TAX AN ILLEGAL ACTIVITY

MUNICIPAL CORPORATIONS ‑- POWERS ‑-TAXATION ‑-LICENSE ‑-GAMBLING ‑- LICENSE OR TAX BY ‑- TAX AN ILLEGAL ACTIVITY.

A city of the first class has no power granted to it to tax or license an illegal activity such as gambling.

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                                                              September 25, 1953

Honorable Ella Wintler
State Representative, 17th District
800 East 24th
Vancouver, Washington                                                                                                              Cite as:  AGO 53-55 No. 138

Dear Mrs. Wintler:

            This is in answer to your letter of August 26, 1953, requesting our opinion upon several questions arising from the operation of a game known as "Skillo," in the city of Vancouver.

            Your questions are:

            1. Can the city legally enact and enforce an ordinance levying an excise tax on the operation of such games?

            2. If the answer to question 1 is "yes," could such a levy be retroactive to the date of the repeal of the licensing ordinance?

            3. Would the imposition of such a levy prejudice any future action to ban, license, tax, or regulate such game by the city?

            4. Would it prejudice the city's position if suit were brought by the operators against the city?

             [[Orig. Op. Page 2]]

            Our answer to the first question is that the city cannot legally enact and enforce an ordinance to tax such games.  This answer renders the other three questions moot.

                                                                     ANALYSIS

            It is necessary to set forth the factual situation in order to completely understand the opinion.

            The game is an adaptation of the well-known "Bingo" with slight modifications.  The cards sell for ten cents each and the game is played for cash prizes ranging from ten to fifty dollars.  The game became popular during the war years under the name "Quizzo" but was modified slightly in January, 1953, and its name changed to "Skillo."  The modification was the addition of a requirement that the winner answer a question by the operator of the game before he could receive the prize.  The ostensible purpose of this change was to render the operation more a test of skill than a game of chance.

            Prior to 1952, these games were licensed by the city.  In the summer of 1952, the city council passed a resolution refusing to renew the licenses for the game then known as "Quizzo."  All licenses expired on December 31, 1952.  On January 1, 1953, the operators changed the game to "Skillo," as explained above, and continued operations without the benefit of licenses.  In March, 1953, the city passed an ordinance banning the operation of "Skillo" games.  Within the required time, a referendum petition was filed, referring to the people the question of the adoption or rejection of the ordinance banning the games.  This referendum measure will come on for vote at the city elections in March, 1954.  In the interim, the games are operating but are neither licensed nor taxed.  Hence, the questions as set forth above.

            The basic question is whether or not the game constitutes gambling.  The secondary question (if it is gambling) is whether a city may license or tax an illegal operation.

            There are two types of illegal gambling transactions under Washington law.  Lotteries are prohibited by Constitution, Article II, § 24.  Gambling, which may include certain transactions not included in the term lottery, is made a misdemeanor by RCW 9.47.020.  Both lotteries and gambling consist of three essential elements:  (1) risk, (2) chance, and (3) consideration.  State ex rel. Evans v. Brotherhood of Friends, 41 Wn. (2d) 133.  But, gambling is a much broader term than lottery.  Any game, when played for money, constitutes gambling, even though a substantial element of skill is involved.  Poker, for example, is a game involving skill and judgment.  Although for this reason, it is not a lottery, it is certainly a gambling game when played for money.

             [[Orig. Op. Page 3]]

            The city of Vancouver is subject to the general laws of the state.  Both lotteries and gambling are prohibited within its limits by state law.  It may be conceded that the game of "Skillo" is not a lottery if the questions asked by the operator bring into the game a substantial element of skill or judgment.  But the game may nevertheless be illegal if it constitutes gambling.

            RCW 9.47.020 provides:

            "Every person who bets, wagers, or hazards any money or property, or any representative of either, upon any game, scheme, or device, opened, conducted, carried on, or operated in violation of RCW 9.47.010 shall be guilty of a misdemeanor."

