Untitled Texas Attorney General Opinion

THE AT~V~RNEY GENERAL
OF-mXAS

The Honorable Bob Bullock Opinion No. H-710
Comptroller of Public Accounts
State Finance Building Re: Propriety of allocation of
Austin, Texas stock and bond sales fees of a
broker between Texas and other
states for franchise tax purposes.

Dear Mr. Bullock:

You have requested our opinion concerning the franchise tax allocation of
receipts of an incorporated stock broker received from Texas clients. You have
asked what percentage of these receipts should be allocated as “business done in
Texas” under the provisions of article 12. 02, Taxation-General.

You have advised us that the taxpayer, a Delaware corporation, classifies
only 60% of its commissions on New York Stock Exchange transactions for the
account of Texas clients and 50% of its receipts from the sale or purchase of
bonds for such clients as “receipts from its business done in Texas. ” Although
all commissions were paid and received at its Texas office, the taxpayer utilizes
these percentages because the State of New York reportedly considers the remain-
ing percentages to be allocable to New York for franchise tax purposes.

Article 12. 02 (l)(b) provides that the term “gross receipts from . . . business
done in Texas” includes:

(ii) Services performed within Texas; . .

. . .

(iv) All other business receipts within Texas . . . .

In certain cases intangibles may be included within the definition of other business
receipts, and as such would be allocated on the basis of the Ilocation of payor”
Humble Oil & Refining Co. v. Calverts414 S. W. 2d 172 (Tex. Sup. 1967).

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The Honorable Bob Bullock - page two(H-710)

In our view, brokers’ commissions as a general matter constitute receipts
for services, although in a particular fact situation some receipts may arise
from intangibles. Ske Gus; v. Schneider, Bernet & Hickman, Inc., 341 S. W.
2d 461 (Tex. Civ. AK -- Waco 1960, writ ref’
d. n. r. e., 344 S. W.2d 429);
Brownev. King, 196 S.W. 884(Tex.Civ.App. -- San Antonio 1917, aff’d, 235 S.
W. 522 ); 73 C. J. S. Property $9. Thus,ordinarily the allocation of receipts from
commissions should be on the basis of the percentage of services performed in
Texas in particular transactions. Cf. Attorney General Opinion H-281 (1974). The
selection of a proper percentage woxd necessarily involve factual determinations;
hence we are unable to say as a matter of law whether the taxpayer’s claimed
percentages are correct. Article 12. 12, Taxation-General, provides ample in-
vestigatory authority to the Comptroller to facilitate such determinations. The
Comptroller is certainly not bound by New York’s determination.

SUMMARY

As a general matter, commissions of a
stock broker should be allocated on the basis
of the percentage of services performed in Texas.
The Comptroller is authorized to investigate and
determine the proper percentage.

Attorney General of Texas

OBERT HEATH. Chairman
Opinion Committee .

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