Is Texas's $150 hazardous-substance registration fee legal, or does federal toy-safety law override it?

Texas AG Opinion JC-0093: The $150 Hazardous-Substance Registration Fee, Federal Preemption, and the Commerce Clause

Plain-English summary

Texas requires anyone who manufactures, repacks, or distributes a hazardous substance in the state to register each year with the Texas Department of Health and pay a $150 fee. The Toy Manufacturers of America, whose members make small balls, balloons, marbles, and other toys with small parts, argued that this requirement was unconstitutional on two grounds: that federal law preempted it, and that it offended the Commerce Clause. The Commissioner of Health asked the Attorney General whether the statute could stand. The opinion concluded that it could on both counts.

On preemption, the opinion separated the two federal statutes the toy makers pointed to. The Child Safety Protective Act deals with choking hazards and imposes detailed warning-label rules for small parts, balloons, small balls, and marbles. Texas has no comparable choking-hazard labeling statute, so there was nothing for the federal act to preempt; federal law simply governs that area in Texas unchallenged. The Federal Hazardous Substances Act was the closer question. Its express preemption clause reaches only "cautionary labeling requirements" and certain Commission regulations about banned substances. The opinion read section 501.024 as neither: it requires a registration filing and a fee, not anything on a product's label, and it does not regulate "banned" substances. The opinion also relied on a 1995 letter from the Consumer Product Safety Commission's counsel, which had looked at this very Texas statute and found no preemption. With no express, conflict, or field preemption, the registration-and-fee requirement survived.

On the Commerce Clause, the opinion drew the line the Supreme Court has drawn between general revenue taxes and "user fees." It distinguished the Pennsylvania per-axle truck tax struck down in Scheiner from the charitable-solicitation fee upheld in Athey, and put the Texas charge in the second category: a single modest fee, once a year, per business, tied to the benefit toy makers get from the state's regulatory apparatus and the consumer confidence it supports. Whether the fee actually approximates the cost of those services is ultimately a fact question the Attorney General could not resolve, but the opinion concluded the Board of Health could make that finding, and that the fee did not discriminate against interstate commerce because it applied equally to in-state and out-of-state businesses.

Currency note

This opinion was issued in 1999. 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.

Common questions

Did federal toy-safety law wipe out the Texas registration fee?
No. The opinion concluded the Federal Hazardous Substances Act preempts only conflicting cautionary-labeling rules and certain banned-substance regulations. A registration filing plus a fee is neither, so it was not preempted.

Why didn't the Child Safety Protective Act preempt it?
Because Texas had not enacted any equivalent choking-hazard labeling statute. The opinion noted there was no state law in that area for the federal act to displace, so federal law simply controlled choking-hazard labeling in Texas.

Was the $150 charge an unconstitutional tax on interstate commerce?
The opinion treated it as a "user fee" rather than a general tax. Following the reasoning in Athey, it concluded the fee reasonably approximated the cost of the state's regulation of hazardous toys, did not discriminate against out-of-state businesses, and so did not offend the Commerce Clause.

Could the Attorney General confirm the fee matched the state's actual costs?
Not directly. The opinion said whether the fee fairly approximated the cost of services was a factual determination outside the opinion process, but that the Texas Board of Health could make that finding.

Background and statutory framework

Section 501.024 of the Health and Safety Code, part of the Texas Hazardous Substances Act (chapter 501, first enacted in 1971), required a person who manufactures, repacks, or distributes a hazardous substance in Texas to keep a registration statement on file with the department and to file it before beginning business and by September 1 each year afterward, with a $150 fee for the initial and each annual statement. The THSA was derived from the federal act and defined "hazardous substance," as to toys, in language nearly identical to the federal definition in section 501.002(a)(2), reaching toys that present an electrical, mechanical, or thermal hazard. Texas had not adopted anything equivalent to the federal choking-hazard statute.

