public-health purpose, its licensing scheme was preempted by the Tax Code.

Currency note

This opinion was issued in 1992. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here. Texas tobacco regulation changed substantially after this opinion (the state later enacted comprehensive tobacco-retailer permitting and minor-access laws, and permitting authority moved from the state treasurer to the Comptroller), and one of the cases the opinion relied on was pending on appeal ("writ granted") when issued. Confirm current law before relying on anything described here.

Background and statutory framework

Chapters 154 and 155 of the Tax Code levy a tax on the sale of cigarettes and other tobacco products and establish a system for administering, collecting, and enforcing the tax. A key enforcement mechanism is the requirement that all distributors, wholesalers, bonded agents, and retailers of tobacco products hold a permit, issued by the state treasurer, to engage in business (Tax Code § 154.101(a)). The treasurer may deny a permit if the applicant's premises are inadequate to protect the products or revenue stamps, the applicant was untruthful in the application, or the applicant previously violated the chapters (Tax Code §§ 154.107, 155.0481), and may suspend or revoke a permit for violations of the chapters or rules (Tax Code §§ 154.114, 155.059). The legislature then amended both chapters to provide: "Permits for engaging in business as a distributor, wholesaler, bonded agent, or retailer shall be governed exclusively by the provisions of this code." Tax Code §§ 154.101(h), 155.041(h) (Acts 1991, 72d Leg., ch. 409).

The City of Arlington, a home-rule city, had enacted Ordinance No. 91-15 (the "Health" chapter, article XI of the city code, effective August 1, 1991), intended "to protect the health, safety, and welfare of persons under the age of eighteen (18) from the health risks caused by the use of tobacco products." The ordinance required tobacco retailers to obtain a "tobacco dealer's license" from the city and allowed the city, by license suspension or revocation, to stop a retailer from selling tobacco after one or more sales to minors; a retailer whose license was revoked had to remove all tobacco products from the premises, and noncompliance was punishable by a fine.

The opinion set out the home-rule framework. The Texas Constitution grants home-rule cities all the power of self-government not denied them by the legislature (Tex. Const. art. XI, § 5; City of Dallas v. Dallas Merchants & Concessionaires Ass'n, 823 S.W.2d 347 (Tex. App.—Dallas 1991, writ granted)), but prohibits a home-rule city from enforcing legislation inconsistent with state law or the constitution (Tex. Const. art. XI, § 5). Courts must try to construe an ordinance and a state statute on the same subject so as to leave both in effect if possible (City of Richardson v. Responsible Dog Owners of Texas, 794 S.W.2d 17 (Tex. 1990)), and legislative intent to limit the broad powers of home-rule cities "must appear with unmistakable clarity" (City of Dallas, 823 S.W.2d at 353, citing City of Corpus Christi v. Continental Bus Systems, 445 S.W.2d 12, 17 (Tex. Civ. App.—Austin 1969), writ ref'd n.r.e. per curiam, 453 S.W.2d 470 (Tex. 1970)).

Applying that framework, the opinion found the plain language of the Tax Code provisions clearly showed the legislature's intent to prohibit local governments, including home-rule cities, from using a licensing system to regulate tobacco sales. The legislative history confirmed it: Senator Teel Bivins, introducing the provisions before the Senate State Affairs Committee, testified that "[t]his amendment makes it clear that it is only the Treasurer's office who is to administer these permits and that local governments are not to be involved in this permitting process" (Hearings on S.B. 689 Before the Senate State Affairs Comm., 72d Leg. (Apr. 8, 1991)). The opinion considered the argument that the Tax Code provisions and the ordinance could be harmonized because the state permit served revenue collection while the city license served health regulation, but concluded the legislature intended to vest the treasurer with the sole power to decide which businesses are entitled to permits to sell tobacco, because a dual permit system would confuse and interfere with the tax-collection process. So regardless of the ordinance's regulatory purpose, its permitting scheme was preempted by the Tax Code.

Common questions

Can a Texas city run its own tobacco-retailer licensing program?
The opinion concluded a home-rule city cannot, where the program is a permitting scheme for tobacco sales. Tax Code sections 154.101(h) and 155.041(h) make tobacco permits "governed exclusively" by the Tax Code, which the opinion read to preempt a city licensing ordinance.

