Hon. Robert S. Calvert Opinion NO. S-48
Comptroller of Public Accounts
Capitol Station Re: Application of occupation tax
Austin, Texas levied by virtue of Section 7
of Article 7047, V.C.S., upon
livestock clearing houses and
those persons utilizing the
Dear Sir: clearing house se,rvices.
Your opinion request of May 13, 1953, sets out the follow-
ing facts and questions from which we quote:
“There are certain firms located in the Livestock
Exchange BuiIding that operate what is known as a live-
stock clearing house. The clearing hou~se does office
and bookkeeping work for a number of small commission
firms. Also a number of livestock dealers operate out
of the clearing house.
“I have requested one of these clearing house firms
to outline for me the nature and function of a livestock
clearing house. The explanation is as follows:
‘In line with your suggestion, we will
undertake to explain the nature and function
of a livestock clearing house, several of which
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 book-
keeping, financing and all other office detail for
the firms who clear through them and for this
service we collect a percentage of their gross
commission that they receive for selling and buy-
ing livestock for their customers. We charge the
firms who clear through us on the basis of 22.2%
of the first $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 to you, for the past several
years we paid the Occupation tax as a clearing
house for the firms who cleared through us. and
no tax was demanded of them as they were consi-
dered to be a subsidiary of the clearing house.
L
. . .’
“I will appreciate your opinion on the following
questions:
-1. Does the clearing house owe the State occu-
pation tax levied by Article 7047, Subdivision
77
‘2. Are the persons or firms that clear through
the clearing house subject to the State occu-
pation tax levied by Article 7047, Subdivision
7 as amended? *
Section 7 of Article 7047, V.C.S., as amended by Section
2 of Chapter 372, Acts of the 48th Legislature, 1943, reads:
L7. Brokers and Factors. From every person,
acting for himself or on behalf of another, engaged in
the business or occupatio~n of a Broker or Factor whe-
ther he is principally engaged in such 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 a fee, commis-
sion or other valuable consideratron, rents, buys, sells,
or transfers, for actual spot or future dellvery, or ne-
otiates 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 of any kind; whether or not he
receives and delivers possession~thereof; provided that
this subsection shall not apply to a salesman who is em-
ployed on a 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 sell-
ing under the order of any Court, or any person who is
included within the definition of any other occupation and
is paying or subject to the payment of a tax under any
Hon. Robert S. Calvert, page 3 (S-48)
other subsection of this 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
the word broker as meaning: “(3) One who for a commission or fee
brings parties together and assists fn negotiating contracts between
them. . . .*
A clearing house that limits its transactions to bookkeep-
ing, financing and office details is not within the purview of Section 7
of Article 7047, V.C.S. The statute clearly and unambiguously levies
the tax, in this instance, only upon those persons who receive compen-
sation for buying, selling or transferring, or, negotiating the purchase,
sale or transfer of livestock for other persons. The fact tb.at the clear-
ing house does not treat the buyer or seller as its customer and does
not have its commission contingent upon the expenses incurred negoti-
ating the sales or purchases of livestock is an indicant that the clearing
house is not a broker or a factor.
Those persons or firms who buy, sell or transfer livestock,
acting in behalf of their 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 7 of Article 7047, V.C.S. Those persons
or firms utilizing the clearing houses to take care of office details and
who negotiate the purchase or sale of livestock 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
Assistant
Robert S. Trotti
First Assistant
John Ben Shepperd
Attorney General