On the federal side, the opinion worked through the Federal Hazardous Substances Act, 15 U.S.C. §§ 1261-1277, and its 1976 amendments' express preemption note, which bars non-identical state cautionary-labeling requirements and certain requirements tied to Commission regulations under subsection 2(q). It read subsection (q), 15 U.S.C. § 1261(q), as covering "banned hazardous substances," which by definition cannot be substances lawfully distributed in the state subject to the fee. For the preemption framework it cited Cipollone v. Liggett Group, M'Culloch v. Maryland, and the Texas Supreme Court's statement of express, conflict, and field preemption in Hyundai Motor Co. v. Alvarado, along with prior opinions JC-0052 (1999) and JC-0007 (1999). It gave deference to the Consumer Product Safety Commission's reading under Chemical Manufacturers Ass'n v. Natural Resources Defense Council, Inc.

For the Commerce Clause, the opinion applied the dormant Commerce Clause framework: the four-part test of Complete Auto Transit, Inc. v. Brady, the flat-tax invalidation in American Trucking Ass'n, Inc. v. Scheiner, and the user-fee analysis of Center for Auto Safety v. Athey (which itself drew on Evansville-Vanderburgh Airport Auth. Dist. v. Delta Airlines and Commonwealth Edison Co. v. Montana), and Oklahoma Tax Comm'n v. Jefferson Lines, Inc. for the dormant Commerce Clause generally. The benefits Texas conferred came from the Board of Health's rulemaking and regulatory duties in sections 501.021, 501.022, 501.023, 501.025, 501.031, 501.032, and 501.033, covering flammability, banned substances, labeling standards, investigations, records inspection, and seizure of misbranded substances.

Citations

Constitutional and statutory provisions:

• U.S. Const. art. VI, cl. 2
• Tex. Health & Safety Code Ann. § 501.024, § 501.002(a)(2), § 501.021, § 501.022, § 501.023, § 501.025, § 501.031, § 501.032, § 501.033 (Vernon 1992)
• 15 U.S.C. §§ 1261-1277, § 1261(q), § 1278 (1995)

Cases:

• Cipollone v. Liggett Group, 505 U.S. 504 (1992)
• M'Culloch v. Maryland, 17 U.S. 316 (1819)
• Hyundai Motor Co. v. Alvarado, 974 S.W.2d 1 (Tex. 1998)
• Complete Auto Transit, Inc. v. Brady, 430 U.S. 274 (1977)
• American Trucking Ass'n, Inc. v. Scheiner, 483 U.S. 266 (1987)
• Center for Auto Safety v. Athey, 37 F.3d 139 (4th Cir. 1994)
• Oklahoma Tax Comm'n v. Jefferson Lines, Inc., 514 U.S. 175 (1995)
• Evansville-Vanderburgh Airport Auth. Dist. v. Delta Airlines, 405 U.S. 707 (1972)
• Chemical Manufacturers Ass'n v. Natural Resources Defense Council, Inc., 470 U.S. 116 (1985)

Attorney General opinions referenced: JC-0052 (1999); JC-0007 (1999).

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/john-cornyn/jc-0093
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1999/jc0093.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

JOHN CORNYN

August 11, 1999

William R. Archer III, M.D.
Commissioner of Health
Texas Department of Health
1100 W. 49th Street
Austin, Texas 78756-3199

Opinion No. JC-0093

Re: Constitutionality of section 501.024 of the Health and Safety Code, which requires manufacturers and distributors of hazardous substances to register annually with the Texas Department of Health and pay a fee of $150.00 (RQ-1221)

Dear Dr. Archer:

You have requested our opinion regarding the constitutionality of section 501.024 of the Texas Health and Safety Code, which requires manufacturers and distributors of hazardous substances to register annually with the Texas Department of Health and pay a fee of $150. We conclude that this provision is neither preempted by federal law nor contravenes the Commerce Clause of the United States Constitution.

