OFFICE OF THE ATTORNEY GENERAL OF TEXAS 

AUSTIN 

February 17, 1939 1 

Sonorable Ceo. II. Sheppard 

Comptroller of Public Accounts 

Austin, Texas 

Dear Sir: 

Under date of Jama 

Cfflce whether or not an att 

subjeiot to the oooupation or 

7061, Ravised Civil Statutes, 

of a collscting 

their legal pxao 

It appears froa 

or commercial 

name and that 

xeoeipts tax b 

r In connsetion with 

.trom suoh .prautiae. 

es8 0r a colleatiag 

conducted under a trade 

to pay said gross 

re attorneys. 

1 Statutes, rsade as follows: 

ny, oorporation or associanaglng or controlling any 

rclal agenap or oommercial retober of each pear, a report to the 

r oath of the individual or oi the 

urer, or superintendent of such company, 

corporation or association, showing from bwinesa done 

within this State the gross amount reasived in the 

payment of charges for collections made and buslueas 

done and reports IBad during the quarter n8X% preceding. 

Such individuals, companies, corporatio~n8 or amiociations 

at the time of making said report shall pay to the freaSUr8r of’ this State en OoCUpatfOn tax for the QUart8S 

beginning on said date equal to one-half of on8 per Cent 

of said gross reoeipts as shown by said report." 
Bon. Gee. H. Sheppara, February 1'7, 1959, Page 8 

/- 

_---\ 

Your inquiry resolves it&elf into this: If the busi- 

,jL88 of operating, owning, managing or aontrolling a collecting 

,,I agency or a commercial agency within this Stat8 is a mere incident 

of tte profession of law, this gross receipts tax will not lie against 

the 

!/ 

the attorneys involved in your letter. If, on the other hand 

operation in T8xaS of a collecting or commercial agenog is an 

., 

I 

independent business rather than a neoeasary incident to the 

practice of law, then we must hold that the attorneys in question 

are liable for this gross receipts or occupation tax despite 

their professional franchise to practioe law. 

\ 

Vie think the line of demarcation between the profession 

of law and the business of oonducting a collecting or oOmmereia1 

agency is claarly drawn by th8 aUti$loritiss, at.113 we are constrained 

to hold that the attorneys involved in the instant ease must pay 

the gross receipts tax levied by kW.ole 7061, Revised Civil Statutes. 

\--, _<.- ..-.-. 

A vcolleotian agenayv wacl derided by the Court in 

EeCarthy v. Xughes. 22 A. 924, a8 followsr 

*A *colleatlon agenap*, uhioh is derined as a 

concern which aolleots all kinds oi olaims for others 

and to whom it renders BCeotUitS, guarantee8 t0 UBB it8 

b8St 8ndeavorS to collect th8 claims and t0 seleot a 

oompetent and reliable attorney when Suit is DeaeSsary, 

for whose negligence, dishoneety, or unauthorized aote 

it will save the creditor haxmileSa.* 

A *oormuetrclal agsncy* was defined by the aourt in oaSe 

of Zugalla v. International Eeroanti1.e Agenoy, 14 Fed, 927, 950, 

as iollows~ 

*A 'oommercial agency' is a person, firm, or 

corporation engaged in the bu8ineas o? aollecting in- ' 

formation as to the financial etanding, ability, and 

credit oi persons engaged in business, and reporting 

the same to subsoribers or oustomere applying end paying therefor." 

The term wcomeroip;L agency* is again defined a8 follows: 

*Ccmmeruial agencies are agenaiea whose businees 

it is to collect information as to the Circumstan088, 

means, and pecuniary ebilfty of merohants and dealers 

throughout th8 oountry, and k88p aCoount.8 theraofV SO 
Floll. Gee. H. Sheppard, February 17, 1939, %ge 3 

that the subscriber to the agenoy, when applied 

to by a cuatoxer to sell goods to hla on credit, by 

referring to the a-;enay or to the lists which it 

publishes, zay aecetitain :he standing, and responslbilsigi;:, :h;ac;toser to W~IO.Z it is pro,posed to extend 

Cole E; Surnhain Co. v. Avery, 8s 13. Y. 

