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                      THEA~ORNEY                       GENERAL
                                       OFTEXAS
                                  AUESTIN   ~~.TExas
                                  ‘!
   WIJi   WILSON
AlTORNEYGENERAL                           July 8,      1960


        Honorable    Robert S. Calvert              Opinion No. ~~-875
        Comptroller     of Public Accounts
        Capitol    Station                          Re:       Application    of occupation
        Austin,    Texas                                      tax on insurance ad-
                                                              justers,   levied by
                                                              Article   X9-01, Section 3,
                                                              Title 122A, Taxation-
                                                              General to Independent
        Dear Mr. Calvert:                                     local recording agents.
                   As your recent letter         requesting        our opinion upon
        the referenced   subject contains        a detailed        fact situation,  we
        quote it In full,   as follows:
                            “Section  (3) of Article lg.01 of
                     Title 122A, Taxation-General,   being RRll,
                     56th Leg. 1959, 3rd C.S., Ch. 1, p. 187,
                    ,levles  an occupation tax on Insurance
                     Adjusters.
                            "A'question   has arisen whether the tax
                      is due from independent Local Recording Agents
                      having limited authority to pay small claims,
                      and who participate    to a limited extent in an
                      advisory capacity in the disposition      of other
                      insurance claims on policies     written through
                      their agencies,   all as incidents    of their
                      primary occupation as independent Local
                      Recording Agents.
                             “Mr. Forest S. Pearson, acting for himself
                      and other independent Local Recording Agents
                      similarly   situated, presents the typical
                      situation.
                             “Mr. Pearson’s business is that of an
                      independent Local Recording Agent repreaentlng
                      several different     companies and *groups’.   HIS
                      primary activity    is the solicitation   of Insurance
                      business,   the writing and issuance of insurance
                      policies,   and the collection    of premiums, all of
                      which, insofar as it pertains to his insurance
                      business,   consumes the-.:major portion of his time
Honorable   Robert S. Calvert,     Page 2       Opinion   No.   ~1-875


            and effort.     His compensation from his
            insurance business is by way of commissions
            directly    proportionate to the volume of
            premiums written through his agency.
                    “Mr. Pearson pays small losses which
            require no independent investigation,             the
            liability     and amount involved being without
            question.      He also acts frequently        in an
            advisory capacity and to a limited degree
            In the negotiation       of settlements      upon
            request of either the insured or the
            adjuster.      Practically    all losses on
            policies     written through his agency are :.~..:
            first    reported to him by the insured.           If
            the reported loss is of a type that has
            any Investigation       or adjustment problems,
            the company or its assigned Insurance
            Adjuster is immediately notified,            at which
            point his responsibility         for investigation,
            negotiation,      or reporting    thereon ends.
            Losses involving       substantial    sums or sub-
            stantial     questions of liability       fall within
            the latter category.         If the loss does not
            fall within such category,          Mr,. Pearson pays
            it and Is reimbursed by the company. We
            receives    no’~addltiona1 or special pay for
            any service rendered on losses.
                   “Mr. Pearson does not maintain a claims
            department; he does not employ a ClaimF
            adjuster;    he does not hold himself out to
            Insurance companies, other agents, or the
            public as an Insurance Adjuster; he is not
            an expert In the techniques of investigation,
            negotiation,     appraisal,  or ascertainment     of
            liability,    characteristic    of the profession
            of Insurance Adjusters or claim agents; and
            the only losses which Mr. Perrmn         has anything
            to do with are those which arise out of
            policies    written through his agency.      He never
            participates     in a responsible   capacity in the
            handling of any loss which arises out of a
            policy written through another agency.          His
            activities    in the field of losses are necessary
            incidents    of his primary occupation as an
            independent Local Recording Agent, being
            limited to such aa is necessary to efficiently
            serve his clients.
Honorable   Robert   S. Calvert,   Page 3    Opinion No. WW-875


