Texas Monthly, Inc. v. Bullock - Oral Argument

Argument of Roger J. George, Jr.

Chief Justice Rehnquist: We'll hear argument now in Number 87-1245, Texas Monthly versus Bob Bullock.

Mr. George, you may proceed whenever.

Mr. George: Mr. Chief Justice, may it please the Court:

Texas Monthly is a general interest magazine published by a commercial corporation in Texas with circulation of roughly 280,000 copies.

It covers various topics of interest to people in Texas ranging from politics to religion, to sports, to food, to social occasions, to all sorts of things, to humor.

It is not published by a religious faith, and it is not a religious magazine.

It is simply a commercial magazine.

It brought this lawsuit in the Travis County District Court in Travis County, Texas, to recover $149,107 in sales tax that it had paid in protest under the applicable Texas procedure for subscription sales during a period in 1985 when the state legislature had imposed a tax on subscription sales of magazines.

Now, the Texas sales and use tax system is a system similar to sales and use tax systems throughout the country.

Generally, any tangible personal property that someone purchases or uses in Texas is subject to the tax.

Thus, if I go across the street from my office and buy a pair of socks, I have to pay 6.125 percent of the purchase price to the State of Texas.

If I buy a typewriter, I have to pay the tax.

If my wife brings back a blouse from Washington after this argument, she's supposed to pay a use tax when she puts it on because she owes 6.125 percent of the purchase price for using it in the state of Texas.

Unknown Speaker: Is that down there?

Mr. George: Well, that was one of the issues that raised in the court below, in the District Court, and our contention was that that was a provision that was ignored and ignored involving sales and use taxes generally.

There are a plethora of exemptions from this tax.

Horses and mules, for example, that are used as draft animals are exempt.

As one might expect in Texas, drill stem bits for drilling equipment, all drilling equipment is exempt from the tax.

And various other items are exempt from the tax ranging from fertilizer to airplanes to certain shrimp boats.

Now, two of the exemptions that exist in this tax are relevant to the case this court has before it today.

Unknown Speaker: Why aren't the others?

Mr. George: Well, the others may be relevant and if so that there is a system of general exemptions or random system of exemptions but two are most relevant to the court's consideration today.

Unknown Speaker: So, you don't claim that there's an unconstitutional distinction between mules and this magazine?

Mr. George: Well, I suppose that would be an interesting case, Your Honor, but I don't have to make that contention today, and I'm not here trying to make that contention.

Unknown Speaker: Yes.

Mr. George: I am here concerning only two of the exemptions, really one of the exemptions.

The first exemption is one to... is an illustration, and that is there is an exemption... and I'll refer to them by the last three digits of these code numbers... Section 310 of the statute... which is a general exemption from tax for charitable, religious, civic organizations, volunteer fire departments, the Boy Scouts, and the Chamber of Commerce.

If any of those institutions... Goodwill Industries, for example... buys something... the Methodist Church... when my church buys something and uses it, it does not have to pay the tax.

There is no exemption for the sale of goods that is generally applicable to those institutions.

So that if the St. Vincent de Paul Store down on Third and Brazos Street in Austin or the Goodwill store sells my magazine or sells a used bicycle or sells a used book, they have to collect the tax and remit it to the state.

And if the tax isn't collected, the state comes after them for the tax.

Unknown Speaker: If they buy it, they are exempt?

Mr. George: Yes.

It's the use of the tax... you have... the tax works so that people who use it are subject to tax except for religious, charitable, educational, the Boy Scouts and all those people.

But if those institutions sell anything--

Unknown Speaker: How about the sale by a church of a religious item, a Bible or a crucifix or something of that sort?

Is there an exemption?

Mr. George: --Now, we come to the subject of this lawsuit, which is the exemption.

The statutes of the state of Texas tax the crucifix.

If they sell the crucifix, they've got to collect the tax.

The regulation involving this very statute.

If they sell a film about a religious subject, they have to collect the tax from the taxpayer.

The regulation specifically provides that if they sell sheet music... for example, if someone sells the Methodist hymnal, if my church sells a Methodist hymnal, that's sheet music, and I suppose the Comptroller of the State of Texas requires them to collect the tax and remit it to the State of Texas.

Now, the exemption that we're here about today reads that exempt from these taxes are periodicals that are published or distributed by a religious faith and they consist wholly of writings promulgating the teachings of the faith and books that consist wholly of writings sacred to a religious faith are exempt from the taxes imposed by this statute.

Unknown Speaker: Mr. George, if you prevail on this argument, do you get your money back?

Do you get a refund?

Mr. George: That's right.

And the trial court--

Unknown Speaker: Is there any question about that?

Mr. George: --No, sir.

In the trial court we won the judgment for $149,107.73, I believe, plus interest, and that's what we're trying to recover here today.

Unknown Speaker: Why is that?