            RCW 9.47.010 provides, in part:

            "Every person who opens, conducts, carries on, * * *any gambling game or game of chance, played with cards, dice, or any other device or any scheme or device whereby money or property or any representative of either, may be bet, wagered, or hazarded upon any chance, or any uncertain or contingent event, shall be a common gambler, * * *" (Emphasis supplied)

            "Skillo" is certainly a game, scheme, or device whereby money is bet upon an uncertain or contingent event.  There may be no uncertainty that a contestant will win once he gets the opportunity to answer the question which the operator asks him.  But to arrive at that point, he must prevail in a game of pure chance, without which, he cannot win.  The game of "Skillo" is clearly a gambling game in violation of the statutes quoted above.

            The secondary question is whether a city may tax an illegal activity.  There is considerable authority for the proposition that a state may do so.  The theory is that a state has all the sovereign powers of government, including the taxing power, limited only by the constitution.  The imposition of a tax does not imply a grant of authority to perform the illegal activity, but merely imposes a levy thereon if it does, in fact, exist.  See Casmus v. Lee, 183 So. 185, 118 A.L.R. 822 (Ala. 1938); License Tax Cases, 5 Wall. 462, 18 L.Ed. 497;Youngblood v. Sextan, 32 Mich. 406, 20 Am. Rep. 654.

             [[Orig. Op. Page 4]]

            A city does not have all those sovereign powers possessed by a state, but only those expressly or impliedly granted to it by the legislature, and those essential to the declared objects and purposes of the corporation.  1 Dillon, Municipal Corporations (4th Ed.) § 89; Christie v. Port of Olympia, 27 Wn. (2d) 534, 172 P. (2d) 294, and cases cited.

            Vancouver is a city of the first class.  Its powers of taxation are set forth in RCW 35.22.280 (2) as follows:

            "(2) To provide for levying and collecting taxes on real and personal property for its corporate uses and purposes.  * * * " (Emphasis supplied)

            This provision seems to be the extent of the taxing power of such cities, and it relates strictly toad valorem taxes.  The imposition of excises would have to fall under the licensing provision, RCW 35.22.280 (33) which provides:

            "(33) Togrant licenses for any lawful purpose, and to fix by ordinance the amount to be paid therefor, and to provide for revoking the same * * *."  (Emphasis supplied)

            This section expressly limits the licensing power to lawful activities, which would exclude gambling.

            The only other possibility of taxing such an activity would be to view the tax as an exercise of the police power for regulation of an activity dangerous to the public.  The police power, for regulation of occupations within first class cities, is granted by RCW 35.22.280 (34) as follows:

            "(34) To regulate the carrying on within its corporate limits of all occupations which are of such a nature as to affect the public health or the good order of said city, or to disturb the public peace, and which are not prohibited by law, and to provide * * *"  (Emphasis supplied)

            This section also excludes the regulation of occupations which are prohibited by law.  Since the city has been granted neither the power to tax, license, nor regulate any illegal activity, it follows that no levy may be imposed upon "Skillo" games.

             [[Orig. Op. Page 5]]

            We note that the games appear to be operating under the supposed authority of a referendum petition which holds in abeyance a municipal ordinance outlawing the games.  As indicated herein, the games are illegal as a matter of state law.  They cannot be legalized by either the city council, or the people of the city of Vancouver acting in a legislative capacity.  SeeMiller v. Spokane, 35 Wn. (2d) 113, 211 P. (2d) 165.  The referendum petition is completely futile and the holding in abeyance of the city ordinance has no effect whatever.

            In our opinion, the games are illegal under RCW 9.47.020 and will remain so until the law is changed by the state legislature, without regard to any further action which may be taken by the city either in favor of, or against their operation.

            Your first question is answered in the negative, and this answer precludes the necessity of considering the others.

Very truly yours,

DON EASTVOLD
Attorney General

RALPH M. DAVIS
Assistant Attorney General