Can a Texas city require its own license, tax, or bond from an air conditioning contractor who already has a state license?

Texas AG Opinion JM-1195: Can Cities Impose Their Own Rules on State-Licensed AC Contractors?

Plain-English summary

The head of the Texas Department of Licensing and Regulation asked whether a municipality could require an air conditioning and refrigeration contractor, already licensed by the state under article 8861, V.T.C.S., to also pay a local registration fee, license tax, or occupation tax, or to file a bond with the city.

The Attorney General concluded that municipalities may not impose a local license tax, since article 8861 itself says a state license is valid statewide and license-holders are not required to hold a municipal license to practice. A municipal occupation tax would also be invalid, because Texas's constitution bars cities from taxing an occupation the state itself does not tax, and no state occupation tax exists for these contractors. A municipal bond requirement was preempted too, because the state had already occupied the field by giving the licensing department authority to set insurance requirements for licensees. The one item left open was a plain "registration fee": the opinion said whether such a fee is permissible would turn on facts about the fee's actual nature, which were not provided.

Currency note

This opinion was issued in 1990. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule mentioned here.

Who this opinion affected (as of 1990)

Air conditioning and refrigeration contractors licensed under article 8861: The opinion confirmed that a state license was valid throughout Texas and that a contractor did not need a municipal license to practice in any city, and that cities could not impose their own license tax, occupation tax, or bond requirement on top of the state license.

Municipalities regulating contractors within their borders: The opinion found that the state had occupied the field of insurance/bond regulation for these contractors through the licensing department's authority to set insurance requirements, preempting a municipal bond requirement, and that the state constitution barred an occupation tax on a pursuit the state itself did not tax. The opinion left open whether a specific "registration fee" (as opposed to a tax or bond) might still be permissible depending on its actual design.

The Texas Department of Licensing and Regulation: The opinion supported the department's broad regulatory scheme under article 8861 as the intended single, statewide framework for these contractors, consistent with the legislative purpose of relieving contractors from varying local permit regimes.

Common questions

Does a state HVAC contractor license let you work in any Texas city without a local license?
Based on this 1990 opinion of article 8861, yes: a state license is valid throughout Texas, and licensees and those under their supervision are not required to hold a municipal license to practice air conditioning and refrigeration contracting in any municipality.

Can a city still charge an occupation tax on these contractors?
No, according to the opinion. The Texas Constitution bars a municipality from imposing an occupation tax on a pursuit the state itself does not tax, and the opinion found no state occupation tax on air conditioning and refrigeration contractors.

Can a city require these contractors to post a bond?
The opinion concluded no, reasoning that the state had already occupied that field by requiring the licensing department to set insurance requirements for licensees, which preempted a municipality from separately requiring a bond covering the same risks.

Can a city still charge a registration fee?
The opinion did not resolve this. It said the answer would depend on facts about the specific fee's nature that were not supplied in the request, though it noted the state's occupation of the insurance/bond field would significantly limit a city's room to add such a fee.

Background and statutory framework

Article 8861, V.T.C.S., established a broad statewide regulatory scheme for air conditioning and refrigeration contractors administered by the Texas Department of Licensing and Regulation, covering practice standards, insurance requirements for licensees, licensure requirements including examinations, and license denial, suspension, or revocation, along with consumer complaint investigation. Section 9(a) of the article expressly provides that while a municipal license remains valid within that municipality, a state license is valid throughout Texas, and licensees are not required to hold a municipal license to practice anywhere in the state.

The opinion read section 9(a) as directly precluding a municipal "license tax" on a state licensee. On the separate "occupation tax" question, the opinion relied on the state constitutional rule, drawn from Ex parte Dreibelbis, that a municipality may not impose an occupation tax on a pursuit the state itself does not tax; since the opinion found no state occupation tax on these contractors, a municipal one would be invalid. On the bond question, the opinion reasoned that because section 3(f) of article 8861 already requires the department to set insurance requirements for licensees, the state had occupied that regulatory field, and a municipal bond requirement, which the opinion treated as a form of insurance against the same operational risks, was therefore preempted, citing the background legislative purpose (a 1983 bill analysis noting that some cities required as many as ten or twelve separate permits) of letting a single state license authorize a contractor to work anywhere in Texas. The opinion left the "registration fee" question open because resolving it would require facts about the fee's actual character that the request did not supply, though it noted the state's occupation of the insurance and bond fields would substantially limit any room for a municipality to layer on such a fee.

