Is Texas's 10% cigarette advertising fee blocked by federal law or the First Amendment?

Plain-English summary

Representative Brandon Creighton, chair of the House Select Committee on Federalism and Fiscal Responsibility, asked the Attorney General about Texas Health and Safety Code section 161.123(a), called the Advertising Fee Statute. That statute makes a purchaser of advertising remit to the comptroller a fee equal to 10 percent of the gross sales price of any outdoor advertising of cigarettes and tobacco products in Texas. The representative asked three things: whether the fee, as applied to cigarettes, is preempted by the federal Cigarette Labeling and Advertising Act (FCLAA); if so, whether the cigarette portion is severable from the rest; and whether the fee violates free-speech protections under the U.S. and Texas Constitutions.

On preemption, the Attorney General walked through the FCLAA's express preemption clause and the U.S. Supreme Court's three-part reading of it in Lorillard Tobacco Co. v. Reilly, acknowledging that a court could conclude the fee is a "requirement ... based on smoking and health ... with respect to the advertising or promotion" of cigarettes, because it expressly targets cigarette advertising. But the party urging preemption bears a heavy burden against a presumption that Congress did not preempt state law, and pinning down what motivated the Legislature could require resolving factual questions. So the AG concluded it could not conclusively decide whether the FCLAA preempts the fee as to cigarettes.

On severability, the AG concluded that if the cigarette portion were struck, the rest would likely survive. Texas treats an invalid provision as severable when the remainder is complete in itself and can be carried out as the Legislature intended, and the statute defines "cigarettes" and "tobacco products" as separate categories, so the fee applied only to non-cigarette tobacco products would still work. On free speech, the AG explained that commercial-speech regulations are judged under the U.S. Supreme Court's Central Hudson test, that the state would bear the burden of justifying the fee, and that whether the fee meets that test is a fact-intensive question only a court can resolve.

Currency note

This opinion was issued in 2013. Subsequent statutory amendments, court decisions, or later Attorney General 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.

What the opinion meant for those who asked

The House Select Committee on Federalism and Fiscal Responsibility (as the opinion described it): The opinion gave the committee a framework rather than answers on the contested questions. It explained that a preemption challenge to the cigarette advertising fee could plausibly succeed under the FCLAA and Lorillard, but that the presumption against preemption and the need to find the Legislature's motivation kept the AG from deciding the question. It told the committee that if a court did find the cigarette portion preempted, the fee on other tobacco products would likely remain enforceable because the Legislature defined the two categories separately. And it explained that the free-speech challenge would be judged under the Central Hudson commercial-speech test, with the state bearing the burden, and could only be resolved by a court on the facts.

The Texas Comptroller (as the opinion described it): The opinion noted that the comptroller administers and collects the advertising fee, and that the office had not received briefing from the comptroller on the issues.

Common questions

What is the Texas cigarette advertising fee?
The opinion described it as the Advertising Fee Statute, Health and Safety Code section 161.123(a), which requires a purchaser of advertising to remit a fee of 10 percent of the gross sales price of outdoor advertising of cigarettes and tobacco products in Texas.

Did the AG decide whether federal law preempts the fee?
No. The opinion said a court could find the cigarette portion preempted under the FCLAA, but the presumption against preemption and the factual question of legislative motivation meant the AG could not conclusively decide it.

If the cigarette part is preempted, does the whole fee fall?
According to the opinion, likely not. The AG concluded that the remainder applying to other tobacco products would probably remain enforceable, because the Legislature defined "cigarettes" and "tobacco products" as separate categories.

Did the AG decide whether the fee violates free speech?
No. The opinion explained that the fee would be judged under the U.S. Supreme Court's Central Hudson commercial-speech test, with the state bearing the burden of justification, and that whether it passes is a fact-intensive question only a court can answer.

Background and statutory framework

The opinion's preemption analysis started from the presumption against preemption, citing the Texas Supreme Court's decision in Graber v. Fuqua and the U.S. Supreme Court's decision in Lorillard Tobacco Co. v. Reilly; the FCLAA's express preemption clause, 15 U.S.C.A. § 1334(b), bars state "requirement[s] or prohibition[s] based on smoking and health" with respect to cigarette advertising, and Lorillard parsed that into three inquiries. The AG applied them to the fee and noted the heavy burden on the party urging preemption, citing the Texas Supreme Court's decision in Great Dane Trailers, Inc. v. Estate of Wells and, within it, the U.S. Supreme Court's decision in Silkwood v. Kerr-McGee Corp., which placed that burden on the party urging preemption.