31, 34; 38 &'Rep. 329; "Jenesee Liar. &nk v. Xichlgan 

Sarge Co., 17 S.~..C. 790, 793, 52 Kich. 164; 40 C. J. 

036; State vs. Xorgnn, .48 :I. k. 314. 

The praatice of las,~as oo~nronly kuovm and understood, 

really needs no aerinltioa, but ln view of the oonteatlon of 

t!?e attorneys., in the instant cam that praatloe of law oomprehehdti 

a oomercial agency, we quote the following definition frov~ the 

court in the case of State Bar 0r Caliiornla v. Superior Court 

in and Sor Los Angeles, County, 278 P. 432, 437: 

"The 'praotioe~ot law* fki the doing or perloanlag 

semvioss~In a oourt of justioe, in any 8aamer depa&lgg 

therein, throu&.mut ito veulous et-s, aad in oario+y 

to the adopted role8 0r pr000dur0. But in a sqpr 

sense it inoludss legal advloe and oouuael, and Ma ~~ 

preparation of Ssgnl instrumenk and oontraots by whloh 

l&gal rights are seamed, althozah such matter may or, 

may hot be depending a oourLm 

ihea ease OS Kendriokrrhitite, 1~020.14&$&he 8u~xama 

Court OS aabama olearly dirferentiates the praotloe or lm rrop 

the operation of a oollsoting or oommerulal agcmoy. Thlr ease 

turns upon a oonetruotion OS ah aot prohibiting anyone but a 

liaensed attoraep from undertaking for another the ooSl.e&ion OS 

olalma out of court,rith refsrenoe to the oonstltutional pnnislon 

xq~uiriag each law to oontsln but one aubfeot whloh shall be olear4 

expressed in its title. The oourt held the act to be violative 'of 

such oonatltutional provision in the, following slgaifioant language: 

*TO practios law ia to sxeroise the aalllng or 

profession or the law, usually for the purpoee or gaining a livelihood, or at least toy gain. 

the buSin8SS of collectinfl claim bs 

w OS oourt is not to uractice law. Thare ie no 

l&ore neoessary relation between the tvo thaa there la 

'between the Draotioe of law and seoses of other things 

whioh lawyers. in oomon wdth other folks. mst U I 

order to be able to follrm their different vow&m~ 

?he actunder consideration, seotlon (d) involvea a 

radical change of meaning in the oolloca&oa of m&M 
,~Bon. Geo. H. Sheppard, Bebmary 17, 1939, Page 4 

Apra4tice law." To oolleot claims out of court, that 

is, without recoume to legal remdies, and to practice 

In-v: connote very different things to ti:e lay aind, 

and re have stated the steps neaeseary to the mking 

of a licensed lawyer, in order to ehovc how broad is 

the teohnicel difference between the two. The opinion 

in Xx parte Cowert, supre, presents a close analogy. 

The laaguage of that ease (page 100 (9 So. 225) we 

think slay be fairly parsphrased as follows: 90 man 

to whoa is presented a proposition to amend a statute 

declaring tnat regularly licensed attorney8 alone have 

authority to practice law, would for a moment cronaeive 

the proposition to involve an inhibition against the 

oolleotion of olaims by demand or negotiation out of 

court by anyods but a lloeneed attorney.* 

we have no ditfloulty in anmreriw your questloon in the 

s&native, and you n&y aocordlngly proceed to oolleot fms the 

sttorneys in question the gross rsaeipte tax levied by hrtlole- 

:' j 

1 

,~7061, 6baeed Civil Statutes, 1925, by virtue or the ownenahlp, 

sperstlon or managemaat by tha of a soollecting agemy+ or ,. 

~oomeroial agency* within the lpeaning of aald statufs. 

Yours very truly