Citations

Statutes:

• V.T.C.S. art. 8861 (statewide licensing scheme for AC and refrigeration contractors)
• V.T.C.S. art. 8861, § 3(a) (commissioner rulemaking authority for practice standards)
• V.T.C.S. art. 8861, § 3(f) (commissioner sets insurance requirements for licensees)
• V.T.C.S. art. 8861, § 4 (licensure requirements, including examinations)
• V.T.C.S. art. 8861, § 5 (denial, suspension, or revocation of licenses)
• V.T.C.S. art. 8861, § 5A (consumer complaint investigation)
• V.T.C.S. art. 8861, § 6(b) (persons not covered remain subject to municipal permit/inspection rules)
• V.T.C.S. art. 8861, § 7 (licensee notification of municipality)
• V.T.C.S. art. 8861, § 9(a) (state license valid statewide; no municipal license required)
• V.T.C.S. art. 8861, § 9(b) (municipalities may adopt consistent standards by ordinance)
• Tex. Const. art. VIII, § 1 (taxation clause)
• Tex. Const. art. XI, § 5 (home-rule cities)
• 16 T.A.C. § 75.6 (insurance requirement rule)
• 16 T.A.C. § 75.9 (notification of municipality rule)

Cases:

• Ex parte Dreibelbis, 109 S.W.2d 476 (Tex. Crim. App. 1937)
• Prescott v. City of Borger, 158 S.W.2d 578 (Tex. Civ. App.-Amarillo 1942, writ ref'd)
• Massachusetts Bonding & Ins. Co. v. McKay, 10 S.W.2d 770 (Tex. Civ. App.-Austin 1928, writ ref'd)

Source

• Landing page: https://www.texasattorneygeneral.gov/opinions/jim-mattox/jm-1195
• Original PDF: https://www.texasattorneygeneral.gov/sites/default/files/opinion-files/opinion/1990/jm1195.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain, the linked PDF is authoritative.

July 27, 1990

Mr. Larry E. Kosta
Executive Director
Department of Licensing and Regulation
P. O. Box 12157
Austin, Texas 78711

Opinion No. JM-1195

Re: Authority of a municipality to impose a registration fee, license fee, occupation tax, or a bond requirement on a state licensed air conditioning and refrigeration contractor (RQ-1993)

Dear Mr. Kosta:

You ask whether an air conditioning and refrigeration contractor licensed by the Department of Licensing and Regulation pursuant to article 8861, V.T.C.S., may be required by a municipality to pay a local registration fee, license tax, occupation tax, or to file a bond with the municipality.

Article 8861 provides for a broad scheme of regulation of air conditioning and refrigeration contractors by the Texas Department of Licensing and Regulation. See V.T.C.S. art. 8861, §§ 3(a) (commissioner of department shall adopt by rule standards for practice of air conditioning and refrigeration contracting, and may adopt rules for enforcement of act), 3(f) (commissioner shall set insurance requirements for licensees), 4 (requirements for licensure by department, including examinations), 5 (denial, suspension, or revocation of licenses), 5A (consumer complaint investigation by commissioner).

You point to section 9(a) of that article, which provides:

A license issued by a municipality of this state is valid under the terms of the license within that municipality. However, a license under this Act is valid throughout the state, and the holder and people under supervision are not required to hold a municipal license to practice air conditioning and refrigeration contracting in any municipality within this state. (Emphasis added.)

With respect to the municipal "license tax" you ask about, the above-quoted provision of section 9(a) of article 8861, in itself, precludes a municipality from imposing a municipal "license tax" on a state licensee.

The municipal "occupation tax" you ask about would, we think, be invalid as contravening the provisions of article VIII, section 1, of the state constitution. That section has been construed to prohibit municipal imposition of an "occupation tax" on pursuits on which the state levies no occupation tax. See Ex parte Dreibelbis, 109 S.W.2d 476 (Tex. Crim. App. 1937). We find no provision of state law for imposition of a state occupation tax on air conditioning and refrigeration contractors. Therefore a municipality may not impose such a tax.

With regard to whether a municipality may require an air conditioning and refrigeration contractor licensed under article 8861 to file a "bond" with the municipality, we think that by virtue of section 3(f) of the article, the state has occupied the field of regulation of such persons and, therefore, such a municipal requirement is preempted.

