Hon. Robert S. Calvert Opinion NO. S-48 

Comptroller of Public Accounts 

Capitol Station Re: Application of occupation tax 

Austin, Texas levied by virtue of Section 7 

of Article 7047, V.C.S., upon 

livestock clearing houses and 

those persons utilizing the 

Dear Sir: clearing house se,rvices. 

Your opinion request of May 13, 1953, sets out the following facts and questions from which we quote: 

“There are certain firms located in the Livestock 

Exchange BuiIding that operate what is known as a livestock clearing house. The clearing hou~se does office 

and bookkeeping work for a number of small commission 

firms. Also a number of livestock dealers operate out 

of the clearing house. 

“I have requested one of these clearing house firms 

to outline for me the nature and function of a livestock 

clearing house. The explanation is as follows: 

‘In line with your suggestion, we will 

undertake to explain the nature and function 

of a livestock clearing house, several of which 

operate on the Ft. Worth Livestock market, and 

generally on the same basis. 

‘The office is maintained by the clearing 

house and handles the office work including bookkeeping, financing and all other office detail for 

the firms who clear through them and for this 

service we collect a percentage of their gross 

commission that they receive for selling and buying livestock for their customers. We charge the 

firms who clear through us on the basis of 22.2% 

of the first $1,250.00 commission and 11.1% all 

over that amount, based on monthly business. The 

firm’s net profit or loss is not considered. Our 

charge being based on gross commission received. 
Hon. Robert S. Calvert, page 2 (S-48) 

‘As explained to you, for the past several 

years we paid the Occupation tax as a clearing 

house for the firms who cleared through us. and 

no tax was demanded of them as they were considered to be a subsidiary of the clearing house. 

L 

. . .’ 

“I will appreciate your opinion on the following 

questions: 

-1. Does the clearing house owe the State occupation tax levied by Article 7047, Subdivision 

77 

‘2. Are the persons or firms that clear through 

the clearing house subject to the State occupation tax levied by Article 7047, Subdivision 

7 as amended? * 

Section 7 of Article 7047, V.C.S., as amended by Section 

2 of Chapter 372, Acts of the 48th Legislature, 1943, reads: 

L7. Brokers and Factors. From every person, 

acting for himself or on behalf of another, engaged in 

the business or occupatio~n of a Broker or Factor whether he is principally engaged in such business o’r not, 

there shall be collected Ten Dollars ($10) per year. & 

‘broker’ or ‘factor,’ for the purpose of this subsection, 

isevery person who, for another and for a fee, commission or other valuable consideratron, rents, buys, sells, 

or transfers, for actual spot or future dellvery, or neotiates purchases or sales or transfers of stocks, bonds, 

rlls of exchange, negotiable paper, promissory notes, 

bank notes, exchange, bullion, coin, money, real estate, 

lumber, coal, cotton, gram, horses, cattle, hog,s. sheep, 

produce and merchandise of any kind; whether or not he 

receives and delivers possession~thereof; provided that 

this subsection shall not apply to a salesman who is employed on a salary or commission basis by not more than 

one retailer, wholesaler, jobber, or manufacturer, nor 

shall this subsection apply to or be construed to include 

persons selling property only as receivers, trustees in 

bankruptcy, executors, administrators, or persons selling under the order of any Court, or any person who is 

included within the definition of any other occupation and 

is paying or subject to the payment of a tax under any 
Hon. Robert S. Calvert, page 3 (S-48) 

other subsection of this Act; however, this exemption 

shall not apply to any individual engaged in more than 

one occupation as defined by the other subsection of 

this Act.” 

Webster’s New International Dictionary (2nd Ed.), defines 

the word broker as meaning: “(3) One who for a commission or fee 

brings parties together and assists fn negotiating contracts between 

them. . . .* 

A clearing house that limits its transactions to bookkeeping, financing and office details is not within the purview of Section 7 

of Article 7047, V.C.S. The statute clearly and unambiguously levies 

the tax, in this instance, only upon those persons who receive compensation for buying, selling or transferring, or, negotiating the purchase, 

sale or transfer of livestock for other persons. The fact tb.at the clearing house does not treat the buyer or seller as its customer and does 

not have its commission contingent upon the expenses incurred negotiating the sales or purchases of livestock is an indicant that the clearing 

house is not a broker or a factor. 

Those persons or firms who buy, sell or transfer livestock, 

acting in behalf of their customers, must pay the tax levied by the above 

quoted statute whether or not their office affairs are handled through a 

clearing house utilized by similar brokers or factors. 

SUMMARY 

The clearing houses engaged exclusively in office details 

are not taxable under Section 7 of Article 7047, V.C.S. Those persons 

or firms utilizing the clearing houses to take care of office details and 

who negotiate the purchase or sale of livestock for compensation for 

their customers are subject to the tax levied by the above stated statute. 

Yours very truly, 

APPROVED: JOHN BEN SHEPPERD 

Attorney Gener,al 

W. V. Geppert 

Taxation Division 

C. K. Richards 

Reviewer 

Robert S. Trotti 

First Assistant 

Assistant 

John Ben Shepperd 

Attorney General