I mean, why wouldn't it be possible, at least, if you were to prevail that the tax would be extended by Texas to religious periodicals--

Mr. George: Because the court... excuse me, ma'am.

Unknown Speaker: --so that you wouldn't benefit from it?

Mr. George: Excuse me, Justice O'Connor.

The system that this court has recognized, and it's every court except the courts of Arkansas and Tennessee and I can find, recognize the rule that courts can't impose taxes.

The legislature of the state of Texas has exempted these publications, period.

This court nor other court can change that decision.

Its only remedy that as taxpayers of under-inclusive statutes have, for generations have is that they don't have to pay the tax until the legislature changes the law and taxes all the people that are similarly situated.

And that's--

Unknown Speaker: Well, does the state concede that you get your money back if you prevail?

Mr. George: --No, no, they do not.

They have contended that the rule ought to be otherwise.

Now, the rule in Texas has, since 1885, been in my favor under state law.

There is the famous Pullman case--

Unknown Speaker: But the state appellate court did not reach this issue, just the state trial court?

Mr. George: --The state trial court said.

The appellate court, of course, ruled that the statute that I contend is unconstitutional wasn't unconstitutional and hadn't reached that issue.

This dissenting judge--

Unknown Speaker: So, I should think that's an issue of state law that's not before us and that's still open?

Mr. George: --Well, I believe that's an issue that... well, I suppose that the state... a possible remand to the court would be possible.

Technically that court did not reach that issue.

The sitting judge, Judge Carroll, in that court, did say that in course the remedy was that we don't have to pay the tax.

Unknown Speaker: But so, then, we're not certain that you're going to get your money back?

Mr. George: Well, we have some... I believe every court in the state of Texas to rule on that has ruled in my favor.

The Comptroller and Attorney General of the State of Texas take a contrary position in this case.

Unknown Speaker: Well, in any event, you have to get over this hurdle first before you can get the--

Mr. George: I've got to win the merits before I would get to that issue, but--

Unknown Speaker: --And why is it relevant for us at all?

Mr. George: --Well, I don't believe it is relevant.

This court addressed this very argument in the Arkansas Writers' Project case.

Unknown Speaker: Well, do we often make decisions that have no meaning?

Mr. George: No, you don't, and that's the reason why you decided in the Arkansas Writers' Project, the Arkansas Times got its money back.

It was suing to get money back it had paid under the Arkansas statute, and this court entered a judgment allowing it to recover that money.

Unknown Speaker: Well, that was treated as a question of standing, though, wasn't it, in Writers'?

Mr. George: I suppose it's either... its standing or remedy is a two-sided coin, obviously.

Unknown Speaker: Now, Ragland treated the question as one of standing, did it not?

Mr. George: Yes.

Well, the Supreme Court of Arkansas in that case--

Unknown Speaker: No, at this court.

Mr. George: --decided that the remedy wasn't available, and this court dealt with it as a standing issue.

Do you have standing to bring it?

And it was exactly the same fact situation in exactly the same pattern; that is, the Arkansas magazine, the Arkansas Times sought to recover taxes it had paid and tried to get back, and the Arkansas Supreme Court said you're wrong on the Constitution, but if you were right, you couldn't get your money back because that's not the appropriate remedy.

This court in its opinion in April of '87 said no, that's wrong, you have standing to bring it.

Now, I think that given the court's decision in the Supreme Court of Arkansas that, in fact, this court has decided that issue; that at least as a matter of law of the United States that my client is entitled to bring this action and seek this remedy and if it is entitled to get it back.

Now, again, Arkansas decided the remedy wasn't available.

This court reversed and rendered in favor of the taxpayer, and I believe that case is directly on point.

Now... it's as on point as any case you're likely to see in this court.

Now, my client brought this action raising three basic kind of arguments.

The first were under the... the first two were under the Minnesota Star issue that we raised: One, that the statute as applied in Texas was discriminatory against in-state magazines, that there was a policy of not collecting the tax if the magazine was distributed in Texas by somebody who wasn't a Texas resident, and that as applied the system discriminated against subscription sold magazines.

The District Court chose not to find any facts or deal with those issues at all and simply determined that the statute was unconstitutional because it constituted a discrimination based upon the content of the speech; that is, if a magazine contained, in the words of the statutes,

"It consisted wholly of writings promulgating the teachings of the faith. "

the statute... the taxpayer didn't have to pay the tax.

And that was unconstitutional under the line of cases that includes this court's decisions from Police versus Mosley through FCC versus the League of Women Voters to Kerry versus Brown and a whole series of cases that say that the government cannot discriminate and impose regulations upon speech based upon the content of that speech.

Unknown Speaker: This is a subsidy rather than a regulation.

What do you think, Mr. George, about the Post Office granting of specially lower rates to educational materials?

That's one category of speech.

Mr. George: Justice Scalia, that--

Unknown Speaker: Why shouldn't amusement materials get the same exemption?

