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
