OFFICE OF THE ATTORNEY GENERAL OF TEXAS AUSTIN

Aonorable Gcoree S. She?pard Co5iptroller of Fublio AOO0unta Austin, Texae

Dear sir:

on inmrance apglicanta, es under Article 7061, Civil :tatlltes. rqmt ror our 02inion on whet3cr or is lteble for the "colprovided fcr in Article 7C61 of the

ve us and vrhichweascertained t!: you are a6 r0il0w0: The ill rarer to as the cgencg, Is psrnit to do business in Terns, t that ita buainees shall be *the ce oompenles concerning the propricceptine eppllcatlone for lnau*no@. OSeald agency, with whloh weare oonoerned king reports to Insurance companies as to r and veracity 02 persons whoare epplinsurence donpanles. whenan insurance company lber,to the aervlce rendered by said agency dsn on an applicant with regard to such applicant as on Insurance risk, said insurance companyasks for such lnfomatlon trot said agency and the agency seeks to obtain the inrormation ana convey it to the ineurance oompany. You have advised us that w?en enid eEency entered Terse it began issuing lndfvfdusl reports on pers0ne, cover,ine the3 lndlvldually and not aa engaged in busineER, reportlne onthetr ~reonal rating or standing for lntx:ence, and t!xt this plnn of opratlng he8 been followed downto the present day.Honorable George, I?. Sheppard, Page ,?.

Youdesire to kaowwhether or not said agency 1s required to pay e.tex under Article 7061 on the gross amount received for buefness done andreports medaas outlined above.

The answer to your inquiry must be found in said Article 7001, which reeds es follows:

Y?ech indlvlduel, COmFRny,corporation or aasooletion, owning, operating, managing or oontrolllng any oollectl~ agency, comercial agency or cornorcfel reporting oredft eeency within this Stete, end char&g 

### forcolleotions mede, or business done, or reports mOde, or January, shell makequarterly, on the first days

April, July end October of Each year, e report to the Comptroller under oath or ths lndlvlduel 

### or. of the president, tree surer, or superintendent or such company, oorpoxa t&on, or association, showing from business done within this State the gross amount reoaived In tha payment of oherecs tar oollectlons madeend business dcne andreports madedurlq the quarter next peceding. Such J.ndivlduals,. compeeies, corporations or associationa et the tIme of making said resort shall pay to the Treasurer oS this State an ocoupetion tax for the quarter baginning on said date aqua1 to one-half of one par oant of said gnoas receipts es shown by said rap0rt.a Llablllty or said agency 

### fortaxaa on aald bualneea under aaid article depends upon whatlmsror not said business 18 a ucommarolal agency or ocmmarclal rtportlng credit agbnoy”, aa those terms are used in the statute: The only Ttxae case conatrulng this Article Is the case of Rarohants Rtdbook Company v. Sate,. (Corn.App.) 135 8, C. (2d) 279; and in dtttrmining whether or not the agency Involved In that cast ma8a corn-, mtrolal agency, the ccu.rt said:

*It la undisputed that ths Merchants RedBook Companyis a *reporting ortdit agenoy,’ but epptllent8 strongly urge that it la not a lCommeroIal* reporting credit agency aa that term weedefined et the tint of the ori&el enactment of Artlclt 7061. It agptars with reasonable otrtalnty that the terms *marcentlla egencirs’ and ‘oommarclel egenoits~, being regarded as synonymous, DaveSor a long 

## timebed a derlnlte ffieaning. Jurie, p. 636. Set 40 corpus In the oest of City o? BrooktltldHonorable George 8. Sheppard, Page 3

v. Kitchen, 163MO.546, 63 S. 'if. 825, 826, the Supreme Court of lElaaourl, speaking of *co-szserclel or mercantile egenolea,~~ said: ‘Such agencies are deflnea to be tetebllshcente which **znkt** a business of collecting lnfon5atlon relating to the credit cherecter, responsibility, endreputation of nerohanta for the purpose of furnishing the lnforaaion to subscribers, - e.g. a. G. Dun&Co. &enoy, Bradstreet Company, etc. 5 Am. k Eng. iho. Law (1st td.) p. 280; Web. Int. Dlct.' nCor& Juris givec the following dtrlnltlon: 'A oa%earclal or mercantile agency msybe defined as a person, firm, or corporation angaged In the business or collecting infonation es to the financial standing, ability, end credit of ereons 

