     OFFICE    OF THE ATTORNEY      GENERAL    OF TEXAS
                            AUSTIN




Aonorable Gcoree S. She?pard
Co5iptroller of Fublio AOO0u nta
Austin, Texae


Dear sir:
                                            on inmrance apglicanta,
                                           es under Article  7061,
                                            Civil :tatlltes.
                                          rqmt     ror our 02inion
on whet3cr    or                         is lteble  for the "col-
                                           provided fcr in Article
7C61 of the
                                      ve us and vrhich we ascertained
                                      t!: you are a6 r0il0w0:    The
                                      ill rarer to as the cgencg, Is
                                   psrnit to do business in Terns,
                                  t that ita buainees shall be *the
                                  ce oompenles concerning the propri-
                             cceptine    eppllcatlone   for lnau*no@.
                         OS eald agency, with whloh we are oonoerned
                        king reports     to Insurance companies as to
                        r and veracity     02 persons who are eppli-
                    nsurence donpanles.        when an insurance company
                   lber,to   the aervlce rendered by said agency ds-
                   n on an applicant      with regard to such applicant
as on Insurance risk, said insurance company asks for such ln-
fomatlon    trot said agency and the agency seeks to obtain the
inrormation    ana convey it to the ineurance oompany. You have
advised us that w?en enid eEency entered Terse it began issuing
lndfvfdusl   reports on pers0ne, cover,ine the3 lndlvldually          and
not aa engaged in busineER, reportlne           on thetr ~reonal   rating
or standing for lntx:ence,      and t!xt this plnn of opratlng         he8
been followed    down to the present day.
Honorable     George, I?. Sheppard,      Page ,?.


               You desire to kaow whether or not said agency 1s
required      to pay e.tex under Article  7061 on the gross amount
received      for buefness done and reports meda as outlined above.
              The answer to your inquiry            must be found in said
Article    7001,  which reeds es follows:
            Y?ech indlvlduel,    COmFRny, corporation    or aaso-
     oletion,   owning, operating,    managing or oontrolllng
     any oollectl~     agency, comercial     agency or cornor-
     cfel reporting    oredft eeency within this Stete, end
     char&g     for colleotions    mede, or business done, or
     reports mOde, shell make quarterly,        on the first    days
     or January, April,     July end October of Each year, e
     report to the Comptroller under oath or ths lndlvlduel
     or.of the president,     tree surer, or superintendent      or
     such company, oorpoxa t&on, or association,       showing
     from business done within this State the gross amount
     reoaived In tha payment of oherecs tar oollectlons
     made end business dcne and reports made durlq           the
     quarter next peceding.        Such J.ndivlduals,. compeeies,
     corporations   or associationa     et the tIme of making
     said resort   shall pay to the Treasurer oS this State
     an ocoupetion    tax for the quarter baginning on said
     date aqua1 to one-half      of one par oant of said gnoas
     receipts   es shown by said rap0rt.a
           Llablllty  or said agency for taxaa on aald bualneea
under aaid article   depends upon whatlmsr or not said business
18 a ucommarolal agency or ocmmarclal rtportlng     credit agbnoy”,
aa those terms are used in the statute:     The only Ttxae  case
conatrulng this Article   Is the case of Rarohants Rtdbook Com-
pany v. Sate,. (Corn. App.) 135 8, C. (2d) 279; and in dtttrmin-
ing whether or not the agency Involved In that cast ma8 a corn-,
mtrolal agency, the ccu.rt said:
           *It la undisputed that ths Merchants Red Book
     Company is a *reporting    ortdit agenoy,’ but epptl-
     lent8 strongly urge that it la not a lCommeroIal*
     reporting   credit agency   aa that term wee defined
     et the tint of the ori&el        enactment of Artlclt
     7061.    It agptars with reasonable otrtalnty     that
     the terms *marcentlla egencirs’ and ‘oommarclel
     egenoits~,   being regarded as synonymous, Dave Sor
     a long time bed a derlnlte     ffieaning. Set 40 corpus
     Jurie,     p.   636.   In   the   oest   of   City   o? Brooktltld
Honorable   George 8. Sheppard,      Page 3



