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
subjeiotto the oooupation or
7061, Ravised Civil Statutes,
of a collscting r In connsetionwith
their legal pxao .tromsuoh .prautiae.
It appears froa es8 0r a colleatiag
or commercial conducted under a trade
name and that to pay said gross
xeoeipts tax b re attorneys.
1 Statutes, rsade as follows:
ny, oorporation or associa-
naglng or controlling any
rclal agenap or oommercial re-
tober 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 frea-
SUr8r 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
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/- Your inquiry resolves it&elf into this: If the busi-
,jL88 of operating, owning, managing or aontrolling a collecting
,,Iagency 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 attorneys involved in your letter. If, on the other hand ., the
!/ operation in T8xaS of a collecting or commercial agenog is an
independent business rather than a neoeasary incident to the
I 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.
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_<.-..-.-.
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 *oormuetrclalagsncy* 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 pay-
ing 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 responslbil-
sigi;:, :h;ac;toser to W~IO.Zit 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 oonteatlonof
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* fkithe doing or perloanlag
semvioss~Ina oourt of justioe, in any 8aamer depa&lgg
therein, throu&.mutito 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 ~~
preparationof Ssgnl instrumenk and oontraotsby 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 dirferentiatesthe praotloe or lm rrop
the operationof a oollsoting or oommerulal agcmoy. Thlr ease
turnsupon a oonetruotion OS ah aot prohibiting anyone but a
liaensed attoraep from undertaking for another the ooSl.e&ionOS
olalma out of court,rithrefsrenoe to the oonstltutionalpnnislon
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 gain-
ing 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 differentvow&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
Apra4ticelaw." To oolleot claims out of court, that
is, without recoume to legal remdies, and to practice
In-v:
connote very different things to ti:elay aind,
and re have stated the steps neaeseary to the mking
of a licensed lawyer, in order to ehovchow 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 slaybe fairly parsphrasedas follows: 90 man
to whoa is presented a proposition to amend a statute
declaring tnat regularly licensed attorney8alone have
authorityto practice law, would for a moment cronaeive
the propositionto involve an inhibitionagainst the
oolleotionof olaims by demand or negotiationout of
court by anyods but a lloeneed attorney.*
we have no ditfloulty in anmreriw your questloon in the
s&native, and you n&y aocordlnglyproceed to oolleot fms the :' j
sttorneys in question the gross rsaeipte tax levied by hrtlole- 1
,~7061, 6baeed Civil Statutes, 1925, by virtue or the ownenahlp,
sperstlon or managemaat by tha of a soollectingagemy+ or ,.
~oomeroial agency* within the lpeaningof aald statufs.
Yours very truly