### engagedin business; and reporting Shil same o aubacrfbera or customers ecplying end -38yingtherefor.' (Underscoring ours) This darlnitlon by the court corresponds wlth the detiaitlon of %arcentlle agency* In Xtbater*s NewInternational Dlotlon

### try,2nd Edition, which says:

*. en establishmnt or institution which collect blllty ,'8iniometion as to the character, rtaponalcredit, reputation, etc., of merchants or otheri-doing buslneae, and furniahea duoh Information to others for a subscription price; a co-merolal agency.” It will be notlotd that the Texas oourte and the dlstlonary dtfInltlon considers that the reports must be in rtgard to marchants end othera doing budnear. In the oabt In question the person onwhomthe report8 are meae

### artnet neotsaerlly merchsnts or persona engaged in’any kind of bualneEa, but they might be applicants for lnsu--not whoart not In any business ?.t all.

In cmr search of the authorities we fled t&it throughout the hi&Dry of “comerolal aganclta~ and %trcentilt agencies” they existed f-2 the purpose cf Informing msrchants es to the credit s6&ndlng and dependability of buyers of merchandise. Aninteresting ease on this question Is the ease of Stats v.Honorable George 9. Sheppard, Page 4

Morgan, 2 3. D’

.32, 40 N. X. 314, by the %preme Court of South Dakota, which we,wlll quote from at length, as follows:

*

. . . Xercantlle co.meroial agenolss, as we unders:a.?‘d ths, are establishments whicl: cake a bdslne;s UPoolleotlnG Inform&km relatlcg to the Credit, character, raapc~eibillty, general reputation and other mtters affecting persona, firm, and corporations engaged in businec.6, for the purpose Or Purnlahirg>his Information to its oustomers for a cash consider?cticn. These agencies have beeme recognized and pemanent adiuncts to the world of trade. Their rice and progress are of but recent date. Aocording to a little Iwrk entitled *TheLaw Relating to Mercantile A&enciec ( recently published by 1. E;J. W.Johoson 8:Co., Ph~ladelphla, andwritten by I. X. Errant, the Amrloan system of mrcantile egencias owes its origin to the work done by one Church, whowaa at first a coannsrclal traveler. Cnhis business tours it wae his custom to makenotee for his own UIB, as to the habits, 

### l to., of different persons andfirms with whomhe dealt. Other merchanta, hearing of hla cuetom, would cometo him, andask lnfomotion in relation to the samepersons. At last hewaaemployed by 30 NewYork homes to travel in the ecuth and aest to oollact information 

### to1then. Rls labors suggested the idea Ofestablishl~ug an inatltut~on whhiohshould r?akea businers Of collecting information oonoernlng the reaponsiblllty, eta., of looal businees firms and oorporatlons t?!at ware seek- 'Ing oredit in the larger oitiee. In 1841 the firat. organized ‘Yeroantlle AgmoFc waaformed by Lewis Tappan. Thle was follcwed in l&42 by 0110 called *The Coxaerctal Agency.’ Thamercantile agency of Tappan was suooeeded by Benjamin Douglas k,Co., and this firs by R. C. Dunk Co. **A** few years arter the establishment of *TheXeroantils Agency’ and the eCommerolel Agenoy’ , 7. Y. Bradstreet established ‘The Inproved Mercantile Agenay,’ Which was 60120jvarr afterwards inoorporated, end kncmqas ‘The Zradstrset Company.* Themercantile and comercial agencies were originally establ?shed for the purpose of reporting the oredit of buyers. It wasBradstreet whofirst published a bcok giving ratings. The other 3eenoie6Honoreble GeorCe B. Sheppard, Page 5

soon followad his example. been establ

In the oase of Genesee Sav. BaDLv. Xichlgan Parge Company, 52 lL.iCh.164, 17F .x

‘

. ... 750, the SupreffieCourt of liichlgan said: "

