Were private-investigation services taxable when performed mainly for insurance companies?

Subject

Private Investigative Services Performed by Insurance Investigators

Plain-English summary

Private-investigation services requiring Chapter 493 licensure were taxable even when performed for insurance companies, agents, or brokers. The firm's work included surveillance, videotaping, interviews, fire and loss investigation, product and construction review, and public-record checks.

An activity not requiring a private-investigator license could be nontaxable when sold as a standalone service unrelated to a taxable investigation. If it furthered taxable investigative work, the entire charge was taxable.

What this means for you

The ruling classified the work by licensing requirement and relationship to the broader engagement, not merely by the insurer customer or the firm's industry code.

Common questions

Did serving insurance companies make licensed investigations exempt? No.

Were database and courthouse-record searches always taxable? No. Standalone retrieval could be nontaxable if it did not further a taxable service.

Could the requester rely on another taxpayer's TAA? No. Florida stated that the other advisement bound only its own facts and business.

Citations and references

• Fla. Stat. §§ 212.05(1)(k)1., 493.6101(15), 493.6101(17), 493.6102(2), and 213.22
• Fla. Admin. Code r. 12A-1.0092(2)(a), (3)(a)1.

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 94A-015

Original ruling text

Feb 17, 1994

TAA 94A-015
Re: Sales Tax - Private Investigative Services Performed by
Insurance Investigators
Sections 212.05(1)(k)1.; 493.6101(15)(17); 493.6102(2),
F.S.
Rule 12A-1.0092(2)(a), (3)(a)1., F.A.C.

Dear :

This is in response to your letter dated August 11, 1993,
requesting a Technical Assistance Advisement, regarding the
taxability of an investigative agency performing insurance
investigation services. I apologize for the long delay in
responding to your letter.

FACTS:

You state in your letter that your investigative firm
provides 99% of your services to insurance companies only. The
services your firm provides include: fire investigation, case
review, examinations relative to product liability and defects,
construction inspections relative to defective products or
workmanship, code violations, and inspections of losses as
related to weather.

In your previous letter dated May 7, 1993, you stated that
the primary investigative activity is that of surveillance,
video taping, and interviews, and a secondary activity is that
of public information record checks.

You further state that your firm is classified as a class
code 6411 on an Industry Verification Statement issued by the
Florida Department of Labor and Employment Security, a copy of
which you included with your letter.

In our telephone conversation on September 8, 1993, you

stated that your firm is licensed as a private investigative
agency because no one issues a license for an insurance
investigator. You also stated that you are a one man operation,
but have two associates in Miami who are private investigators
and work for you on a contract basis, doing surveillance,
interviews and whatever.

STATUTORY/REGULATORY AUTHORITY:

Section 212.05(1), F.S., as amended by Section 16 of
Chapter 92-319, L.O.F., provides in part:

"Sales, storage, use tax. - It is hereby declared to be the
legislative intent that every person is exercising a
taxable privilege who... furnishes any of the things or
services taxable under this chapter...
"(1) For the exercise of such privilege, a tax is levied on
each taxable transaction or incident, which tax is due and
payable as follows:
"(k) At the rate of 6 percent on charges for all:
"1. Detective, burglar protection, and other protection
services (SIC Industry Numbers 7381 and 7382)...."

Section 493.6101(15)(17), F.S., provides the following
definitions:

"(15) Private investigative agency' means any person who, for consideration, advertises as providing or is engaged in the business of furnishing private investigations. "(17)Private investigation' means... the investigation by
a person or persons for the purpose of obtaining
information with reference to any of the following matters:
"(a) Crimes or wrongs... against the United States or any
state or territory of the United States...
"(b) The identity, habits, conduct, movements, whereabouts,
affiliations, associations, transactions, reputation, or
character of any society, person, or group of persons.
"(c) The credibility of witnesses or other persons.
"(d) The whereabouts of missing persons, owners of
abandoned property or escheated property, or heirs to
estates.