Mr. George: --Justice Scalia, that is a logical conclusion, the dissent that you reached in those cases, in the Arkansas Writers' case, was a logical conclusion.

This is simply a subsidy and obviously we can support the Kennedy Center, using your example, from that case.

The problem is history not logic.

And if this court will review the history of the imposition of penalties involving speech from the Stamp Acts imposed upon the English press through Grosjean versus American Publishing Company, you will see that we have had a history where sometimes legislatures impose taxes and where there is a suspicion, at least, that it was because they want to either silence or in some way chill speech.

Unknown Speaker: But you're talking there... you must distinguish between a tax that just taxes a particular activity and an exemption for a particular activity from a general tax.

Is there no difference between those two in our cases?

Mr. George: Well, if you will look back at the English example of the Stamp Act taxes, the Stamp Act was a general tax, and it was applied to newspapers.

And if you will review the court's reciting of Justice Sutherland's opinion in Grosjean, you will see that that was indeed the case.

It wasn't... the Stamp Act was applied to all sorts of things, including newsprint, and there was a great outcry about that.

But, in fact, the problem is intrusiveness in my judgment.

The problem with the logical position about subsidy versus history is that my magazine, for example, my client contends every two years the legislature of the state of Texas meets, and in those sessions they have all kinds of statutes.

One time they had my clients were exempt.

The next session they weren't exempt.

And now they are.

Subscription sales are exempt, but newsstand sales aren't exempt.

Now, that back and forth, back and forth occurs in this area.

Now, each year my client writes an article, writes the ten best and ten worst legislators, and there is a great interest in that because it is a widely circulated magazine.

And there is some political careers who believe that they have been seriously damaged by being on the ten worst and some that have been greatly enhanced by being on the ten best.

Unknown Speaker: xxx--

Mr. George: Right.

My problem is I cannot prove that Stan Sludder, a representative who was chairman of the committee in 1978, took that exemption out because he didn't like being on the "ten worst" list.

I can't prove that.

And the courts should not be inquiring into that.

That's why we need and why the court's majority in Arkansas Writers' Project have a salutary rule that because while exemptions from tax and subsidies have a logical symmetry... we have Justice Brennan's dissent in the Walz case involving exemption from church property... they are some similar, but not the same.

And the lack of sameness comes from history as much as logic.

Unknown Speaker: --And the threat, the threat that you're worried about would be eliminated if Texas provided that this, this tax would apply uniformly to all magazines including those sold by religious organizations and dealing with religion provided, however, that every religious organization that pays such a tax will receive a subsidy from the state in the amount of that tax that they've paid.

That would be all right?

Mr. George: Well, you rapidly... from breaking this case down into its logical components, the part of the First Amendment that deals with the press and the speech you would have solved.

But the problem with the speech that you deal with the establishment clause, you certainly wouldn't have solved because it's clear there is one fundamental message.

If you start back with Everson, run through Lindlin, run through the Bowen case from last term about establishment clause cases, and that is the state cannot subsidize delivery of religious message.

Justice O'Connor's concurrence in that case says if there's nothing else clear about this area of the law about establishment clause law, you can't do that.

Now, you could not have a system that said every time I pay a dollar to the First Methodist Church in Austin, Texas, for the Methodist Layman that comes every week, that they give that church six and a quarter cents for delivering that message to me.

Now, because it is a direct, it violates every tenet of the Lemon test, and it goes to the heart of the establishment clause.

Unknown Speaker: Religious organizations do not get special mail rates?

Mr. George: I don't know the answer to that.

Unknown Speaker: I think they do.

That's granted.

Mr. George: And obviously they are not alone in getting that.

Unknown Speaker: Well, that may well be--

Mr. George: --But the problem--

Unknown Speaker: --but they're not excluded either.

Mr. George: That's true.

Unknown Speaker: Your argument is the establishment clause excludes them.

We can subsidize everybody else but not these religious organizations because if you establish the clause--

Mr. George: Well, Justice Scalia, we have had since Walz a system and a recognition by this court that when you have carved out a general category of institutions, as in the Texas constitution and Texas statutes that range from the Boy Scouts to the Methodist Church, to the volunteer fire department, to hospitals, to libraries, and you give those, all those good works or good institutions a special kind of benefit, a tax break, a subsidy, as in the Bowen case.

One of the basic... basis of the court's opinion was the religious organizations weren't singled out for special treatment.

The problem with this statute is that only whatever religious faiths are, are singled out for the treatment.

Unknown Speaker: --Mr. George, I take it, then, if the exemption here applied also to publications sold by charitable and educational institutions as well as religious, you think that Walz would be satisfied?

Mr. George: You would not have the establishment clause case, and if it didn't depend on the message, we'd have the kind of Regan case, Regan versus Taxpayers League, that involved the exemption for veterans' organizations and 501... 50(c)(3)(1)... I'm not a tax lawyer... exemption that involved lobbying because it wouldn't depend on the message if all those institutions could distribute magazines or periodicals or other institutions free of the message being determined.

