Is a New York corporation licensed only as an independent insurance adjuster (not as a private investigator) subject to sales tax on its trial-preparation work for insurers -- interviewing witnesses, taking statements, photographing accident scenes, serving subpoenas, and evaluating and negotiating claims?

Subject

Bridges, is whether the receipts from the activities described below of a New York, corporation which is licensed as an independent adjuster as defined in Section 2101(g) of the New York State Insurance Law, are subject to New York State and local sales tax.

What this means for you

A New York corporation licensed exclusively as an independent insurance adjuster (not also as a private investigator, unlike the companion opinion issued the same day, TSB-A-95(24)S) does trial-preparation work assigned by insurers, self-insurers, or their attorneys for personal-injury and property-damage cases: interviewing and taking statements from claimants and witnesses, photographing or videotaping claimants' activities, photographing and diagramming accident scenes, obtaining official reports, serving subpoenas, and evaluating and negotiating claims.

New York taxes "protective and detective services" (including detective agencies), but doesn't define the term itself. Following the same 1994 appellate decision applied in the companion opinion -- Compass Adjusters and Investigators, Inc. v. Commissioner of Taxation and Finance -- the Department confirmed that "detective services" under Tax Law § 1105(c)(8) doesn't reach work that can only be performed under an Insurance Law Article 21 adjuster's license. Because this client is licensed only as an independent adjuster and doesn't perform private-investigation services, all of its described activities -- even the ones that superficially resemble investigative legwork, like interviewing witnesses or photographing an accident scene -- are treated as adjusting work, not detective work, and its receipts are entirely exempt from the sales tax.

Q&A

Q: Our firm is licensed only as an independent insurance adjuster, with no private-investigator license -- do we need to charge sales tax on our claims-investigation and trial-prep work?
A: No. As long as your license is exclusively as an independent adjuster and you don't perform private-investigation services, your charges for investigating and adjusting claims (including trial-prep tasks like witness interviews, accident-scene photos, and subpoenas) are not subject to the detective-services sales tax.

Q: Doesn't interviewing witnesses and photographing accident scenes sound like private-investigator work?
A: It can resemble it functionally, but the tax result turns on which occupational license the work falls under, not on how similar the tasks look. Since this client holds no private-investigator license and performs no such services, the activities are categorized entirely as adjusting work.

Q: How is this different from the companion opinion issued the same day (TSB-A-95(24)S)?
A: That opinion involved a firm licensed as BOTH a private investigator and an independent adjuster, so its taxability had to be split activity-by-activity depending on which license each task required. Here, the client holds only the adjuster license and performs no investigator services, so the whole charge is exempt with no need to split it.

Citations

• Tax Law § 1105(c)(8) -- taxes protective and detective services, including detective agencies.
• General Business Law Article 7, § 70 -- licenses private investigators; excludes insurance adjusters from its scope.
• General Business Law Article 7, § 71 -- defines "private investigator," expressly excluding persons in the business of insurance adjusters.
• Insurance Law § 2101(g) -- defines "independent adjuster" as one acting on an insurer's behalf investigating and adjusting claims.
• Compass Adjusters and Investigators, Inc. v. Commissioner of Taxation and Finance, 197 AD2d 38, 610 NYS2d 625 -- holds "detective services" under Tax Law § 1105(c)(8) doesn't include work requiring an Insurance Law adjuster's license.