The severability analysis drew on the U.S. Supreme Court's decision in Virginia v. Hicks (severability is a matter of state law), the Texas Supreme Court's decision in Rose v. Doctors Hosp., and Government Code section 311.032(c), along with the Texas Supreme Court's decision in Tex. Mut. Ins. Co. v. Ruttiger on ascertaining legislative intent. The statute's separate definitions of "cigarettes" and "tobacco products" came from Tax Code sections 154.001 and 155.001 by way of section 161.121. The free-speech analysis relied on the First Amendment as applied to the states through the Fourteenth Amendment (the U.S. Supreme Court's decision in Gitlow v. New York), the Texas Supreme Court's decision in Bentley v. Bunton on the congruence of article I, section 8, and the U.S. Supreme Court's commercial-speech decisions in Central Hudson Gas v. Public Service Commission and Sorrell v. IMS Health, Inc., with the statute entitled to a presumption of constitutionality under Government Code section 311.021(1).

Citations

Cases:

• Lorillard Tobacco Co. v. Reilly, 533 U.S. 525, 542 (2001)
• Graber v. Fuqua, 279 S.W.3d 608, 611 (Tex. 2009)
• Great Dane Trailers, Inc. v. Estate of Wells, 52 S.W.3d 737, 743 (Tex. 2001)
• Silkwood v. Kerr-McGee Corp., 464 U.S. 238, 255 (1984)
• Virginia v. Hicks, 539 U.S. 113, 121 (2003)
• Rose v. Doctors Hosp., 801 S.W.2d 841, 844 (Tex. 1990)
• Tex. Mut. Ins. Co. v. Ruttiger, 381 S.W.3d 430, 452 (Tex. 2012)
• Gitlow v. New York, 268 U.S. 652, 666 (1925)
• Bentley v. Bunton, 94 S.W.3d 561, 579 (Tex. 2002)
• Central Hudson Gas v. Public Service Commission, 447 U.S. 557, 562-63 (1980)
• Sorrell v. IMS Health, Inc., 131 S. Ct. 2653, 2667 (2011)

Statutes:

• Tex. Health & Safety Code Ann. § 161.123(a) (West 2010); § 161.121(2), (5)
• Tex. Gov't Code Ann. § 311.016(2), § 311.021(1), § 311.032(c) (West 2013)
• Tex. Tax Code Ann. § 154.001(2) (West 2008); § 155.001(2), (15)
• 15 U.S.C.A. § 1332(1), (7), § 1333, § 1334(b) (West 2009 & West Supp. 2013)
• U.S. Const. amend. I; Tex. Const. art. I, § 8

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/greg-abbott/ga-1020
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/2013/ga1020.pdf

Original opinion text

Best-effort transcription from the official PDF. Minor extraction artifacts were corrected; the linked PDF is authoritative.

ATTORNEY GENERAL OF TEXAS
GREG ABBOTT

August 26, 2013

The Honorable Brandon Creighton Opinion No. GA-1020
Chair, Select Committee on Federalism
and Fiscal Responsibility Re: Whether Health & Safety Code section
Texas House of Representatives 161.123 is preempted by the Federal Cigarette
Post Office Box 2910 Labeling and Advertising Act or is in violation of
Austin, Texas 78768-2910 the First and Fourteenth Amendments to the United
States Constitution (RQ-1120-GA)

Dear Representative Creighton:

Your request concerns section 161.123(a) of the Texas Health and Safety Code, the "Advertising Fee Statute," which provides that "[a] purchaser of advertising is liable for and shall remit to the comptroller a fee that is 10 percent of the gross sales price of any outdoor advertising of cigarettes and tobacco products in this state." TEX. HEALTH & SAFETY CODE ANN. § 161.123(a) (West 2010). You ask (1) whether the Advertising Fee Statute is preempted as it applies to cigarettes under the Federal Cigarette Labeling and Advertising Act (the "FCLAA"); (2) if preempted, whether the provision of the Advertising Fee Statute applying to cigarettes is severable from the rest of the statute; and (3) whether the Advertising Fee Statute violates free speech protections under the United States and Texas Constitutions.[1] We address your questions in turn.

A preemption analysis begins "with a presumption that Congress did not preempt state law." See Graber v. Fuqua, 279 S.W.3d 608, 611 (Tex. 2009). That is, a state regulation is "'not to be superseded by [a] Federal Act unless that is the clear and manifest purpose of Congress.'" Lorillard Tobacco Co. v. Reilly, 533 U.S. 525, 542 (2001) (citation omitted). In that vein, "State action may be foreclosed by express language in a congressional enactment." Id. at 541.

