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### THEA~ORNEY GENERAL OFTEXAS

AUESTIN ~~.TExas
WIJi WILSON ‘! AlTORNEYGENERAL July 8, 1960

Honorable Robert S. Calvert Comptroller of Public Accounts Capitol Station Austin, Texas

Dear Mr. Calvert: tax on insurance adjusters, levied by Article X9-01, Section 3, Title 122A, TaxationGeneral to Independent local recording agents. Asyour recent letter the referenced subject contains quote it In full, as follows: requesting our opinion upon a detailed fact situation, we

“Section (3) of Article lg.01 of

Opinion No. ~~-875 Re: Application of occupation

Title 122A, Taxation-General, being RRll, 56th Leg. 1959, 3rd C.S., Ch. 1, p. 187, ,levles an occupation tax on Insurance Adjusters. "A'question has arisen whether the tax is due from independent Local Recording Agents having limited authority to pay small claims, andwhoparticipate to a limited extent in an advisory capacity in the disposition of other insurance claims onpolicies written through their agencies, all as incidents of their primary occupation as independent Local Recording Agents.

“Mr. Forest S. Pearson, acting for himself and other independent Local Recording Agents similarly situated, presents the typical situation.

“Mr. Pearson’s business is that of an independent Local Recording Agent repreaentlng several different companies and *groups’

. HIS primary activity is the solicitation of Insurance business, the writing andissuance of insurance policies, andthe collection of premiums, all of which, insofar as it pertains to his insurance business, consumes the-.:major portion of his timeHonorable Robert S. Calvert, Page 2 Opinion No. 

### ~1-875

andeffort. His compensation from his insurance business is by wayof commissions directly proportionate to the volume of premiums written through his agency.

“Mr. Pearson pays small losses which require noindependent investigation, the liability andamountinvolved being without question. Healso acts frequently in an advisory capacity andto a limited degree In the negotiation of settlements upon request of either the insured or the adjuster. Practically all losses on policies written through his agency are :.~..: first reported to himbythe insured. If the reported loss is of atype that has anyInvestigation or adjustment problems, the companyor its assigned Insurance Adjuster is immediately notified, at which point his responsibility for investigation, negotiation, or reporting thereon ends. Losses involving substantial sumsor substantial questions of liability fall within the latter category. If the loss does not fall within such category, Mr,.Pearson pays it andIs reimbursed bythe company. We receives no

’~addltiona1 or special pay for any service rendered on losses.

“Mr. Pearson does not maintain a claims department; he does not employ a ClaimF adjuster; he does not hold himself out to Insurance companies, other agents, or the public as an Insurance Adjuster; he is not an expert In the techniques of investigation, negotiation, appraisal, or ascertainment of liability, characteristic of the profession of Insurance Adjusters or claim agents; and the only losses which Mr. Perrmn has anything to dowith are those which arise out of policies written through his agency. Henever participates in a responsible capacity in the handling of any loss which arises out of a policy written through another agency. His activities in the field of losses are necessary incidents of his primary occupation as an independent Local Recording Agent, being limited to such aa is necessary to efficiently serve his clients.Honorable Robert S. Calvert, Page 3 Opinion No. WW-875

“Mr. Pearson’s business Is in the nature of an independent business rather than that of a branch office of a particular company or group of companies. His clientele hold him responsible for the selection of companies which most adequately andappropriately meet the Insurance requirements of his clients. He is free to restrict his activity to the primary occupation of soliciting andwriting of insurance policies andthe collection of premiums. In these respecte his ‘independent’ agency Is different from a ‘direct writing1 agency, where the agent is an employee or under the direct control of the principal companyor ‘group’, andmaybe directed to perform on behalf of the employer anyduties assigned to him, including those duties normally perforled by professlona.1 Insurance Adjusters. The ‘direct writing’ agent has no choice of companies.

“Kindly advise whether, under these facts, the tax applies to Mr. Pearson.. Abrief on behalf of Mr. Pearson, prepared by O’Quinn, McDaniel &Randle, Attorneys at Law, 422 Perry-Brooks ,Bulldlng, Austin, Texas, is enclosed herewith. The attorneys represent Mr. Pearson andthe Texas Association of Insurance Agents whose membership Is vitally Interested In the question presented.” It is our opinion that a Local Recording Agent, as illustrated in your letter, is not liable for the occupation tax oninsurance adjusters.