Section 501.024 of the Health and Safety Code provides, in relevant part:

(a) A person who manufactures or repacks a hazardous substance that is distributed in this state or who distributes a hazardous substance in this state shall have on file with the department a registration statement as provided by this section.

(b) The board by rule shall prescribe the contents of the registration statement.

(c) The person must file the registration statement with the department before:

(1) beginning business in this state as a manufacturer, repacker, or distributor of a hazardous substance; and

(2) not later than September 1 of each year after the initial filing.

(d) The initial registration statement and each annual registration statement must be accompanied by a fee of $150.

The Toy Manufacturers of America ("TMA"), an organization of manufacturers of small balls, balloons, marbles, and other toys and games that contain small parts, contends that section 501.024 contravenes the Federal Constitution in two respects: 1) it is preempted by federal statute, specifically 15 U.S.C. § 1261, et seq., and thus invalid under the Supremacy Clause; and 2) it is inconsistent with the Commerce Clause. We shall address these arguments in turn.

The Federal Hazardous Substances Act ("FHSA"), 15 U.S.C. §§ 1261 - 1277 (1995), was initially enacted in 1960 and has been extensively amended. See Federal Hazardous Substances Act of 1960, Pub. L. No. 86-613, 74 Stat. 372 (1960). It provides in detail for the regulation of "hazardous substances" by the Federal Consumer Product Safety Commission with particular regard to labeling. The term "hazardous substance" is defined to include, inter alia,

Any toy or other article intended for use by children which the Commission by regulation determines, in accordance with section 1262(e) of this title, presents an electrical, mechanical, or thermal hazard.

15 U.S.C. § 1261(f)(1)(D) (1995) (emphasis added). On the other hand, the Child Safety Protective Act ("CSPA"), id. § 1278, was enacted only in 1994, as another amendment to the FHSA. See Child Safety Protective Act of 1994, Pub. L. No. 103-267, 108 Stat. 722 (1994). The CSPA is addressed, not to children's toys or games that present an "electrical, mechanical, or thermal hazard," but to those that pose a "choking hazard." It imposes extensive labeling requirements for toys or games that constitute or contain small parts, balloons, small balls, or marbles, including labels warning that certain items are "not for children under 3 years."

The Texas Hazardous Substances Act ("THSA"), chapter 501 of the Health and Safety Code, was first enacted in 1971. Act of May 27, 1971, 62d Leg., R.S., ch. 1033, 1971 Tex. Gen. Laws 3372. It is clearly derived from the FHSA, and it defines "hazardous substance" with regard to toys in language virtually identical to that of the federal statute:

a toy or other article, other than clothing, that is intended for use by a child and that presents an electrical, mechanical, or thermal hazard.

TEX. HEALTH & SAFETY CODE ANN. § 501.002(a)(2) (Vernon 1992). Texas has not, however, adopted a statute in any way equivalent to the CSPA. Thus, the registration and fee requirements of section 501.024—the subject of your inquiry—are applicable only to manufacturers and distributors of toys that pose electrical, mechanical, or thermal problems.

Article VI of the United States Constitution provides that the laws of the United States "shall be the supreme Law of the Land . . . any Thing in the Constitution or Laws of any State to the Contrary notwithstanding." U.S. CONST. art. VI, cl. 2. As the Supreme Court said in Cipollone v. Liggett Group, 505 U.S. 504 (1992), since the 1819 decision in M'Culloch v. Maryland, 17 U.S. 316 (1819), "it has been settled that state law that conflicts with federal law is 'without effect.'" Cipollone, 505 U.S. at 516. Since, however, "the historic police powers of the States [are] not to be superseded by . . . Federal Act unless that [is] the clear and manifest purpose of Congress," preemption analysis begins with a determination of congressional intent. Id. As the Texas Supreme Court said in Hyundai Motor Co. v. Alvarado, 974 S.W.2d 1 (Tex. 1998):

A state law is preempted and "without effect" if it conflicts with federal law. A federal law may expressly preempt state law. Additionally, preemption may be implied if the scope of the statute indicates that Congress intended federal law to occupy the field exclusively or when state law actually conflicts with federal law. A state law presents an actual conflict with federal law when "it is impossible for a private party to comply with both state and federal requirements" or where state law "stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress."

