When are missing-person investigative services subject to Florida sales tax, and is a separate monthly administration fee taxable?

Plain-English summary

Florida sales tax followed where the customer primarily benefited from the investigative service, not simply where the investigator worked. Services sold to a non-Florida resident were not taxable when they did not concern Florida property, Florida activities, or a Florida decedent's estate. Services used by a Florida customer were taxable even if the investigation occurred outside Florida.

For a Florida customer, the taxable amount included the field investigator's hourly charges and expenses plus the intermediary's markup. The registered businesses could use resale certificates as the investigative service moved through the chain before the final sale to the customer.

The intermediary's separate monthly administration fee was not taxable. It paid for access to investigators and status-report administration regardless of whether any investigation was underway, so the Department found that it was not connected with furthering a specific taxable investigation.

What this means for you

Businesses selling detective or private-investigator services should identify where the purchaser receives the service's primary benefit and keep the documentation required for services treated as used outside Florida. They should also separately state genuinely independent administrative services; combining taxable and nontaxable services without support can cause the full charge to be presumed taxable under the authority quoted in the ruling.

Common questions

Q: Are investigative services performed in Florida always taxable?
A: No. In this ruling, services used outside Florida by a non-Florida purchaser were not taxable even though the governing law also addressed services performed in Florida.

Q: Can Florida tax an investigation performed in another state?
A: Yes. The Department said services used by a Florida purchaser were taxable regardless of where the investigation was performed.

Q: What part of the charge was taxable for a Florida customer?
A: The total investigative charge, including the field investigator's hourly fee and expenses and the intermediary's markup.

Q: Why was the monthly administration fee not taxable?
A: It was payable even when no investigation was active and had no relationship to furthering a specific investigation.

Citations and references

• Fla. Stat. § 212.05(1)(k) — detective, burglar-protection, and other protection services
• Fla. Admin. Code r. 12A-1.0092 — detective and private-investigator services
• Fla. Admin. Code r. 12A-1.0161 — primary-benefit sourcing and resale certificates
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 96A-005

Original ruling text

Jan 16, 1996

Re: TAA 96A-005
Sales Tax; Investigative Services
s. 212.05(1)(k), F.S.
Rules 12A-1.0092; 12A-1.0161, F.A.C.

Dear :

This is in response to your request for a technical
assistance advisement on behalf of your client, XXXX
(hereinafter "Taxpayer"). You request an official binding
statement in conformity with the opinion expressed in a Letter
of Technical Advice, dated May 12, 1995, which was issued in
response to your initial inquiry.

FACTS PRESENTED

"Taxpayer' ... proposes to provide services to locate persons who currently or in the future are, or may be, reported missing due to kidnappings, abductions or other unforeseen circumstances. Once identified, the location of the missing person is reported byTaxpayer' to the
relevant state or federal law enforcement authorities for
recovery of the individual(s).

"Taxpayer' will engage the services of Company B (B'), to
contract the services of private investigators within the
various states including Florida. B' is an unrelated XXXX corporation that conducts business in Florida, and who likeTaxpayer,' is a registered Florida sales and use tax
dealer. The investigators contracted by B' function entirely in their capacity as independent contractors in pursuing the investigatory activities necessary to locate the missing persons.B' will monitor the progress of the
investigations and report their status to Taxpayer' but will not conduct the actual investigation. The hourly fees plus expenses which the investigators bill toB', will be

separately passed through to Taxpayer' includingB's'
markup. B' will separately chargeTaxpayer' monthly
administrative expenses for accessing the services of the
private investigators upon demand in the various states.
B' will also compile and remit toTaxpayer' information
relating to the status of on going investigations as these
are received and reported to B' from the independent field investigators.Taxpayer' has been currently paying `B'
monthly administration fees even though no engagements have
been contracted to date, nor investigations commenced.

"As an example of the type of services to be rendered, a
typical case may involve the disappearance of the son or
daughter of a resident in XXX who has contracted the
services of Taxpayer'.Taxpayer' notifies B' of the case involving the disappearance of the relative in XXX.B' through newspaper advertisements and other available
means will solicit the services of a private investigator
in XXX. Once an investigator is found and approved by B', his (her) services will be contracted to conduct the field investigation in XXX. The investigator, hereinafter referred to asC', will report any leads which are
uncovered in the course of the investigation to a
functioning administrator on duty at B'. Multiple leads may be reported at various times to various individuals, who depending at the time of the contact, may be on duty to receive such information atB'. B' compiles the reported information and remits [it] toTaxpayer'. B' neither supervises nor maintains under its direction or control the investigative services rendered byC'.

"C' chargesB' for services rendered at an hourly fee
plus expenses. B' in turn invoicesTaxpayer' for these
charges at a marked up hourly rate, plus expenses. These
are separate from and in addition to the monthly
administration fee paid to Taxpayer' for accessing the placement of investigatory services on demand, and remitting the compiled information toTaxpayer'.

"Once the location of the missing person has been
identified and reported to Taxpayer',Taxpayer' alerts

the local state and/or federal authorities for recovery of
the individual.

"In connection with the foregoing, we seek technical advice
with respect to the following questions.

"1. Will Florida sales tax apply to the fees for
investigatory services rendered by C' within or outside Florida in connection with cases arising from out-of-state (non Florida) customers ofTaxpayer'?

"2. Will sales tax apply to the fees for investigatory
services rendered by C' either within or outside Florida in connection with cases arising from Florida resident customers ofTaxpayer'?