The problem among others with this exemption is that it focuses upon the message.

Someone has to determine whether the message is the appropriate message to get the tax benefit whether it be the... it says... it has to... it has to consist wholly of the teaching of that faith.

Unknown Speaker: How do you reconcile that with our other line of cases that say that the First Amendment not only prevents... not only does not prevent special treatment for religion but, indeed, requires it in such areas as employment benefits.

Somebody who says I don't want to work on a Saturday because my faith prohibits it.

We say you have to make an exemption for that--

Mr. George: Yes.

Unknown Speaker: --even though you don't have to make it for sportsmen who want to shoot on Saturday or any other people who want to do anything else on Saturday, right?

Mr. George: There's no question that there's the whole line of cases, Jehovah Witness cases about working munitions plants that this court has decided.

Unknown Speaker: So, now, why is... why is special treatment of religion required there, but here it is not only not required, it is not even permitted.

Mr. George: One, it is an accommodation to the exercise, and it is possible... and remember in Texas we don't have special treatment for religions except for delivering the message.

If they sell you a crucifix, they've got to pay the tax.

And in this exemption, for example, if you'll look at the last page of the jurisdictional statement, the regulation promulgated by this Comptroller says if they sell you a film, they've got to pay the tax.

It is possible that you could have a system that provided for exemptions for all religious messages or something, and that might be a different case because somehow taxing the message would be intrusive into religions.

The rationale for all of those accommodations of exercise is that we're accommodating the... we're somehow accommodating the exercise of that religious activity.

Now, here--

Unknown Speaker: But the religion clauses don't say anything, in haec verbis, about any duty to accommodate.

I can see how that would explain the Title VII accommodation cases.

But how about the ones that are based purely on the Constitution?

Mr. George: --Well, those cases are based upon a concept that you are forcing someone to violate their religious tenets.

Okay?

That is, I am forcing that gentleman to work in the munitions factory on the tank turret or forego his worker's compensation, and it is against his religion to work on the tank turret.

Now, we have decided, the Court has decided as a matter of constitutional principle that you can't require him to choose between a benefit and his religion.

There would be no choice between benefit and religion to treat the delivery of this tangible good like all other tangible goods, or to collect the 6.125 percent tax.

They can give it away, they can deliver it free and there's no tax.

It's only when they get paid by the person who buys it from the religion.

Unknown Speaker: Well, is this a... is your First Amendment argument based on religious clauses or just on the First Amendment?

Mr. George: Well--

Unknown Speaker: Or is it an equal protection case or both?

Mr. George: --Well, the argument runs first that it's a content-based discrimination, Justice White, and thus you get Arkansas Writers' Project versus Ragland--

Unknown Speaker: Well, then, it doesn't make any difference whether it's a religious message that's discriminated for or against.

Mr. George: --In my judgment, no, it does not.

Unknown Speaker: All right.

You would be here if they exempted magazines about agriculture and taxed, God forbid, magazines about oil?

Mr. George: God forbid.

And I would... in connection with the Arkansas Writers' Project--

Unknown Speaker: But wouldn't you be making the same argument?

Mr. George: --I would say Arkansas Writers' Project... in that case the Arkansas statute exempts religious, professional, trades, and sport journals.

And this court's opinion said that was unconstitutional.

Unknown Speaker: Because?

Mr. George: Because of discrimination--

Unknown Speaker: It taxed somebody else.

Mr. George: --on the base of content.

It's a discrimination based on content.

Unknown Speaker: And I suppose it could be argued that it violates the equal protection clause because it's an irrational distinction.

Mr. George: Well, it's not one.

It is an irrational distinction.

Unknown Speaker: The First Amendment proved it's an irrational distinction.

Mr. George: Now, I come to the religious issue only after--

Unknown Speaker: Why?

Why?

Why?

Mr. George: --Why?

Because it's there, I suppose.

And when I brought this case Arkansas Writers' Project had not been decided.

Unknown Speaker: I notice you put it in your second paragraph.

Mr. George: Well, I think Arkansas Writers' Project is directly, precisely on point with this case, and it is a direct decision in this case.

I didn't have the benefit of that case when I--

Unknown Speaker: Let me make a suggestion.

Maybe you got to the religious issue because you have to grapple with it to determine that this is an irrational distinction because the state is going to say... I haven't heard the state yet, but I'm sure they're going to say, you know, we're dealing with a Constitution that gives special privileges to religion.

We have a Supreme Court jurisdiction that gives special privileges to religion.

We have decided that religion is important enough that we're going to give special privileges to religion in this tax law.

Now, if it's rational for the Constitution and if it's rational for the Supreme Court, it's rational for the State of Texas.

Maybe that's why you drew--

Mr. George: --Maybe that is why.