Hyundai, 974 S.W.2d at 4 (citations omitted); see also Tex. Att'y Gen. Op. Nos. JC-0052 (1999); JC-0007 (1999).

A letter submitted by the TMA contends that section 501.024 is preempted by both the CSPA and the FHSA. With respect to the former, it is clear that no preemption exists, because there is no preempting Texas statute. The THSA and the CSPA, as we have noted, impose entirely different labeling requirements. Texas has no statute requiring labeling of toys that present a "choking hazard." With regard to such items, federal law prevails in this state without challenge.

As to the FHSA, we must consider three kinds of preemption: (1) express; (2) conflict; and (3) occupation of the field. In enacting that statute, Congress specifically addressed the matter of preemption. The statutory notes accompanying the 1976 amendments to the FHSA provide:

(b)(1)(A) Except as provided in paragraphs (2) and (3), if a hazardous substance or its packaging is subject to a cautionary labeling requirement under section 2(p) or 3(b) [subsec. 2(p) of this section or section 1262(b) of this title] designed to protect against a risk of illness or injury associated with the substance, no State or political subdivision of a State may establish or continue in effect a cautionary labeling requirement applicable to such substance or packaging and designed to protect against the same risk of illness or injury unless such cautionary labeling requirement is identical to the labeling requirement under section 2(p) or 3(b) [subsec. (p) of this section or section 1262(b) of this title].

(B) Except as provided in paragraphs (2), (3), and (4), if under regulations of the Commission promulgated under or for the enforcement of section 2(q) [subsec. (q) of this section] a requirement is established to protect against a risk of illness or injury associated with a hazardous substance, no State or political subdivision of a State may establish or continue in effect a requirement applicable to such substance and designed to protect against the same risk of illness or injury unless such requirement is identical to the requirement established under such regulations.

See Federal Hazardous Substances Act Amendments of 1976, § 17(a), Pub. L. No. 94-284, 90 Stat. 510 (statutory note addressing Effect Upon Federal and State Law) (emphasis added). Paragraph (b)(1)(A) preempts only "cautionary labeling requirements," which section 501.024 clearly does not. The TMA argues that the registration and fee are requirements applicable to a hazardous substance and designed to protect against the same risk of illness or injury, and thus, that section 501.024 is preempted under paragraph (b)(1)(B). But paragraph (b)(1)(B) applies only to "regulations of the Commission promulgated under 2(q) [subsec. (q) of this section]."

Subsection (q) relates to "banned hazardous substances," which it defines as

(A) any toy, or other article intended for use by children, which is a hazardous substance, or which bears or contains a hazardous substance in such manner as to be susceptible of access by a child to whom such toy or other article is entrusted; or (B) any hazardous substance intended, or packaged in a form suitable, for use in the household, which the Commission by regulation classifies as a "banned hazardous substance" on the basis of a finding that, notwithstanding such cautionary labeling as is or may be required under this chapter for that substance, the degree or nature of the hazard involved in the presence or use of such substance in households is such that the objective of the protection of the public health and safety can be adequately served only by keeping such substance, when so intended or packaged, out of the channels of interstate commerce.

15 U.S.C. § 1261(q) (1995). It is obvious that, if a hazardous substance is "banned" under section 1261, subsection (q), it cannot be deemed "a hazardous substance that is distributed in this state," and consequently, it is not a substance for which registration and payment of the fee is required.