Generally, municipalities are prohibited from entering a field of legislation occupied by general legislative enactments. Where a field of legislation has been occupied by a state statute, specific grants of authority to municipalities to enact ordinances in such field should be considered as implicitly limiting municipal authority to that specifically conferred by statute. See V.T.C.S. art. 8861, §§ 6(b) (persons not covered by article 8861 remain subject to permit, inspection, or approval requirements prescribed by municipal ordinance), 7 (article 8861 licensee must notify municipality in which he is engaged in air conditioning and refrigeration contracting, the notification to be "in the form required by the municipality"), 9(b) (municipalities may by ordinance adopt and enforce standards for air conditioning and refrigeration contractors that are consistent with the standards established under the article); see also Prescott v. City of Borger, 158 S.W.2d 578 (Tex. Civ. App.-Amarillo 1942, writ ref'd); Tex. Const. art. XI, § 5; 67 Tex. Jur. 3d Statutes § 119 (1989), and authorities cited there (expressio unius est exclusio alterius rule).[1]

1. The bill analysis to the 1983 act in which the provisions of article 8861 were first adopted stated as background for that legislation:

Some cities regulate air conditioning contractors and others do not regulate air conditioning contractors. Some air conditioning contractors need ten or twelve permits in order to operate their business and others do not need any permits to operate in their geographic area.

Bill Analysis, S.B. 642, 68th Leg. (1983).

We think it is clear that article 8861 was meant to relieve air conditioning and refrigeration contractors from compliance with regulations varying from jurisdiction to jurisdiction, by providing a scheme under which the obtaining of a state license would authorize such contractors to do business anywhere in the state.

Section 3(f) requires the commissioner of the Department of Licensing and Regulation to set insurance requirements for persons licensed under article 8861. See also 16 T.A.C. § 75.6. We think that having provided for the regulation of article 8861 licensees' insurance coverage by the department, the legislature has in effect preempted municipal authority in the area of requiring licensees to insure against risks attendant on their operations. We assume that the bonds you say some municipalities require of article 8861 licensees are in the nature of such insurance.[2] In our opinion, municipalities lack authority to impose such bond requirements. See, e.g., Massachusetts Bonding & Ins. Co. v. McKay, 10 S.W.2d 770 (Tex. Civ. App.-Austin 1928, writ ref'd).

2. Also, we assume that the bonds which you ask whether municipalities may require would be imposed by municipalities in their regulatory capacities. We do not here address the propriety of a municipality which has contracted with an article 8861 licensee for the performance of work for the municipality requiring a bond in connection with such contract.

As to whether a municipality may require a "registration fee" of an article 8861 licensee performing air conditioning and refrigeration contracting in the municipality, we think that the nature of a particular "registration fee" might have a bearing on a resolution of the issue of its validity. The state's entry, in article 8861, into the field of regulation of air conditioning and refrigeration contracting, as discussed above with respect to insurance or bond requirements, would severely limit the authority of a municipality to additionally require a "registration fee." However, we think that determination of the permissibility of a particular fee would depend on factual questions as to the nature of the fee, which we have not been supplied in your request. See V.T.C.S. art. 8861, § 7 (article 8861 licensee to notify municipality where performing work under license that he has obtained license, the notification to be "in the form required by the municipality"); see also 16 T.A.C. § 75.9 (department rule regarding notification of municipality).

3. While we did not address the preemption effect of article 8861 on municipal authority to impose the "license tax" or "occupation taxes" because we feel that issues as to the permissibility of such requirements are sufficiently disposed of on the grounds stated above, we think that general preemption considerations would also support the conclusions we reached as to the permissibility of such requirements.

SUMMARY

Municipalities may not impose additional local license taxes, occupation taxes, or requirements of filing a bond with the municipality on air conditioning and refrigeration contractors licensed under V.T.C.S. article 8861. Whether a municipality may impose a "registration fee" on such licensees would involve questions of fact as to the nature of the particular fee.

JIM MATTOX
Attorney General of Texas

MARY KELLER
First Assistant Attorney General

LOU MCCREARY
Executive Assistant Attorney General

JUDGE ZOLLIE STEAKLEY
Special Assistant Attorney General

RENEA HICKS
Special Assistant Attorney General

RICK GILPIN
Chairman, Opinion Committee

Prepared by William Walker
Assistant Attorney General