And I think I got there, however, because it seems to me that any equal protection analysis requires the achievement of a legitimate stadient and to achieve a legitimate stadient, it cannot be a law respecting the establishment of religion.

And I believe that in addition to being Arkansas Writers' Project versus Ragland all over again, this case is also a law respecting the establishment of religion as well.

Now, the reason why I arrived at that argument is because I believe both of them are correct.

Unknown Speaker: --Mr. George, do you think it would be unconstitutional to grant an exemption for crucifixes?

Mr. George: For what?

Unknown Speaker: For crucifixes.

Mr. George: Probably not, although the problem with crucifixes and all other religious symbols, that they are delivery of a message.

The problem is, you got to... it is clear that you can't subsidize deliveries of messages.

Now, you may be able to accommodate conduct, and somewhere physical things become conduct as in the man who won't work in the munitions plant.

Now, you would have to stop and say is that conduct or is that a message?

It is symbolic.

You could very well argue that the crucifix by its definition is a statement of your religious principles and thus is a delivery of a message.

Now, you have to accommodate the man going to the church to light the candle.

Now, how about buying the candle?

The candle, in lighting the candle may be conduct; that is, has to be accommodated.

But it doesn't... but when it is the message and delivering the message, we certainly can't subsidize it.

Now, I'm not sure how you deal with that.

I'll reserve the balance of my time.

Argument of Harriet D. Burke

Chief Justice Rehnquist: Thank you, Mr. George.

Ms. Burke, we'll hear now from you.

Mr. Burke: Mr. Chief Justice, and may it please the Court:

It is the position of the State of Texas in this appeal that there's been no violation of the establishment clause; that in judging this exemption, Section 151.312, it should be viewed on a violation of an equal protection standard and not a standard involving violation of First Amendment rights.

The test to be applied should be one of a rational basis test.

The rational basis that the state asserts is that, one, it seeks to accommodate religion in the sense of being neutral towards religion and helping effectuate the free distribution of religious messages by a religious faith.

The second rational basis is that the exemption seeks to avoid any violation of the establishment clause.

The third basis is it seeks to avoid any violation of the free exercise clause of the First Amendment to the Constitution.

Unknown Speaker: What about the message of the Arkansas case?

That was just a freedom of the press case, wasn't it?

Mr. Burke: The Arkansas case, Your Honor, the way Texas views the Arkansas case is that in that particular case, you had a different tax structure than what you have in Texas.

Unknown Speaker: Well, but it was a free... a freedom of the press case?

Mr. Burke: It did involve the issue of First Amendment right, free press, yes, Your Honor.

Unknown Speaker: And here some publications are, some parts of the press are taxed and some aren't, in this case.

Mr. Burke: Texas taxes all parts of the press except for religious periodicals.

Unknown Speaker: So, some are taxed and some aren't--

Mr. Burke: The state does not--

Unknown Speaker: --based on content.

Mr. Burke: --The way the state reads Arkansas Writers' Project is that to have a First Amendment violation, there must be a tax that singles out the press as a whole and targets the press for that tax, or it must target a small group within the press.

And then, beyond that, you look to content-based discrimination.

If that is not the way the Arkansas case is to be read, then we must be judging this one a strict scrutiny approach.

However, the state doesn't see that Texas Monthly has been harmed any more than any other retailer in the state of Texas having to pay the tax.

If the court--

Unknown Speaker: I'm not sure that I understand that.

You're saying that this is not a press tax as was involved in Arkansas.

This is a general sales tax.

Mr. Burke: --Yes.

Unknown Speaker: And, therefore, the public harmed by the exemption is not just the rest of the press, but rather the entire body politic.

Mr. Burke: Yes, Your Honor.

That's the way the state views it.

However, if the Court does not view it in that manner and determines that a strict scrutiny approach should be applied in this case, the compelling state interests are the same that I have enunciated as being rational basis to sustain the exemption.

I would like to point out that if the Court so determines that there has been a constitutional violation, the state would request the court to invalidate the exemption, leave Texas Monthly subject to the tax, and remand the case to the trial court level to determine whether or not religious periodicals would then become subject to the tax under Texas Law.

Unknown Speaker: Texas Monthly would not get its money back under that, is that right?

Texas Monthly wouldn't get its money back?

Mr. Burke: Not at that point in time, Your Honor, until a decision was made as to whether religious periodicals become subject to the tax because under the current tax structure, all sales of tangible personal property are taxable.

All property brought into the state for use or shipped into the state are presumed to be subject to the tax.

Therefore, we think in arguing before the state courts that the intent of the legislature is quite clear that if the legislation is invalidated, this exemption falls, that these sales will become automatically subject to the tax, and everyone will be treated equally under the Texas tax structure.

Unknown Speaker: Ms. Burke, what if I think it's unconstitutional for the Texas courts to say after the fact, after the years have passed, we are retroactively going to subject religious periodicals to taxes?

Then I wouldn't have to remand to the Texas courts at all if I thought there's no power in the Texas courts whatever?