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1995.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a95_25s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-95 (25)S
Sales Tax
June 29, 1995

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S940810A

On August 10, 1994 a Petition for Advisory Opinion was received from Robert M. Bridges,
c/o Jacobson & Schwartz, 510 Merrick Road, P. 0. Box 46, Rockville Centre, New York 11571.
The issue raised by Petitioner, Robert M. Bridges, is whether the receipts from the activities
described below of a New York, corporation which is licensed as an independent adjuster as defined
in Section 2101(g) of the New York State Insurance Law, are subject to New York State and local
sales tax.
Petitioner's client, a New York corporation, is licensed under Article 21 of the New York
State Insurance Law as an independent insurance adjuster. The client only performs insurance
adjusting functions. The client is not licensed as a private investigator and does not perform private
investigation services.
As part of Petitioner's client's adjustment business, the client engages in trial preparation for
personal injury and property damage cases assigned to it by insurance companies, self-insurers or
their attorneys. The client's services include interviewing and obtaining signed or recorded
statements from claimants, insureds and witnesses; observing, photographing and/or videotaping
insurance claimant's activities; obtaining photographs and preparing diagrams of accident scenes;
obtaining copies of official reports and records; serving subpoenas; and evaluating claims and
negotiating settlements.
Section 1105 of the Tax Law states, in part:
Imposition of sales tax.--...there is hereby imposed and there shall be paid a tax ...
upon:
(c) The receipts from every retail sale, except for resale, of the following services:
(8) Protective and detective services, including, but not limited to, all services
provided by or through alarm or protective systems of every nature, including, but not
limited to, protection against burglary, theft, fire, water damage or any malfunction
of industrial processes or any other malfunction of or damage to property or injury
to persons, detective agencies, armored car services and guard, patrol and watchman
services of every nature other than performance of such services by a port watchman
licensed by the waterfront commission of New York harbor, whether or not tangible
personal property is transferred in conjunction therewith.

-2­
TSB-A-95 (25)S
Sales Tax
June 29, 1995
Article 7 of the General Business Law states, in part:
§70. Licenses

1. The department of state shall have the power to issue separate licenses to private
   investigators and to watch, guard or patrol agencies....
2. ... Nothing contained in this section shall be deemed to include the business of
   adjusters for insurance companies, nor public adjusters incensed by the
   superintendent of insurance under the insurance law of this state....
   § 71. Definitions
3. "Private investigator" shall mean and include the business of private investigator
   and shall also mean and include, separately or collectively, the making for hire,
   reward or for any consideration whatsoever, of any investigation, or investigations
   for the purpose of obtaining information with reference to any of the following
   matters, notwithstanding the fact that other functions and services may also be
   performed for fee, hire or reward; crime or wrongs done or threatened against the
   government of the United States of America or any state or territory of the United
   States of America; the identity, habits, conduct, movements, whereabouts,
   affiliations, associations, transactions, reputation or character of any person, group
   of persons, association, organization, society, other groups of persons, firm or
   corporation; the credibility of witnesses or other persons; the whereabouts of missing
   persons; the location or recovery of lost or stolen property; the causes and origin of,
   or responsibility for fires, or libels, or losses, or accidents, or damage or injuries to
   real or personal property; or the affiliation, connection or relation of any person, firm
   or corporation with any union, organization, society or association, or with any
   official, member or representative thereof; or with reference to any person or persons
   seeing employment in the place of any person or persons who have quit work by
   reason of any strike; or with reference to the conduct, honesty, efficiency, loyalty or
   activities of employees, agents, contractors, and sub-contractors; or the securing of
   evidence to be used before any authorized investigating committee, board of award,
   board of arbitration, or in the trial of civil or criminal cases. The foregoing shall not
   be deemed to include ... persons engaged in the business of adjusters for insurance
   companies nor public adjusters licensed by the superintendent of insurance under the
   insurance law of this state.
4. "Watch, guard or patrol agency" shall mean and include the business of watch
   guard or patrol agency and shall also mean and include, separately or collectively, the
   furnishing, for hire or reward, of watchmen or guards or private patrolmen or other
   persons to protect persons or property or to prevent the theft or the unlawful taking
   of goods, wares and merchandise, or to prevent the misappropriation or concealment
   of goods, wares or merchandise, money, bonds, stocks, choses in action, notes or