Chapter 19, Title 122A, Taxation-General (H.B.ll, 56th Leg., 3rd C.S.) levies miscellaneous occupation taxes. Article lg.01 (3) reads as follows:

“Insurance Adjusters. Fromevery person engaged In the occupation of adjusting insurance losses in this State, there shall be collected anannual tax of TenDollars ($10.00).

“For the purpose of this Subsection, a person shall be deemedto be engaged In the occupation of adjusting Insurance losses when he investigates or ascertains the liability or amountof damage, or negotiates the adjustmentHonorable Robert S. Calvert, Page 4 Opinion No. ~~-875

of Insurance claims or losses, or reports thereon; whether employed by an Insurance commw, or companies, or the Insured, or is amemberof a firm, association of persons, or an employee, or representative, or officer of such firm, association of persons, or an employee, or representative, or officer of such firm, association, or of a corporation, whensuch firm, association, or corporation is engaged in adjusting Insurance losses.” This language Is apartial verbatim re-enacg;nie;f the previously existing Article 7047-10 (a), R.C.S. in this re-enactment bythe 56th Legislature wasan exemption clause which read as follows:

“Provided that this tax shall not apply to any local, recording, soliciting or special agents of anyInsurance company, nor to any person regularly employed on a salary by any insurance company, whomayadjust Insurance losses only for a companyrepresented byhim, such person not charging or being paid for his services as aninsurance adjuster on a fee basis.” Thus, under the previously existing Article 7047-10 (a), notax liability wasincurred by a “local, recording, soliciting or special” agent, or by a salaried adjuster of any Insurance company. Thoughthe agent might be handling the duties of an adjuster, his agent’s status provided anexemption. The obvious intent of the 56th Legislature in deleting tNs exemption provision from the present Article 19.01 (3), Title 122A, wasto extend the coverage of this tax to every person pursuing the occupation of insurance adjuster, notwithstanding his title or method of compensation.

Therefore, in determining whether or not the present provision wasintended to include “independent local recording ,agents”, it is necessary to determine with particularity the nature of the services performed by such agents, then to decide whether or not those services are sufficient to classify them as “insurance adjusters” within the statutory definition.

Thetax here involved is an occupation tax. See Hurt v. Cooper, 130 Tex. 433, 100S.W.2d 896 (1937); See also State v. Galveston, H&SARy. Co., 210U.S. 217, 28 S. Ct:. b36, reversing 100Tex. 153, 97 S.W. 71, (1906); Attorney General’s Opinion No. o-2120. Its incidence is upon every person embraced within the statutory definition. However, such definition wasIntended to delineate the occupation being- .”

Honorable Robert S. Calvert, Page 5 Opinion No. ~~-875

taxed; mere performance of anact or acts specified in the definition cannot create liability for the tax if done incidentally to the pursuit of another occupation. Johnson v. State 1.36S.W.2d 837, (Tex.Crim.App. 1940); Bailey, State Tax &tor v. Southern Bell Telephone Company&Telegraph

Weview the acts done byMr. Pearson In paying small, undisputed claims, andin **an** advisory capacity during negotiation, as incidental to his occupation as anindependent local recording agent, and as such, insufficient to bring him andothers similarly situated into the statutorily defined class upon which the tax is levied.

It should be understood, of course, that this opinion Is limited to the fact situation which you set forth in your letter as typical of independent local recording agent9. AnyIncreased exercise of discretion or granting of authority in the adjustment of losses might compel a different result. -
SUMMARY Independent local recording agents, performing described duties, are not within the scope of Art. 19.01(s), Title 122A, Taxation-General, andnot subject to the occupation tax on insurance adjusters. Yours very truly, WILLWILSON Attorney General?&@ Texas

JRI:jp APPROVED: OPINIONCOMMITTEE: Gordon C. Cass, Chairman Marietta Payne John Stelnberger Donald Benard Virgil Pulliam %vIRw~D FORTHEATTORNEY GENERAL

BY: Leonard Passmore