      v. Kitchen, 163 MO. 546, 63 S. 'if. 825, 826, the
      Supreme Court of lElaaourl, speaking of *co-szserclel
      or mercantile egenolea,~~ said:           ‘Such agencies are
      deflnea to be tetebllshcente          which znkt a business
      of collecting     lnfon5atlon     relating   to the credit
      cherecter,    responsibility,       end reputation   of
      nerohanta for the purpose of furnishing            the lnforaa-
       ion to subscribers,       - e.g.    a. G. Dun & Co. &enoy,
      Bradstreet Company, etc. 5 Am. k Eng. iho. Law (1st
      td.) p. 280; Web. Int.        Dlct.'
            nCor&   Juris givec the following     dtrlnltlon:
      'A oa%earclal or mercantile      agency msy be defined
      as a person, firm, or corporation      angaged In the bus-
      iness or collecting    infonation    es to the financial
      standing, ability,   end credit of ereons engaged in
      business;  and reporting    Shil same o aubacrfbera or
      customers ecplying end -38ying therefor.'      (Underscoring
      ours)
This darlnitlon  by the court corresponds wlth the detiaitlon
of %arcentlle   agency* In Xtbater*s New International  Dlotlon-
try, 2nd Edition, which says:
             *.       en establishmnt     or institution     which
      collect '8 iniometion     as to the character,     rtaponal-
      blllty , credit,    reputation,  etc.,  of merchants or
      otheri-doing    buslneae, and furniahea duoh Information
      to others for a subscription      price; a co-merolal
      agency.”

           It will be notlotd that the Texas oourte and the dls-
tlonary dtfInltlon  considers that the reports must be in rt-
gard to marchants end othera doing budnear.     In the oabt In
question the person on whom the report8 are meae art net neo-
tsaerlly merchsnts or persona engaged in’any kind of bualneEa,
but they might be applicants  for lnsu--not  who art not In any
business ?.t all.
            In cmr search of the authorities   we fled t&it through-
out  the hi&Dry of “comerolal    aganclta~ and %trcentilt    agen-
cies” they existed f-2 the purpose cf Informing msrchants es to
the credit s6&ndlng and dependability     of buyers of merchandise.
An interesting   ease on this question Is the ease of Stats v.
Honorable George 9. Sheppard,        Page 4


Morgan, 2 3. D’. 32, 40 N. X. 314, by the %preme Court of
South Dakota, which we ,wlll quote from at length, as follows:
            * . . . Xercantlle      co.meroial     agenolss,    as we
     unders:a.?‘d ths,     are establishments        whicl: cake a
     bdslne;s    UP oolleotlnG      Inform&km relatlcg          to the
     Credit,    character,    raapc~eibillty,       general reputation
     and other mtters       affecting      persona, firm,       and cor-
     porations engaged in businec.6, for the purpose Or
     Purnlahirg>his       Information to its oustomers for a
     cash consider?cticn.       These agencies have beeme re-
     cognized and pemanent adiuncts to the world of
     trade.     Their rice and progress are of but recent
     date.     Aocording to a little        Iwrk entitled      *The Law
     Relating to Mercantile A&enciec ( recently               published
     by 1. E; J. W. Johoson 8: Co., Ph~ladelphla,             and writ-
     ten by I. X. Errant, the Amrloan system of mrcan-
     tile egencias owes its origin to the work done by
     one Church, who waa at first           a coannsrclal traveler.
     Cn his business tours it wae his custom to make notee
     for his own UIB, as to the habits, lto.,               of different
     persons and firms with whom he dealt.               Other   merchanta,
     hearing of hla cuetom, would come to him, and ask ln-
     fomotion     in relation     to the same persons.          At last
     he waa employed by 30 New York homes to travel in
     the ecuth and aest to oollact            information to1 then.
    Rls labors suggested the idea Of establishl~ug an in-
     atltut~on whhioh should r?ake a businers Of collecting
     information    oonoernlng     the reaponsiblllty,        eta.,   of
     looal businees firms and oorporatlons              t?!at ware seek-
    'Ing oredit in the larger         oitiee.      In 1841 the firat.
     organized ‘Yeroantlle       AgmoFc       waa formed by Lewis
    Tappan. Thle was follcwed            in l&42 by 0110called        *The
     Coxaerctal Agency.’        Tha mercantile agency of Tappan
    was suooeeded by Benjamin Douglas k, Co., and this
     firs by R. C. Dun k Co. A few years arter the estab-
     lishment of *The Xeroantils          Agency’ and the eCommer-
     olel Agenoy’ , 7. Y. Bradstreet           established    ‘The In-
    proved Mercantile       Agenay,’ Which was 60120 jvarr after-
    wards inoorporated,        end kncmqas ‘The Zradstrset            Com-
    pany. * The mercantile         and comercial        agencies were
     originally    establ?shed     for the purpose of reporting
     the oredit of buyers.         It was Bradstreet who first
     published a bcok giving ratings.              The other 3eenoie6
Honoreble   GeorCe B. Sheppard,     Page 5