Thus, federal law does not expressly preempt the registration and fee requirement of section 501.024 of the Health and Safety Code. Neither is conflict preemption present: it is possible to fully comply with both federal and state law by, on the one hand, observing the federal labeling requirements and, on the other, registering in Texas and paying the annual fee. Finally, the very language of the federal statute indicates that Congress contemplated that states could legislate in this area, provided they complied with the mandated restrictions. Accordingly, it cannot plausibly be maintained that "Congress intended federal law to occupy the field."

A 1995 letter prepared by the Assistant General Counsel for Regulatory Affairs of the United States Consumer Product Safety Commission specifically considered whether section 501.024 of the Texas Health and Safety Code was preempted by the FHSA, and concluded that no preemption exists:

We do not believe that these [registration] requirements would be considered "cautionary labeling requirements" under the FHSA preemption provision. The Texas law requires one to file a registration statement for a hazardous substance and to pay a fee. It does not require any registration information on the product's label. Nor does it appear that the registration requirement would be preempted by section 18(b)(1)(B) of the FHSA. Section 2(q) authorizes the Commission to ban or otherwise restrict a hazardous substance. In contrast, the Texas law's registration provision seems to be an administrative mechanism to provide the state with information about firms manufacturing or distributing hazardous substances in the state and to charge a fee. The registration provision does not prescribe restrictions necessary to ensure the safety of a hazardous substance, as does section 2(q) of the FHSA. Based on the limited information you have provided, we do not believe that this registration requirement would address "the same risk" as any particular regulation under section 2(q).

Letter from Stephen Lemberg, Asst. Gen. Counsel for Regulatory Affairs, U.S. Consumer Product Safety Comm'n, to H. Allen Irish, Gov't Affairs Counsel, Nat'l Paint & Coatings Ass'n 2, 3 (Sept. 15, 1995) (on file with Opinion Committee). An agency's interpretation of a statute it is charged with implementing is entitled to considerable deference, provided it is reasonable and does not clearly conflict with the statute. Chemical Manufacturers Ass'n v. Natural Resources Defense Council, Inc., 470 U.S. 116, 150 (1985). In our opinion, this letter fully supports our conclusion that section 501.024 is neither expressly preempted by federal law nor an obstacle to enforcement of the federal statute. We conclude that section 501.024 is not preempted by the FHSA.

The TMA also suggests that the fee requirement of section 501.024 contravenes the Commerce Clause of the Federal Constitution. As the Supreme Court has frequently observed, the language of the Commerce Clause "contain[s] a further, negative command, known as the dormant Commerce Clause, prohibiting certain state taxation even when Congress has failed to legislate on the subject." Oklahoma Tax Comm'n v. Jefferson Lines, Inc., 514 U.S. 175, 179 (1995). Lump sum annual fees imposed by a state have been described by the Supreme Court as "flat taxes." American Trucking Ass'n, Inc. v. Scheiner, 483 U.S. 266, 271 (1987). The Court has held that a state tax imposed on interstate commerce must, in order to be valid, pass a four-part test: the tax must be (1) applied to an activity with a substantial nexus to the taxing state; (2) fairly apportioned; (3) nondiscriminatory against interstate commerce; and (4) fairly related to the services provided by the state. Complete Auto Transit, Inc. v. Brady, 430 U.S. 274 (1977). In Scheiner, the Supreme Court invalidated an annual "axle tax" imposed by the State of Pennsylvania on interstate trucks that used its highways.

Not all state taxes on interstate commerce, however, are subject to the test of Brady. The Supreme Court has drawn a distinction between "user fees" and general revenue taxes. "'User fees' are taxes or other fees collected by the state as reimbursement for use of state-owned or state-provided facilities or services." Center for Auto Safety v. Athey, 37 F.3d 139, 142 (4th Cir. 1994). Because user fees "are purportedly assessed to reimburse the State for costs incurred in providing specific quantifiable services," they are not true revenue measures and ". . . the considerations applicable to ordinary tax measures do not apply." Id. at 142 (citing Commonwealth Edison Co. v. Montana, 453 U.S. 609, 621 n.12 (1981)).