Isn't that a strange procedure to decide after the fact that prior sales have been subject to tax, even though the statute says on its face they are not?

How can Texas do that?

Mr. Burke: It's an unusual procedure, Your Honor.

I haven't seen this argued before, but it's no more unusual than invalidating, striking down the entire tax system here just because you have one exemption from an otherwise equal tax.

All retailers of publications are subject to the tax in Texas, including newspapers for this period of time.

Unknown Speaker: Well, that doesn't harm anybody, though, to do that.

I mean, I agree.

It's very upsetting for the state, but it doesn't tromp on any individual rights.

But I'm... the other solution that you suggest is open to the state suddenly subjects somebody to a law that was not in effect at the time the sales were made.

Mr. Burke: Of course, Your Honor, there would be a limitations time period running against the state on necessities taxes.

So, the state would not be able to go back and assess for unlimited time periods.

Unknown Speaker: Is this Appellant the only entity that has filed a protest on this theory?

Mr. Burke: No, Your Honor.

There are two other taxpayers who have suits now pending on this particular issue.

Unknown Speaker: And has the statute run as to all others, because, I take it, this statute has been repealed, the one that we're looking at?

Mr. Burke: The statute was repealed in 1987, effective October 1, 1987.

Unknown Speaker: Has the time run on any further protests?

Mr. Burke: No, Your Honor.

There's a four-year statute of limitations in Texas.

Unknown Speaker: Four-year, a four-year statute?

Mr. Burke: Yes, sir.

Four years from the time the taxes become due and payable.

Unknown Speaker: So, if we told this appellant that it could get its money back, then any number of others could file?

Mr. Burke: That is correct, Your Honor.

The state would be subjected to having numerous refund claims filed against it.

Depending, of course, some would be of larger amounts than others, depending on how the court rules in this particular case.

If the court, though, however finds that the tax itself should be struck in this instance, the state asks the Court to remand this case... not with regard to Texas Monthly... they should get their money back, but to determine from a state court perspective, let the state court determine how to handle the refund situation that might be occasioned as a result of this decision.

The state, though, just as I said before, does not view this as a First Amendment-type issue.

What we have here is an exemption--

Unknown Speaker: Ms. Burke, let me interrupt you just a moment.

Does the state have any statistics as to what the amount of tax that might be collected from exempt organizations if this exempt organization... if this exemption weren't in effect compare as a matter of percentage with the amount of revenue brought in by the state sales tax?

Mr. Burke: --No, Your Honor, there is nothing in the record and I do not have that kind of evidence since the state has not been taxing religious organizations.

Unknown Speaker: Do you have any figures in the record or that you know of what the gross revenue from the state sales tax is in any given year?

Mr. Burke: Your Honor, it is the largest revenue-raising tax in the state of Texas.

Last year alone it brought in about two-thirds of the taxes that were being paid to the State of Texas.

I don't have a dollar figure for you, but it is a substantial tax to the State of Texas.

The exemption in Section 151.312 I have heard been called basically a content-based type exemption.

The state would characterize it more in the nature of first a status-based exemption.

The first decision to be made under the exemption is whether or not the periodical is being distributed or published by a religious faith.

Then, the second part of the exemption deals whether it wholly contains writings promulgating the teachings of the faith.

The aim of this exemption, the state would submit, is to accommodate religious faiths and their adherents by exempting them from the tax on their publications which are disseminating the teachings of the faith.

It allows, therefore, religion to advance itself, but also to be neutral between church and state.

So, it's more of an activity-based exemption even though to a degree you must look at content.

It is allowing the church to be free from religious restraints in disseminating its religious messages.

Unknown Speaker: Ms. Burke, may I ask you on the status point, the first prong, what about an organization of atheists who published a magazine promulgating their views about religion?

Would that qualify for the exemption?

Mr. Burke: I believe it might, Your Honor.

I'm trying to think that the state has granted... and this is not in the record... that the state has granted an exemption to a religious faith that was an atheistic organization.

Unknown Speaker: The statute said religious faith.

I mean, you would really have to interpret religious faith to include an atheist in that.

It's rather strange, isn't it?

Mr. Burke: Yes, it is, Your Honor, but it is a belief, even though it's anti-religion.

The state has tried to extend this exemption as far as it can.

Unknown Speaker: You would interpret religious faith to include anti-religious faith?

Mr. Burke: Yes, in a sense.

Unknown Speaker: That's stretching it about as far as you can, isn't it?

Mr. Burke: Yes, but the state has tried to accommodate religion to the extent that it can, and I believe I'm correct on that.

Unknown Speaker: How in the world does that accommodate religion?

How do you accommodate religion by saying atheism is religion?

Mr. Burke: How do you... accommodation is by allowing the organization to be free from having to support the state.

It is maintaining a physical neutrality between the organization and the state.

Unknown Speaker: Wouldn't you have to name religion and atheism?