Section 1334 of the FCLAA contains express language preempting state regulation of cigarette advertising: "No requirement or prohibition based on smoking and health shall be imposed under State law with respect to the advertising or promotion of any cigarettes the packages of which are labeled in conformity with the provisions of this chapter." 15 U.S.C.A. § 1334(b) (West 2009); see id. § 1333 (West Supp. 2013) (cigarette package labeling requirements). The United States Supreme Court addressed a question similar to yours concerning the preemption of state cigarette advertising regulations in Lorillard Tobacco Co. v. Reilly. 533 U.S. at 540-52. In analyzing the preemption claims, the Court considered three distinct inquiries arising from the plain language of section 1334(b): whether the state regulations were (1) a "requirement or prohibition," (2) "based on smoking and health," and (3) "with respect to the advertising or promotion" of cigarettes. See id. at 541; 15 U.S.C.A. § 1334(b) (West 2009).

With regard to the first element of the Supreme Court's analysis in Lorillard, by providing that the fee "shall" be remitted, the Advertising Fee Statute imposes a "requirement" upon purchasers of outdoor cigarette advertising. TEX. HEALTH & SAFETY CODE ANN. § 161.123(a) (West 2010); TEX. GOV'T CODE ANN. § 311.016(2) (West 2013). With regard to the second element, whether the Advertising Fee Statute is "based on smoking and health," the Supreme Court determined that Congress, in using the phrase "based on smoking and health," intended to prohibit "state cigarette advertising regulations motivated by concerns about smoking and health." Lorillard, 533 U.S. at 548 (emphasis added). Like the regulations at issue in Lorillard, the Advertising Fee Statute imposes a requirement specifically on purchasers of outdoor cigarette advertising. The Supreme Court held that such regulations were "inevitably motivated by concerns about smoking and health" because they "expressly target cigarette advertising." Id. at 547, 550. As for the third element, whether the state regulation is "with respect to the advertising and promotion of cigarettes," the Supreme Court suggested that "with respect to" means the state law must "relate to" or "expressly target" cigarette advertising. Id. at 547. The Advertising Fee Statute plainly relates to and expressly targets cigarette advertising. Thus, a court considering a preemption claim against the Advertising Fee Statute could conclude that it is preempted by section 1334(b) as a "requirement ... based on smoking and health ... with respect to the advertising or promotion" of cigarettes. 15 U.S.C.A. § 1334(b) (West 2009); Lorillard, 533 U.S. at 547-52.

Nevertheless, in court, "the party urging preemption has the difficult burden of overcoming the presumption against preemption." Great Dane Trailers, Inc. v. Estate of Wells, 52 S.W.3d 737, 743 (Tex. 2001) (citing Silkwood v. Kerr-McGee Corp., 464 U.S. 238, 255 (1984)). Without the benefit of adversarial litigation and the opportunity for all sides to present argument, it is impossible for this office to conclusively determine, for example, what motivated the Legislature to adopt the Advertising Fee Statute. That determination, which is an important part of preemption analysis, may require the resolution of factual questions, which is inappropriate for the opinion process. Therefore, we cannot conclusively determine whether section 1334(b) preempts the Advertising Fee Statute as it applies to cigarettes.[2]

If a court were to conclude that the Advertising Fee Statute is preempted as it applies to cigarettes, you ask if the entire Advertising Fee Statute is preempted. See Request Letter at 2. Whether unconstitutional provisions of a state statute are severable is a matter of state law. Virginia v. Hicks, 539 U.S. 113, 121 (2003). In Texas, an invalid provision is severable "[i]f, when the unconstitutional portion is stricken out, that which remains is complete in itself, and capable of being executed in accordance with the apparent legislative intent, wholly independent of that which was rejected." Rose v. Doctors Hosp., 801 S.W.2d 841, 844 (Tex. 1990); see also TEX. GOV'T CODE ANN. § 311.032(c) (West 2013) (governing severability of statutes). Courts ascertain legislative intent by drawing from the plain language of the statute, using any statutory definitions provided and presuming every word has been deliberately chosen. Tex. Mut. Ins. Co. v. Ruttiger, 381 S.W.3d 430, 452 (Tex. 2012). The Advertising Fee Statute applies to the purchase of outdoor advertising of both "cigarettes" and "tobacco products." TEX. HEALTH & SAFETY CODE ANN. § 161.123 (West 2010). The terms have separate and distinct meanings assigned by sections 154.001 and 155.001, respectively, of the Tax Code. Id. § 161.121(2), (5) (defining the terms pursuant to the Tax Code); TEX. TAX CODE ANN. §§ 154.001(2) (West 2008), 155.001(15). By listing and defining the two terms separately, the Legislature indicated an intent to distinguish "cigarettes" from all other "tobacco products." To conclude that they are "essentially and inseparably connected in substance," thus precluding severability, would ignore the Legislature's intent to the contrary. See Rose, 801 S.W.2d at 844. Applied only to non-cigarette tobacco products, the Advertising Fee Statute appears capable of being executed in accordance with legislative intent. Therefore, if a court concludes that the Advertising Fee Statute is preempted with regard to cigarettes, it would likely find that the remainder of the statute applicable to tobacco products remains enforceable.[3]

