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I've often heard this story as well for years but no one has ever provided said where one could find this "statute."

This is what I found with a quick google, http://www.capitol.state.tx.us/statutes/docs/GV/content/htm/gv.011.00.003100.00.htm#3100.051.00 , I have seen beter sites, this does say it tho... : ) <<< me

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§ 3100.055. DISPLAY ON FLAGPOLE OR FLAGSTAFF WITH FLAG
OF UNITED STATES. (a) If it is necessary for the state flag and
the flag of the United States to be displayed on the same flagpole
or flagstaff, the United States flag should be above the state flag.
(b) If the state flag and the flag of the United States are
displayed on flagpoles or flagstaffs at the same location:
(1) the flags should be displayed on flagpoles or
flagstaffs of the same height;
(2) the flags should be of approximately equal size;
(3) the flag of the United States should be, from the
perspective of an observer, to the left of the state flag;
(4) the flag of the United States should be hoisted
before the state flag is hoisted; and
(5) the state flag should be lowered before the flag of
the United States is lowered... : ) <<< me