     soon followad   his example.
     been establ



In the oase of Genesee Sav. BaDL v. Xichlgan Parge Company, 52
lL.iCh. 164, 17 F‘. .x
                    .. . 750, the Supreffie Court of liichlgan said:
            "      . ??.e busina:s of these agencies is well
     known ti ihe comnerclsl       coxwnlty.       Indeed It is said
     by Justice Hepello,      in ;,ton,    I;ole & Burnham Co. v.
     Avery, 63 N. Y. 31, ‘thet the business and office            of
      these ap,encies ere so well-known, and have been so
     often the subject     of diacus8iOn in adjudicated        canes,
     tht    the court can take judicial        notice of them. Their
     bwiness    is to collect    Information as to the circum-
      stances, means, and pecuniary ability          of merchants and
     dealers throughout     the country, and keep accounts thsre-
     -that          the subecriber      to the agency,
     to by a customer to sell goods to him on
     by restorin& to t?.e figency oz to t?e
     lishas,   ascertsin   the standing and respo-elbllity        of-
     the customer to when it is proposed to extend credit.”
      (Underecorlng oui+s)
In the case of Furry V.I. O*:onnor, 3 Ind. A;p.       573, 28 N. E. 103,
the Appellate Court of Indiana said:
            “. .   Cormrclal     egencles have become vast arfd
     extensive iaotors    In modern oomzerclal transaotions.
     ior furnlsblnE lnfoxxcatlon to retail       dealex    and    .
       obbers as *all es to wholesale merchants.         Tf\
     oourts are bound to know judicially        that no vizdor
     of goods at wholesa:a oon be regarded es a prudent
     business me2 if he sells to a retell        dealer upcn a
     credit without first     lnformine. himeelf through these
     mediums of ltUor?n?;tion of tha finsnoial      standing of
     the customer,   end the credit      to which he fairly    is en-
     titled.”    (Underecorirq    olura)
In the c0se ‘if Stevens v. Ludlun, 46 Elnn.       160, 40 N. X. 771,
the Sup~em9 Court of Kinnesota said:
Honorable    Gaorga 11. Sheppard,   Page 6


            *This bueine6a     of a oommercial apancv 16 to
      get such infoxmatldn      am it can raletive  tb the bus-
      11106s and pecuniary     ability of businesr rmn and bue-
      h866   OOIlOerll6, an&   OORUllUlliOEite
                                           it t0 6UCh Of it6
        trons a8 may have      ocoa6ion to apply for it.*
       Underscoring   ours)

The definition    of "OOZIumrcial agency" given in Bouviercs       Law
Dlotlonary,    Rawlo(e Third Revision,   16 a6 fOllOW6~
             “CODERCIAL  AC’IPJCY. A person, rim,   or cor-
      pOl'at.iOn engaged in .tk6 bURine66 Of OOl~OCting in-
      formetion a6 to the financial    standing, ability,
      and credit of pertons engaped in businese and re-
      portillg the 666ie t0 6UbECriber6 Or to CU6tOlXr6 6p-
      plying and paying thereror."    (Underscoring  oure)
In 18 h. C. L. 997, we flad       a etatement   az followea
             *YlOrCantilO agenOiO6 Bra 06tabli6hmsnt6 which
      make a burrins:: of oollectlng      infoxnatlon    relating
      to the credit.    character.   reaa~nalb~litv.     nenaral
      reputation,   akd other matterra-affecting       per6on6,
      fiI%I6. end oorpcretions     engaged In busine66, for the
      purpose or fUrni6h1ng thle lnfomtion            to 6UbfNriber6
      thereto for a cash c%nelder Mon.          Their object 16
      to procure through tub-egOnt6, nervants and corre6-
      pondente 6UCh information      coneernlng the tN6twOrth-
      in066 of parsons and corporaticna        engaged in trade
      or aommeroe a6 ah611 enable their subroribers           rarely
      and properly   to conduct busine&s with atrungere or
      distant cu6toDlbr6.n (Underscoring       our6)

Th666 oa6ea bring u6 to the conclu6ion  that in order for a
bUPine66 to be that or a Ww2uercla1 agencyw it ntu6t OOMl6t
of making report6 on merchants or others engaged in buaineea.
A~woo.mmoralal reporting oredlt a6enoy” may ooneiet or making
credit report6 upon persona In their individual    oapaclties
wlthout regard to their buaineesea.    RoweYer, (18 we under-
6tXtnd the naturr of the report6 in puertion they cannot
properly be olasslfied  a6 credit reporta.
             It 16 our opinion thet the agenoy fn Cuaetion 16 not
rrqulred    to pay a tax under Article 7061 bn the gro66 amount
reoeived    for the buaine6e done end or sake a report of eaid
. -




      Honorable    George      R.   Sheppard,   Page   7



      buainesm,    as           in your inquiry and dlecusmed herein.
                         outlined
      Hongver     if    thlr
                          agency does other bUdn866   which wmtltut6r
      t.he buekear  of a ~commerolal agency or commercial reporting
      oredlt kgency , ** the lbbility   for the tax on such othar buei-
      no66 would not be governed by thi6 opinion.


                                                           Youre very tNly




                                                                 Cecil%.        Roteoh
                                                                           Asli6tUt
      CCR:GO




      /6/ Grover EOllff6
      FIRST A:Z.fSTAHT
      ATTORmx OjmWAL



      This   Opinion     ConddOrOd and Approved            in Limited   Conferenoe.