"(e) The location or recovery of lost or stolen property.
"(f) The causes and origin of, or responsibility for,
fires, libels, slanders, losses, accidents, damage, or
injuries to real or personal property.
"(g) The business of securing evidence to be used before
investigating committees or boards of award or arbitration
or in the trial of civil or criminal cases and the
preparation therefor."

Section 493.6102(2), F.S., provides:

"Inapplicability of parts I through IV of this chapter. This chapter shall not apply to:
"(2) Any insurance investigator or adjuster licensed by a
state or federal licensing authority when such person is
providing services or expert advice within the scope of his
license."

Rule 12A-1.0092(2)(a), F.A.C., in pertinent part, provides
a definition of the services provided by detectives or
investigative agencies:

"Detective... services are... those services which are
rendered to obtain evidence or other information for legal,
business, or personal purposes of a kind typically
performed by detective or investigative agencies, and
include, but are not limited to, the following services
which are subject to the State's sales and use tax:

"... 3. Detective agency services;...
"... 8. Investigators, private;..."

Rule 12A-1.0092(3)(a)1., F.A.C., provides:

"(a) For the purpose of this rule, detective agency
services and private investigator services which require
licensure under Chapter 493, F.S., are taxable. Services
which do not require licensure are taxable when performed
in furtherance of a taxable service. Services which do not
require licensure are not taxable when free standing and
not performed in furtherance of a taxable service.

"1. Example: A private investigator performs data base
retrieval or courthouse records retrieval, neither of which
is an activity requiring a private investigator license
under Chapter 493, F.S. If these services are free
standing, and have no relevance to the performance of a
taxable service, they are not taxable. If these services
are in furtherance of the performance of a taxable service,
the entire charge is taxable."

DETERMINATION:

TAA 93A-005, which you refer to in your letter, was issued
to a specific business with regards to its own specific
questions and activities and can not be relied upon by another
business in its application of sales tax to its activities,
since the two business may or may not be doing the same types of
taxable or exempt transactions.

Rule 12A-1.0092(2)(a), F.A.C., quoted above, provides us
with the definition of detective services. These are generally
found in SIC codes 7381. Services which require licensure under
Chapter 493, F.S., are further examples of these services. Rule
12A-1.0092(3)(a), F.A.C., provides that private investigative
services that require licensure under Chapter 493, F.S., are
subject to sales tax. It is the position of the department that
sales tax on those services provided by industries listed under
Standard Industry Code classification 7381 are taxable, which
industries include detective agencies and private investigators,
and the tax is to be collected by the detective agencies,
private investigative agencies, and private investigators, who
are required to be licensed under Chapter 493, F.S. By example
in the above quoted Rule, it provides that those services which
do not require licensure under Chapter 493, F.S., AND which are
not required in the furtherance of a taxable service are not
subject to sales tax, even though performed by a licensed
private investigator, private investigative agency, or detective
agency.

Detective agency services or private investigative services
which require licensure under Chapter 493, F.S., are taxable,
unless the services are specifically exempt. Therefore, if you

are required by law to be licensed under Chapter 493, F.S., then
you would be required to collect sales tax on those services
that require licensure under Chapter 493, F.S., regardless that
those services are performed for insurance companies, agents,
brokers, etc.

This response constitutes a Technical Assistance Advisement
under s. 213.22, F.S., which is binding on the Department only
under the facts and circumstances described in the request for
this advice as specified in s. 213.22, F.S. Our response is
predicated on those facts and the specific situation summarized
above. You are advised that subsequent statutory or
administrative rule changes or judicial interpretations of the
statutes or rules upon which this advice is based may subject
similar future transactions to a different treatment than
expressed in this response.

You are further advised that this response and your request
are public records under Chapter 119, F.S., which are subject to
disclosure to the public under the conditions of s. 213.22, F.S.
Your name, address, and any other details which might lead to
identification of the taxpayer must be deleted by the Department
before disclosure. In an effort to protect the confidentiality
of such information, we request you notify the undersigned in
writing within 15 days of any deletions you wish made to the
request or the response.

Sincerely,

Sharon Blair
Technical Assistant

SB/pb
Enclosure