In Athey, the Court of Appeals for the Fourth Circuit considered a challenge to a fee imposed by the State of Maryland on charitable organizations that solicited in the state. Relying on the Supreme Court's decision in Evansville-Vanderburgh Airport Auth. Dist. v. Delta Airlines, 405 U.S. 707, 717-20 (1972), the Fourth Circuit said that, in order to pass constitutional muster under the Commerce Clause, a "user fee . . . must (1) reflect a fair, if imperfect, approximation of the cost of using state facilities for the taxpayer's benefit, (2) not discriminate against interstate commerce, and (3) not be excessive in relation to the costs incurred by the taxing authorities." Athey, 37 F.3d at 142. The court upheld the user fee on all three criteria. As to the first and third, "the Commerce Clause does not require that user fees be precisely correlated to actual use that a party makes of government services," but only that the "fee be based on a 'fair approximation of the costs of benefits supplied.'" Id. at 143. The court found that the purpose of the user fee was to monitor and administer charitable organizations. "[C]harities seeking to solicit in Maryland use the state's apparatus for regulating charities, and, as a result, derive a benefit, namely the privilege of soliciting in Maryland where donor confidence is enhanced owing to the state's regulation of charities." Id. at 143-44 (footnotes omitted). As to the second factor, the fee doesn't discriminate against out-of-state charities because all charities are required to pay the fee if they operate in Maryland. Id. at 143.

In our opinion, the registration and fee requirement of section 501.024 bears a closer resemblance to the kind of "user fee" considered in Athey than to the Pennsylvania axle tax struck down by the Supreme Court in Scheiner. As in Athey, a single fee is imposed only once per year per business entity (charity/toy manufacturer-distributor) rather than on every instrumentality of that entity (truck-axle/toy). As a result, the annual fee in both Maryland and Texas is modest compared to that assessed in Pennsylvania. Thus, we apply the "user fee" criteria to section 501.024.

Just as the charities in Maryland receive a benefit from state law, manufacturers of potentially hazardous toys likewise derive a benefit from the THSA. The Texas Board of Health is required to enact rules, TEX. HEALTH & SAFETY CODE ANN. § 501.025 (Vernon 1992), to regulate hazardous toys in various ways such as determining flammability, id. § 501.021, and designating certain items as "banned hazardous substances," id. § 501.022. In addition, the Texas Department of Health is required to implement labeling standards, id. § 501.023; conduct examinations and investigations, id. § 501.031; inspect and copy records of manufacturers and distributors, id. § 501.032; and seize and dispose of banned or misbranded hazardous substances, id. § 501.033. As did the charitable organizations in Athey, toy manufacturers and distributors in Texas are accorded the privilege of doing business with consumer confidence enhanced by virtue of the state's regulation of hazardous toys. We think it is likely that such a plenitude of services is more than sufficient to offset a fee of $150 per year. Although resolution of this matter ultimately requires a factual determination that we cannot make in the opinion process, we believe that the Texas Board of Health may make such a finding. Likewise, section 501.024 does not discriminate against interstate commerce. It is applicable equally to anyone who distributes in Texas and to any manufacturer or repacker whose product is distributed in Texas. We conclude that, under the "user fee" test, section 501.024 of the Texas Health and Safety Code does not offend the Commerce Clause of the United States Constitution.

SUMMARY

Section 501.024 of the Texas Health and Safety Code, which requires persons who distribute hazardous substances in Texas, and manufacturers and repackers whose hazardous substances are distributed in Texas, to register annually with the Texas Department of Health and pay a fee of $150.00, is neither preempted by federal law nor violative of the Commerce Clause of the United States Constitution.

JOHN CORNYN
Attorney General of Texas

ANDY TAYLOR
First Assistant Attorney General

CLARK KENT ERVIN
Deputy Attorney General - General Counsel

ELIZABETH ROBINSON
Chair, Opinion Committee

Rick Gilpin
Assistant Attorney General - Opinion Committee