Finally, you ask whether the Advertising Fee Statute violates free speech protections under the United States and Texas Constitutions. Request Letter at 1-2. The First Amendment to the United States Constitution, made applicable to state governments through operation of the Fourteenth Amendment, provides in relevant part that "Congress shall make no law ... abridging the freedom of speech ...." U.S. CONST. amend. I; see Gitlow v. New York, 268 U.S. 652, 666 (1925). Article I, section 8 of the Texas Constitution provides that "no law shall ever be passed curtailing the liberty of speech." TEX. CONST. art. I, § 8. Generally, a court applying Texas law will limit its analysis "to the First Amendment and simply assume that its concerns are congruent with those of article I, section 8" of the Texas Constitution. Bentley v. Bunton, 94 S.W.3d 561, 579 (Tex. 2002).

In Lorillard, the Supreme Court used the test described in Central Hudson Gas v. Public Service Commission, 447 U.S. 557, 562-63 (1980), to analyze the constitutionality of commercial speech regulations related to cigarette advertising. See Lorillard, 533 U.S. at 554-56. To satisfy the Central Hudson test, a commercial speech regulation must (1) not be misleading and concern a lawful activity, (2) further a substantial governmental interest, (3) directly advance that interest, and (4) not be more extensive than is necessary to serve that interest. Cent. Hudson, 447 U.S. at 566.

In court, the state would have the burden of justifying its commercial speech regulation by demonstrating that it satisfies the Central Hudson test. See Sorrell v. IMS Health, Inc., 131 S. Ct. 2653, 2667 (2011). In that process, the Advertising Fee Statute should be afforded a presumption of constitutionality. TEX. GOV'T CODE ANN. § 311.021(1) (West 2013) (providing that it is presumed the Legislature intended to comply with state and federal constitutions in enacting a statute). Ultimately, whether the Advertising Fee Statute furthers a substantial government interest, directly advances that interest, and is no more extensive than necessary are issues that can only be resolved by a court of law upon consideration of the arguments and facts presented by the parties to a First Amendment claim. See Lorillard, 533 U.S. at 563 ("The degree to which speech is suppressed ... under a particular regulatory scheme tends to be case specific."). Thus, this office cannot resolve your question regarding the constitutionality of the Advertising Fee Statute.

SUMMARY

This office cannot conclusively determine whether section 1334(b) of the Federal Cigarette Labeling and Advertising Act preempts the Advertising Fee Statute as it applies to cigarettes. If a court concludes that the Advertising Fee Statute is preempted with regard to cigarettes, it would likely find that the remainder of the statute applicable to tobacco products remains enforceable. Whether the Advertising Fee Statute violates free speech protections under the United States and Texas Constitutions is a fact-intensive question that can only be resolved by a court of law upon consideration of the arguments and facts presented by the parties to a First Amendment claim.

Very truly yours,

DANIEL T. HODGE
First Assistant Attorney General

JAMES D. BLACKLOCK
Deputy Attorney General for Legal Counsel

VIRGINIA K. HOELSCHER
Chair, Opinion Committee

Stephen L. Tatum, Jr.
Assistant Attorney General, Opinion Committee

[1] Letter from Honorable Brandon Creighton, Chair, Select Comm. on Federalism & Fiscal Responsibility, to Honorable Greg Abbott, Tex. Att'y Gen. at 1-2 (Apr. 8, 2013), http://www.texasattorneygeneral.gov/opin ("Request Letter").

[2] The Texas Comptroller of Public Accounts is charged with administering and collecting the advertising fee. See TEX. HEALTH & SAFETY CODE ANN. § 161.123 (West 2010). We have not received briefing from the Comptroller regarding its position on the issues presented in your request.

[3] No product listed under the definition of "tobacco product," including "cigar," falls within the FCLAA's definition of "cigarette." Compare TEX. TAX CODE ANN. § 155.001(2) (West 2008) (defining "cigar"), (15) (listing "cigar" under definition of "tobacco product"), with 15 U.S.C.A. § 1332(1) (West 2009) (defining "cigarette"), (7) (defining "little cigar" for purposes of the FCLAA).