Wouldn't you have to name both of them?

And you didn't name both of them.

Mr. Burke: No, unless--

Unknown Speaker: And that was deliberate.

Mr. Burke: --the state considers atheism to be a form of faith.

Unknown Speaker: And the distinction was deliberately made by the state.

Mr. Burke: The state legislature did make a deliberate enactment to exempt religious-type periodicals being distributed by a religious faith.

Unknown Speaker: Ms. Burke, you don't take the position that this accommodation is required, do you, by the free exercise clause?

Mr. Burke: Your Honor, as I understand the free exercise clause, it does mandate that accommodation be required.

It's not just permitted; it's required.

Unknown Speaker: So, you take the position that Texas may not impose a general sales tax on religious publications?

Mr. Burke: No, Your Honor.

I'm not saying it would be an absolute violation--

Unknown Speaker: Well, that's what I'm asking.

Mr. Burke: --to impose the tax.

No, that is not the position of the state.

Unknown Speaker: Can the state impose its sales tax on the sale of candles in a Catholic church, too?

Mr. Burke: Yes, Your Honor, it could.

Unknown Speaker: Okay.

Mr. Burke: And the state is certainly not asserting that it would be an absolute violation of either the establishment clause or the free exercise clause if the exemption were not in place.

They recognize that rational bases have to meet... be drawn under the statute.

With regard to the Arkansas tax, Texas again does see a distinction there because Arkansas did tax only general interest periodicals and exempted everything else from the terms of the tax including newspapers.

Texas tax structure is just the reverse.

It taxed all publications, including newspapers, but exempted only religious periodicals from the terms of the tax.

If the exemption were not in place, as I have said, the state is not saying that the rational basis is that there would be a violation of the establishment clause, but without the exemption there would be a greater involvement between the church and the state in the sense that the church would have the authority to be subject to paying the tax, have an obligation and duty to pay the tax, and if it did not, then the state could go in and file liens against church property if there was a delinquency.

It could seek to seize the church property and sell it to pay a tax debt, and it also could freeze church bank accounts.

This is certainly a greater involvement between the church and the state than if the exemption were not present.

This also pertains with regard to the free exercise of religion.

If the exemption were not present, there's a possibility of a violation under the free exercise clause in that it has previously been held that Jehovah's Witnesses, for example, going out and disseminating their religious messages by selling publications containing their religious messages when they were required to pay a tax and obtain a license before they could engage in these activities, this was held to be a violation of their free speech rights and also a violation of their free exercise rights.

Under the Texas Sales and Use Tax Act, as it was structured during the time period in question, what you had was a situation that engaged in operation as a retailer within the state of Texas, you had to post a bond first.

Then you had to obtain a permit, and then you had to collect and remit the tax or remit the tax to the State of Texas.

Without the exemption in place there is a possibility of a violation of the free exercise clause of the First Amendment.

Unknown Speaker: Ms. Burke, I'm not sure... were you saying that one of our cases we have a Jehovah's Witness case that rested on establishment clause grounds?

Mr. Burke: Free exercise clause grounds.

Unknown Speaker: Free exercise clause grounds?

Mr. Burke: Yes, which was Murdock versus Commonwealth of Pennsylvania.

Unknown Speaker: Murdock.

And you're saying just as we, just as the state couldn't... must make an exemption from a general licensing law for the sale of those pub... was it clear that that was a sale case?

Mr. Burke: Yes, Your Honor, they were directly going out and selling their Watchtower publications, and sometimes they were receiving donations from them.

But that would fall within the definition of a sale under the Texas Sales and Use Tax Act, which is a transfer of tangible personal property for a consideration.

And under that particular case, as I said, it was a general regulatory-type situation, but it also was a tax that was being imposed upon the sale of these magazines.

They had to pay the tax in advance, and they also had to obtain a license, and this is pretty much the same structure under the Texas Sales and Use Tax Act.

The state, therefore, feels that it has asserted either rational basis or compelling state interest to sustain the exemption in this case.

Texas Monthly has also raised the fact that Section 151.312 does not or... they say it does constitute a law respecting establishment of religion.

The position of the state is that the lower court correctly determined that this exemption does not fall under that category; that it meets a three-part test in Lemon versus Kurtzman: Number one, that it has a secular legislative purpose in that it restricts the physical relationship between church and state, and this is what the Court of Appeals in Texas so determined.

It also held that its primary purpose was not to advance or inhibit religion.

To the contrary, the effect was to permit religious periodicals, religious organizations in effect to be free from state sponsorship or support.

And, thirdly, that the exemption did not foster an excessive entanglement with religion.

Unknown Speaker: Do you think the Lemon test is the exclusive test?

Mr. Burke: I think it's a test that should be applied, Your Honor, in this case.

I think it probably should not be so rigidly applied in this type of context, but I think it should be applied.