. ??.e busina:s of these agencies is well knownti ihe comnerclsl coxwnlty. Indeed It is said by Justice Hepello, in ;,ton, I;ole &BurnhamCo. v. Avery, 63N. Y. 31, ‘thet the business andoffice of these ap,encies ere sowell-known, and have been so often the subject of diacus8iOn in adjudicated canes, tht the court can take judicial notice of them. Their bwiness is to collect Information as to the circumstances, means, and pecuniary ability of merchants and dealers throughout the country, and keep accounts thsre- -that the subecriber to the agency, to by a customer to sell goods to himon by restorin& to t?.e figency oz to t?e lishas, ascertsin the standing andrespo-elbllity ofthe customer to whenit is proposed to extend credit.” (Underecorlng oui+s) In the case of Furry V.I.O*:onnor, 3Ind. A;p. 573, 28N. E. 103, the Appellate Court of Indiana said:

“

. . Cormrclal egencles have become vast arfd extensive iaotors In modern oomzerclal transaotions.

. ior furnlsblnE lnfoxxcatlon to retail dealex and obbers as *all es to wholesale merchants. Tf\ oourts are bound to knowjudicially that novizdor of goods at wholesa:a oon be regarded es a prudent business me2if he sells to a retell dealer upcn a credit without first lnformine. himeelf through these mediumsof ltUor?n?;tion of tha finsnoial standing of the customer, end the credit to which he fairly is entitled.” (Underecorirq olura) In the c0se ‘if Stevens v. Ludlun, 46Elnn. 160, 40N. X. 771, the Sup~em9Court of Kinnesota said:Honorable Gaorga 11.Sheppard, Page 6

*This bueine6a of a oommercial apancv 16to get such infoxmatldn amit can raletive tb the bus11106sand pecuniary ability of businesr rmnand bueh866 OOIlOerll6,an&OORUllUlliOEite it t0 6UChOfit6 trons a8mayhave ocoa6ion to apply for it.* Underscoring ours) The definition of "OOZIumrcialagency" given in Bouviercs Law Dlotlonary, Rawlo(e Third Revision, 16a6 fOllOW6~

“CODERCIAL AC’IPJCY. Aperson, rim, or corpOl'at.iOn engaged in .tk6bURine66 Of OOl~OCting informetion a6 to the financial standing, ability, and credit of pertons engaped in businese andreportillg the 666iet0 6UbECriber6 Or to CU6tOlXr6 6pplying and paying thereror." (Underscoring oure) In 18 h. C. L. 997, weflad a etatement az followea

*YlOrCantilOagenOiO6 Bra 06tabli6hmsnt6 which makeaburrins:: of oollectlng infoxnatlon relating to the credit. character. reaa~nalb~litv. nenaral reputation, akd other matterra-affecting per6on6, fiI%I6. endoorpcretions engaged In busine66, for the purpose or fUrni6h1ng thle lnfomtion to 6UbfNriber6 thereto for a cash c%nelder Mon. Their object 16 to procure through tub-egOnt6, nervants and corre6- pondente 6UChinformation coneernlng the tN6twOrthin066 of parsons and corporaticna engaged in trade or aommeroea6 ah611 enable their subroribers rarely and properly to conduct busine&s with atrungere or distant cu6toDlbr6.n (Underscoring our6)
Th666 oa6ea 

### bringu6to the conclu6ion that in order for a bUPine66 to be that or a Ww2uercla1 agencyw it ntu6tOOMl6t of making report6 onmerchants or others engaged in buaineea. A~ woo.mmoralalreporting oredlt a6enoy” mayooneiet or **making** credit report6 uponpersona In their individual oapaclties wlthout 

### regardto their buaineesea. RoweYer, (18weunder6tXtndthe naturr of the report6 in puertion they cannot properly be olasslfied a6 credit reporta.

It 16 our opinion thet the agenoy fn Cuaetion 16not rrqulred to pay a tax under Article 7061 bn the gro66 amount reoeived 

### for the buaine6e done end or sake a report of eaid. -

Honorable George R. Sheppard, Page 7

buainesm, as outlined in your inquiry and dlecusmed herein. Hongver if thlr agency does other bUdn866 which wmtltut6r t.he buekear of a oredlt kgency,** ~commerolal agency or commercial reporting

the lbbility for the tax on such othar bueino66 would not be governed by thi6 opinion.

Youre very tNly

CCR:GO

/6/ Grover EOllff6 FIRSTA:Z.fSTAHT ATTORmxOjmWAL Cecil%. Roteoh Asli6tUt

This Opinion ConddOrOd and Approved in Limited Conferenoe.