Did it matter that the city's purpose was protecting minors, not collecting taxes?
No. The opinion rejected the harmonization argument and concluded the ordinance was preempted regardless of its public-health purpose, because the legislature meant the state treasurer to have sole authority over tobacco permits and a dual system would interfere with tax collection.

Why isn't a home-rule city free to add its own rules?
Because while home-rule cities have broad self-government power, they cannot enforce ordinances inconsistent with state law, and the legislature can remove a subject from local control when its intent is clear. The opinion found that intent clear here, in both the "governed exclusively" text and the legislative history.

Does this mean cities can do nothing about tobacco sales to minors?
The opinion addressed only the city's permitting/licensing scheme, holding that scheme preempted. It did not purport to resolve every possible form of local tobacco regulation; it concluded that a license-based system for tobacco retailers conflicts with the Tax Code's exclusive state permitting.

Citations

• Tax Code §§ 154.101(a), (h), 155.041(h) (state tobacco permits "governed exclusively" by Tax Code)
• Tax Code §§ 154.107, 155.0481 (denial); §§ 154.114, 155.059 (suspension/revocation)
• Acts 1991, 72d Leg., ch. 409 (enacting §§ 154.101(h), 155.041(h))
• Tex. Const. art. XI, § 5 (home-rule powers; no enforcement of law inconsistent with state law)
• City of Dallas v. Dallas Merchants & Concessionaires Ass'n, 823 S.W.2d 347 (Tex. App.—Dallas 1991, writ granted)
• City of Richardson v. Responsible Dog Owners of Texas, 794 S.W.2d 17 (Tex. 1990)
• City of Corpus Christi v. Continental Bus Systems, 445 S.W.2d 12 (Tex. Civ. App.—Austin 1969), writ ref'd n.r.e. per curiam, 453 S.W.2d 470 (Tex. 1970)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/dan-morales/dm-0182
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1992/dm0182.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain; garbled case names were verified against the official reporters. The linked PDF is authoritative.

Office of the Attorney General
State of Texas

DAN MORALES
ATTORNEY GENERAL

November 17, 1992

Honorable Bill G. Carter
Chairman
Public Safety Committee
Texas House of Representatives
P. O. Box 2910
Austin, Texas 78768-2910

Opinion No. DM-182

Re: Whether Tax Code sections 154.101(h) and 155.041(h), establishing the Tax Code as the exclusive authority for the issuance of permits for engaging in business as a retailer of cigarettes and other tobacco products, preempt provisions of a city ordinance licensing tobacco product retailers (RQ-300)

Dear Representative Carter:

You have requested an opinion from this office as to whether sections 154.101(h) and 155.041(h) of the Texas Tax Code, establishing that permits for engaging in business as a distributor, wholesaler, bonded agent, or retailer of cigarettes and other tobacco products shall be governed exclusively by the Tax Code, preempt a home-rule city ordinance establishing a licensing scheme for tobacco products retailers.

Chapters 154 and 155 of the Tax Code levy a tax on the sale of cigarettes and other tobacco products, and establish a system for the administration, collection, and enforcement of the tax. A crucial mechanism for the enforcement of this tax is the requirement that all distributors, wholesalers, bonded agents and retailers of cigarettes and other tobacco products have a permit, issued by the state treasurer, to engage in business in their respective capacities. See Tax Code § 154.101(a). The treasurer may deny a permit application upon finding that the applicant's business premises are not adequate to protect the tobacco products or revenue stamps, that the applicant has not been truthful in the permit application, or that the applicant has previously violated provisions of the chapters. Id. §§ 154.107, 155.0481. Suspension or revocation of a permit may occur if the treasurer finds that the permit holder violated provisions of the relevant Tax Code chapters or an administrative rule promulgated under them. Id. §§ 154.114, 155.059. Recently, the legislature amended chapters 154 and 155 to provide the following:

Permits for engaging in business as a distributor, wholesaler, bonded agent, or retailer shall be governed exclusively by the provisions of this code.

Tax Code §§ 154.101(h), 155.041(h) (emphasis added); Acts 1991, 72d Leg., ch. 409, § 17.48 (eff. June 7, 1991).

