              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).




                                           p. 3060
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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