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

Comptroller ofPublic Accounts Capitol Station Re: Application of occupation tax Austin, Texas levied byvirtue ofSection 7 ofArticle 7047, V.C.S., upon livestock clearing houses and those persons utilizing the Dear Sir: clearing house se,rvices.

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

“There are certain firms located inthe Livestock Exchange BuiIding that operate what is known as a livestock clearing house. The clearing hou~sedoes office and bookkeeping work for anumber ofsmall commission firms. Also anumber of livestock dealers operate out ofthe clearing house.

“Ihave requested one ofthese clearing house firms to outline for me the nature and function ofalivestock clearing house. The explanation is as follows:

‘In line with your suggestion, wewill undertake to explain the nature and function of alivestock clearing house, several ofwhich 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 thefirms who clear through them and for this service we collect a percentage oftheir gross commission that they receive for selling andbuying livestock for their customers. We charge the firms who clear through us onthebasis of 22.2% of thefirst $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 toyou, for the past several years we paid the Occupation tax as a clearing house for the firms who cleared through us. and no taxwas demanded ofthem as they **were** considered tobe asubsidiary of the clearing house. L

. . .’

“Iwill 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 7as amended? * Section 7ofArticle 7047, V.C.S., as amended by Section 2of Chapter 372, Acts ofthe 48th Legislature, 1943, reads:

L7. Brokers and Factors. From every person, acting for himself or onbehalf ofanother, engaged in the business or occupatio~n ofa Broker or Factor whether he is principally engaged insuch 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 afee, 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 ofany kind; whether or nothe receives and delivers possession~thereof; provided that this subsection shall not apply to a salesman who is employed ona 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 ofany other occupation and is paying or subject to the payment ofatax under anyHon. Robert S. Calvert, page 3 (S-48)

other subsection ofthis 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 theword broker as meaning: “(3) One who for a commission or fee brings parties together and assists fnnegotiating contracts between them.

. . .* A clearing house that limits its transactions tobookkeeping, financing and office details is notwithin the purview of Section 7 ofArticle 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 oflivestock for other persons. The fact tb.atthe clearing house does not treat thebuyer or seller as its customer and does not have its commission contingent upon the expenses incurred negotiating the sales or purchases of livestock is anindicant that the clearing house is not abroker or afactor.

Those persons or firms who buy, sell or transfer livestock, acting inbehalf oftheir 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 7ofArticle 7047, V.C.S. Those persons or firms utilizing the clearing houses to take care ofoffice details and who negotiate the purchase or sale oflivestock 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