Private Investigators are required to
collect state sales tax

Jan 12, 2004

Generally, an investigation company in Texas must collect sales tax for any investigation services it conducts in Texas for a Texas client who is not otherwise exempt from taxation (eg, a government entity such as the court, or the Chapter 13 Trustee), when the information is provided to the Texas client within the state of Texas. 

The Texas Comptroller (800-531-5441) has documents and opinion letters that address the collection of state sales tax, including opinion letters that relate specifically to businesses offering any type of “security services”.

The first paragraph of that letter stipulates that “security services are taxable if the service provider must be licensed by the Texas Commission on Private Security.”  Continuing in the next paragraph, “taxable services include…investigations…” Investigations may only be conducted by an investigations company.

§1702.104 of the Texas Occupations Code (below) defines an investigation company as “a person who…engages in the business of obtaining information related to the identity, habits, business, occupation, knowledge, efficiency, loyalty, movement, location, affiliations, associations, transactions, acts, reputation, or character of a person.”  Other opinion letters from the Texas Comptroller, in consultation with the Texas Commission on Private Security (previously the Texas Board of Private Investigators and Private Security Agencies) conclude that “investigations” include skip tracing or locating individuals, and obtaining information from them during an interview when that information may be used in court.

Under §151.0101(a)(14) of the Texas Tax Code, Security Services are defined as a taxable service (a business that must collect state sales tax). Under §151.0075, a security service is defined as any service for which a license is required pursuant to §1702.101 or §1702.102 of the Texas Occupations Code.   Sec. 1702.101 (Tx.Occ.C.) requires an investigation company to have a license from the Texas Board of Private Investigators and Private Securities Agencies (currently the Texas Commission on Private Security). And again, §1702.104 (Tx.Occ.C.) is briefly defined above, and in the full text below.

The Texas Comptroller is governed by certain regulations, and Rule 3.333(b) specifically relates to the requirement that security services are taxable entities that must collect state sales tax for the services they perform. The exception to that is the service of process, which is a non-taxable item because it is a function of the courts (a non-taxable entity). Go to PS-Academy's site for more information on process servers.

Below are a few of the comptroller’s opinion letters that address security services, (listed by accession number). You may conduct a more detailed search at the Comptroller's website:

#200207308L (asset searches, locations of people and property)

#200009717L (investigations conducted in Texas for a Texas client are taxable; investigations conducted outside Texas and for a non-Texas client are non-taxable)

#200005251L (asset searches, locations of people and property)


Occupations Code
§1702.104
A person acts as an investigations company for the purpose of this chapter if the person:

(1) engages in the business of obtaining or furnishing, or accepts employment to obtain or furnish, information related to:

(A) crime or wrongs done or threatened against a state or the United States;

(B) the identity, habits, business, occupation, knowledge, efficiency, loyalty, movement, location, affiliations, associations, transactions, acts, reputation, or character of a person;

(C) the location, disposition or recovery of lost or stolen property; or

(D) the cause or responsibility for a fire, libel, loss, accident, damage, or injury to a person or to property;

2) engages in the business of securing, or accepts employment to secure, evidence for use before a court, board, officer or investigating committee;

3) engages in the business of securing, or accepts employment to secure, the electronic tracking of the location of an individual or motor vehicle other than for criminal justice purposes by or on behalf of a governmental entity; or

4) engages in the business of protecting, or accepts employment to protect, an individual from bodily harm through the use of a personal protection officer.

PI-CEU
P.O. Box 8040
Fort Worth, TX 76124
 
 
Copyright 2004. All right reserved by Cat's-Eye Intelligence Service