"3. Does Florida sales tax apply on the separate monthly
administration fees paid by Taxpayer' toB'?"

STATUTORY/REGULATORY AUTHORITY

Section 212.05(1), F.S., provides in part:

"(1)... [A] tax is levied on each taxable transaction or
incident, which tax is due and payable as follows: ...
"(k)1. At the rate of 6 percent on charges for all:
"1 Detective, burglar protection, and other protection
services (SIC Industry Numbers 7381 and 7382)....
"3. Charges for detective, burglar protection, and other
protection security services performed in this state but
used outside this state are exempt from taxation. Charges
for detective, burglar protection, and other protection
security services performed outside this state and used in
this state are subject to tax.
"4. If a transaction involves both the sale or use of a
service taxable under this paragraph and the sale or use of
a service or any other item not taxable under this part,
the consideration paid must be separately identified and
stated with respect to the taxable and exempt portions of
the transaction or the entire transaction shall be presumed
taxable. The burden shall be on the seller of the service

or the purchaser of the service, whichever applicable, to
overcome this presumption by providing documentary evidence
as to which portion of the transaction is exempt from tax.
The department is authorized to adjust the amount of
consideration identified as the taxable and exempt portions
of the transaction; however, a determination that the
taxable and exempt portions are inaccurately stated and
that the adjustment is applicable must be supported by
substantial competent evidence.
"5. Each seller of services subject to sales tax pursuant
to this paragraph shall maintain a monthly log showing each
transaction for which sales tax was not collected because
the services meet the requirements of subparagraph 3. for
out-of-state use. The log must identify the purchaser's
name, location and mailing address, and federal employer
identification number, if a business, or the social
security number, if an individual, the service sold, the
price of the service, the date of sale, the reason for the
exemption, and the sales invoice number. The monthly log
shall be maintained pursuant to the same requirements and
subject to the same penalties imposed for the keeping of
similar records pursuant to this chapter...."

Rule 12A-1.0092, F.A.C., provides in part:

"(2)(e) On and after July 1, 1994, the services in this
rule are taxable when performed within or outside this
state and used within this state by the purchaser or when
the purchaser's primary benefit of the services is within
this state. The services in this rule are exempt when
performed within this state but used outside this state by
the purchaser or when the purchaser's primary benefit of
the services is outside this state. The seller must
maintain a log pursuant to Rule 12A-1.0161(2)(d), F.A.C.,
documenting any transaction where services are performed in
this state but used by a purchaser outside this state....
"(3)(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. The
charge for such services must be separately stated on the
invoice given to the purchaser in order to be considered
exempt from tax...."

Rule 12A-1.0161, F.A.C., provides in part:

"(2)(b) ... The primary benefit of the service is presumed
to be used or consumed in Florida... when:
"1. The real property is located in Florida, if the service
is applied to or otherwise directly relates to the real
property; or
"2. The situs or permanent location of tangible personal
property is in Florida, if the service is applied to or
otherwise directly relates to the tangible personal
property; or
"3. The direct result of the service applies to activities
of the purchaser in Florida, if the service is unrelated to
real property or tangible personal property; or
"4. The service is performed for or primarily benefits the
estate of a decedent whose last established residency was
in Florida....
"(5)(a)5. When a sale of a service is made to a person who
claims to be entitled to purchase services for resale, the
seller of the service being a duly registered dealer
pursuant to Part I of Chapter 212, F.S., shall obtain from
the purchaser of the service a resale certificate..."

ADVISEMENT

In response to Question One, investigative services that
are performed inside or outside Florida are not taxable where
the purchaser's primary benefit of the service is outside
Florida. In the example presented of the type of services
rendered by Taxpayer, the purchaser was a non-Florida resident
who purchased investigative services from Taxpayer. The
services were performed in XXX by investigators contracted by
"B." The investigative services did not relate to real or
personal property located in Florida belonging to the nonFlorida resident, the services did not apply to Florida

activities of the non-Florida resident, nor were the services
related to the estate of a Florida decedent. In this example,
the investigative services billed to the non-Florida resident by
Taxpayer would not be subject to sales tax in that the
investigative services were not used in Florida.

In response to Question Two, investigative services are
subject to tax where the services are used by the purchaser in
Florida, regardless that the services may be performed outside
Florida. The total charge Taxpayer makes to its Florida
customer, including "C's" hourly rate and expenses billed to
Taxpayer by "B" plus "B's" markup, is taxable. If "C" were a
registered Florida dealer, "B" would extend a resale certificate
to "C." Taxpayer would extend a resale certificate to "B" since
both Taxpayer and "B" are registered for Florida sales tax
purposes.

In response to Question Three, Taxpayer engages the
services of "B" to contract the services of third party private
investigators within the various states including Florida to
conduct investigative services on behalf of Taxpayer. "B's"
services also include monitoring and providing status reports on
ongoing investigations performed by the third party
investigators. B" resells the third party services to Taxpayer
for resale to Taxpayer's customer. "B" charges Taxpayer a
monthly administrative fee for providing these services which is
a separate and unrelated charge "B" makes to Taxpayer for third
party services resold to Taxpayer. Taxpayer's purchase of "B's"
administrative services are not subject to sales tax in that
these services have no relation to the furtherance of any
specific investigation and the fees for the administrative
services are payable, regardless of any ongoing investigations.

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 Gallops
Senior Tax Specialist

/sg
Cont. #21612