The City of Arlington has enacted Ordinance No. 91-15, codified as the Code of the City of Arlington, "Health" Chapter, Article XI (effective August 1, 1991). The ordinance is intended "to protect the health, safety, and welfare of persons under the age of eighteen (18) from the health risks caused by the use of tobacco products." Code of the City of Arlington, "Health" chapter, art. XI, § 11.02 (1991). To accomplish this goal, the ordinance requires tobacco products retailers to obtain a "tobacco dealer's license" from the city. As you state in your brief, the licensing provisions allow the city "to prevent a retailer, by license suspension or revocation, from selling tobacco products after one or more instances of tobacco sales to minors." Once the administrator of the licensing program revokes a license held by a retailer, that retailer must remove all tobacco products from the place of business. Id. § 11.15(C). Failure to comply with this or other provisions of the ordinance is punishable by a fine not to exceed $2,000. Id. §§ 11.15(D), (E), 11.16(A).

The City of Arlington is a home-rule city. The Texas Constitution grants such cities all the power of self-government not expressly denied them by the legislature. Tex. Const. art. XI, § 5; City of Dallas v. Dallas Merchants & Concessionaires Ass'n, 823 S.W.2d 347 (Tex. App.—Dallas 1991, writ granted). The Texas Constitution prohibits a home-rule city from enforcing any legislation inconsistent with state laws or the state constitution. Tex. Const. art. XI, § 5. The Texas Supreme Court has instructed that, in determining whether an ordinance is fatally inconsistent with state law on the same subject matter, courts must seek to construe the two in a way that will leave both in effect, if possible. City of Richardson v. Responsible Dog Owners of Texas, 794 S.W.2d 17 (Tex. 1990). Moreover, it is well established that "legislative intent to limit the broad powers of home-rule cities must appear with unmistakable clarity." City of Dallas, 823 S.W.2d at 353 (citing City of Corpus Christi v. Continental Bus Systems, 445 S.W.2d 12, 17 (Tex. Civ. App.—Austin 1969), writ ref'd n.r.e. per curiam, 453 S.W.2d 470 (Tex. 1970)).

The plain language of the relevant Tax Code provisions clearly demonstrates the legislature's intent to prohibit local governments, including home-rule cities, from using a licensing system to regulate tobacco sales. As noted above, the Tax Code provides that "[p]ermits for engaging in [tobacco sales] shall be governed exclusively by the provisions of this code." Tax Code §§ 154.101(h), 155.041(h) (emphasis added). In addition, legislative history reveals that the legislature intended to exclude local governments from the regulation of the tobacco industry by permits. Senator Teel Bivins, in introducing sections 154.101(h) and 155.041(h) before the Senate State Affairs Committee, testified as follows:

This amendment makes it clear that it is only the Treasurer's office who is to administer these permits and that local governments are not to be involved in this permitting process.

Hearings on S.B. 689 Before the Senate State Affairs Comm., 72d Leg. (Apr. 8, 1991) (statement of Senator Teel Bivins) (tapes available from Senate Staff Services). It has been suggested that the Tax Code provisions and the city ordinance can be harmonized because although both the statute and the ordinance require a retailer to obtain a document before selling tobacco products, the two permitting processes address distinct governmental concerns, i.e., revenue collection in the case of the Tax Code provisions, and health regulation in the case of the city ordinance. We believe, however, that the legislature, in enacting sections 154.101(h) and 155.041(h) of the Tax Code, intended to vest the state treasurer with the sole power to determine which businesses are entitled to permits to sell tobacco products because a dual permit system would confuse and interfere with the tax collection process. Thus, regardless of the city ordinance's regulatory purpose, we believe its permitting scheme is preempted by the Tax Code.

SUMMARY

A home-rule city ordinance, which establishes a licensing system for the retail sale of cigarettes and other tobacco products, is preempted by sections 154.101(h) and 155.041(h) of the Tax Code, which provides that permits to engage in business as a retailer of cigarettes and other tobacco products shall be governed exclusively by the Tax Code.

DAN MORALES
Attorney General of Texas

WILL PRYOR
First Assistant Attorney General

MARY KELLER
Deputy Assistant Attorney General

RENEA HICKS
Special Assistant Attorney General

MADELEINE B. JOHNSON
Chair, Opinion Committee

Prepared by Mary R. Crouter
Assistant Attorney General