-3­
TSB-A-95 (25)S
Sales Tax
June 29, 1995
other valuable documents, papers, and articles of value, or to procure the return
thereof or the performing of the service of such guard or other person for any of said
purposes. The foregoing shall not be deemed to include the business of ... persons
engaged in the business of adjusters for insurance companies nor public adjusters
licensed by the superintendent of insurance under the insurance law of this state.
Article 21 of the New York State Insurance Law states, in part:
§2101. Definitions
(g) In this article, "adjuster" means any "independent adjuster" or "public adjuster"
as defined below:
(1) The term "independent adjuster" means any person, firm, association or
corporation who, or which, for money, commission or any other thing of value, acts
in this state on behalf of an insurer in the work of investigating and adjusting claims
arising under insurance contracts issued by such insurer and who performs such
duties required by such insurer as are incidental to such claims and also includes any
person who for compensation or anything of value investigates and adjusts claims on
behalf of any independent adjuster....
In Compass Adjusters and Investigators Inc. v. Commissioner of Taxation and Finance of
the State of New York, 610 NYS2d 625, 197 AD2d 38 the court stated in part that:
...among the detective and protective services covered by Tax Law § 1105(c)(8) are
those provided by detective agencies, but the Tax Law contains no definition of
detective services or detective agency. ... That broad definition can be found in
General Business Law article 70, which regulates private investigators and certain
other agencies (see, General Business Law § 71[1]). Expressly excluded from the
broad definition of private investigator, however, are persons engaged in the business
of adjusters for insurance companies and public adjusters licensed under the
Insurance Law (id). Among those regulated by Insurance Law article 21 are
adjusters. An adjuster is defined as any independent adjuster or public adjuster and
an independent adjuster is defined as one who acts "on behalf of an insurer in the
work of investigating and adjusting claims arising under insurance contracts issued
by such insurer and who performs such duties required by such insurer as are
incidental to such claims" (Insurance Law § 2101[g][1]).
Based upon the foregoing statutory scheme, and considering the general rule that tax
statutes are to be strictly construed with any doubt resolved in favor of the taxpayer
... we conclude that the term protective and detective services contained in Tax Law
§ 1105(c)(8) does not include those services which cannot be performed without the
license required by Insurance Law § 2102(a) (1). ... Plaintiffs are licensed private
investigators and licensed independent adjusters. Their status at any given time
depends entirely upon the nature of the activities they are performing at that time.

-4­
TSB-A-95 (25)S
Sales Tax
June 29, 1995
When they are performing activities that require a license pursuant to the provisions
of General Business Law article 70, plaintiffs are acting as private investigators for
which no independent adjuster license is required, and they concede that the fees they
charge for those detective services are subject to the sales tax under Tax Law §
1105(c)(8). When plaintiffs are performing activities that require a license pursuant
to the provisions of Insurance Law article 21, they are acting as independent
adjusters, for which no private investigator's license is required, and the fees charged
for those services are not subject to the sales tax.
In the instant matter, Petitioner's client is licensed as an independent adjuster as defined under
Section 2101(g) of the Insurance Law. Petitioner's client is not licensed as a private investigator.
The activities performed by Petitioner's client, as described above, are the type of activities
contemplated to be performed by a licensed independent insurance adjuster pursuant to said section
of the Insurance Law.
Therefore, it must be concluded that Petitioner's client is hired to perform services as an
independent insurance adjuster and not as a private investigator. Accordingly, when the client is
performing the services of investigating and adjusting an insurance claim as an independent adjuster
and such activities include the performance of the services discussed above, the client's charges to
the customer will be for services performed by an independent adjuster as contemplated by Section
2101(g) of the Insurance Law and will not be subject to the tax imposed under Section 1105(c)(8)
of the Tax Law. The client's services, even though including services of an investigatory nature, are
not to be construed as the services of a private investigator. Compass Adjusters and Investigators,
Inc. v Commissioner of Taxation and Finance, supra.

DATED: June 29, 1995

s/PAUL B. COBURN
Deputy Director
Taxpayer Services Division

NOTE: The opinions expressed in Advisory Opinions
are limited to the facts set forth therein.