And I think the exemption meets all elements of the test because I feel that it doesn't constitute excessive entanglement with religion in the respect that it doesn't create the appearance of an ongoing partnership between church and state that, like, say, a direct aid or subsidy would, even though you might refer to an exemption as being a subsidy.

Certainly it has been held in the past that determining in the Walz case that real property being exclusively used for religious purposes didn't constitute an excessive entanglement with religion and also determined whether secular books that were to be given to students of parochial schools, there had to be a determination made there as to whether it contained religious material or whether it was secular in nature.

That was held not to constitute excessive entanglement with religion.

What the state is doing here is being mutual towards religion.

It is trying to accommodate religion by allowing for the free distribution of religious teachings and materials.

It is not advancing or inhibiting religion, it is a secular, legislative purpose, and it does not foster an excessive entanglement with religion.

In the past in that area on advancing religion, just going back to that for a minute, it has already been held that time-release programs where students that were released from public schools to go off school grounds to attend religious instruction, that this type of program did not create a symbolic union between church and state so as to constitute an advancement of religion.

I think this same sort of approach can be applied to tax case in that the voluntary sale and purchase of these types of religious periodicals likewise does not constitute excessive entanglement, does not advance religion.

It has been pointed out that under the Texas tax structure that what we have here is an exemption exempting the sales of religious periodicals based on content.

We previously said we don't feel that the whole exemption is really content-based.

It's more status-based and activity-based.

There are other exemptions, however, in the Texas Sales and Use Tax Act, one of which is an exemption that allows religious organizations and other organizations to make one-day sales in a calendar year of any items that they so desire to sell.

And I realize that is broader based than just the religious aspect.

But, there's another exemption that permits the sale of food, food products by church or the church function, and that can occur any time during the church year.

So there are other exemptions that are basically religious-based in the Texas Sales Tax Act.

The state perceives this, as I've said earlier and submits to the Court that what we have here is a nondiscriminatory tax.

If the Court, however, perceives this as a situation where there is content-based discrimination, a strict scrutiny test should be applied and the exemption should be upheld under this type of test because what we have here is two competing constitutional interests, the right to free speech by the press and the right to free speech by religion.

And to avoid any violation of the free exercise clause or the establishment clause in which we feel a compelling state interest, we submit that the exemption should be upheld.

Thank you.

Unknown Speaker: Thank you, Ms. Burke.

Mr. George, you have three minutes remaining.

Rebuttal of Roger J. George, Jr.

Mr. George: Two points.

First, the Arkansas Writers' Project case involved an Arkansas general sales tax statute.

It provided a taxation of all tangible property, according to the court's opinion, in the state of Arkansas, and there were a series of exemptions, like in Texas, for mules and various things, but there was only an exemption for religious, trade, sports, and professional journals.

So, there were a lot of... or media, I suppose.

The agricultural magazines, magazines about the oil and gas industry or other things were subject to tax, along with general interest magazines.

Unknown Speaker: Well, all newspapers were exempted.

Mr. George: In Arkansas they exempted newspapers.

That was a separate grounds for writ petition in that area, in the appeal in that case.

Second... and thus, this case is similar in that only the restriction is... does not include sports, professional journals and trade journals.

It just includes religion, one of the five topics that were involved in the Arkansas case.

And there the evidence was, according to this court's opinion, one to three magazines paid the tax.

In our evidence, the Comptroller's people testified that 20 to 30 paid the tax.

Given the relative size of Arkansas and Texas, I think that's a distinction without a difference in that we, in fact, have as few as 20 of the hundreds and hundreds of magazines that are circulated in Texas are subject to tax... not because of the exemptions, because of the enforcement policy.

Finally--

Unknown Speaker: Because of what?

Mr. George: --Our enforcement policy argument that was part of the trial court evidence.

Finally, let me point to the question of does the taxpayer get his money back.

And, in fact, if you look at this court's opinions about taxpayers contending statutes or schemes were unconstitutional for interstate commerce reasons, a whole range of reasons.

This court's Armco versus Hardesty case and West Virginia statute taxing certain interstate sales--

Unknown Speaker: That may be somewhat different if the holding rests on an equal protection basis than it does on a commerce clause.

Because our case... some of our cases have said when it's an equal protection violation, the state can choose whether to eliminate the favored treatment or the disfavored treatment and just make sure they're all treated equal.

Mr. George: --Well, I suppose the state has to... if it has a statute, it can repeal it and then solve the problem, and you can't repeal... I suppose you could repeal the... there is no equal protection in commerce clause.

Obviously you can't tax it because in commerce you can't solve it by corrective legislation.

You can solve this by corrective legislation.

But you can't solve... courts don't have powers to impose taxes.

It can't go out and make those people who distributed the Watchtower and the Baptist Standard and the Methodist Layman pay the tax because the legislature has exempted them.

Thank you.

Chief Justice Rehnquist: Thank you, Mr. George.

The case is submitted.