                   “Mr. Pearson’s business Is in the
            nature of an independent business rather than
            that of a branch office     of a particular    company
            or group of companies.      His clientele   hold him
            responsible    for the selection    of companies
            which most adequately and appropriately        meet
            the Insurance requirements of his clients.          He
            is free to restrict    his activity    to the primary
            occupation of soliciting      and writing of
            insurance policies    and the collection     of premiums.
            In these respecte his ‘independent’       agency Is
            different   from a ‘direct    writing1 agency, where
            the agent is an employee or under the direct
            control of the principal      company or ‘group’,
            and may be directed    to perform on behalf of
            the employer any duties assigned to him, in-
            cluding those duties normally perforled        by pro-
            fesslona.1 Insurance Adjusters.       The ‘direct
            writing’ agent has no choice of companies.
                  “Kindly advise whether, under these facts,
            the tax applies to Mr. Pearson..    A brief on
            behalf of Mr. Pearson, prepared by O’Quinn,
            McDaniel & Randle, Attorneys at Law, 422
            Perry-Brooks ,Bulldlng,   Austin, Texas, is
            enclosed herewith.    The attorneys represent
            Mr. Pearson and the Texas Association     of
            Insurance Agents whose membership Is vitally
            Interested   In the question presented.”
            It is our opinion      that a Local Recording Agent, as
illustrated   in your letter,      is not liable for the occupation
tax on insurance adjusters.
             Chapter 19, Title 122A, Taxation-General    (H.B.ll,
56th   Leg., 3rd C.S.)   levies miscellaneous  occupation taxes.
Article   lg.01 (3) reads as follows:
                   “Insurance Adjusters.   From every person
            engaged In the occupation of adjusting
            insurance losses in this State, there shall
            be collected   an annual tax of Ten Dollars
            ($10.00).
                  “For the purpose of this Subsection,   a
            person shall be deemed to be engaged In the
            occupation of adjusting Insurance losses when
            he investigates  or ascertains the liability
            or amount of damage, or negotiates   the adjustment
Honorable   Robert   S. Calvert,   Page 4      Opinion No. ~~-875


            of Insurance claims or losses,       or reports
            thereon; whether employed by an Insurance
            c ommw, or companies, or the Insured, or is
            a member of a firm, association       of persons, or
            an employee,    or representative,    or officer  of
            such firm, association      of persons, or an employee,
            or representative,     or officer   of such firm, asso-
            ciation,    or of a corporation,    when such firm,
            association,    or corporation    is engaged in adjusting
            Insurance losses.”
           This language Is a partial   verbatim re-enacg;nie;f
the previously  existing  Article 7047-10 (a), R.C.S.
in this re-enactment by the 56th Legislature    was an exemption
clause which read as follows:
            “Provided that this tax shall not apply to any
            local,   recording,   soliciting or special
            agents of any Insurance company, nor to any
            person regularly    employed on a salary by any
            insurance company, who may adjust Insurance
            losses only for a company represented by him,
            such person not charging or being paid for his
            services    as an insurance adjuster on a fee basis.”
           Thus, under the previously       existing  Article
7047-10 (a), no tax liability       was incurred by a “local,
recording,   soliciting    or special” agent, or by a salaried ad-
juster of any Insurance company. Though the agent might be
handling the duties of an adjuster,        his agent’s status pro-
vided an exemption.      The obvious intent of the 56th Legislature
in deleting tNs exemption provision         from the present Article
19.01 (3), Title 122A, was to extend the coverage of this tax
to every person pursuing the occupation of insurance adjuster,
notwithstanding     his title  or method of compensation.
             Therefore,  in determining whether or not the present
 provision   was intended to include “independent local recording
,agents”,  it is necessary to determine with particularity    the
 nature of the services performed by such agents, then to decide
 whether or not those services     are sufficient to classify them
 as “insurance adjusters”    within the statutory definition.
           The tax here involved is an occupation tax.          See
Hurt v. Cooper,   130  Tex. 433, 100  S.W.2d  896    (1937);  See  also
State v. Galveston, H & S A Ry. Co., 210 U.S. 217, 28 S. Ct:.
b36, reversing   100 Tex. 153, 97 S.W. 71, (1906); Attorney
General’s Opinion No. o-2120.     Its incidence     is upon every
person embraced within the statutory     definition.       However, such
definition   was Intended to delineate   the occupation       being
-   .”




    Honorable   Robert   S. Calvert,   Page 5        Opinion No. ~~-875


    taxed; mere performance of an act or acts specified       in the
    definition    cannot create liability  for the tax if done inci-
    dentally to the pursuit of another occupation.       Johnson v.
    State    1.36 S.W.2d 837, (Tex.Crim.App.   1940); Bailey, State Tax
    &tor         v. Southern Bell Telephone Company & Telegraph




                 We view the acts done by Mr. Pearson In paying
    small, undisputed claims, and in an advisory capacity during
    negotiation,    as incidental to his occupation as an indepen-
    dent local recording agent, and as such, insufficient     to
    bring him and others similarly situated into the statutorily
    defined class upon which the tax is levied.
                It should be understood,    of course, that this
    opinion Is limited to the fact situation       which you set forth
    in your letter     as typical of independent local recording
    agent 9. Any Increased exercise     of discretion   or granting
    of authority    in the adjustment of losses might -  compel a
    different   result.
                                 SUMMARY
                Independent local recording agents, performing
                described duties,    are not within the scope of
                Art. 19.01(s),  Title 122A, Taxation-General,
                and not subject to the occupation tax on
                insurance adjusters.

                                          Yours very truly,
                                          WILL WILSON
                                          Attorney     General?&@   Texas


    JRI: jp
    APPROVED:
    OPINION COMMITTEE:                 %vIRw~D    FOR THE ATTORNEY
    Gordon C. Cass, Chairman              GENERALBY: Leonard Passmore
    Marietta Payne
    John Stelnberger
    Donald Benard
    Virgil Pulliam
