I inspect homes and buildings, sometimes for insurance purposes and sometimes just because someone is buying or selling the property. Which of these inspections are taxable, and do I need a sales tax permit?

Plain-English summary

A home/building inspector asked the Comptroller which of their inspection services are taxable in Texas.

Insurance-related inspections are taxable. Inspections performed for buyers, sellers, or others specifically for insurance purposes are taxable insurance services under Rule 3.355(b). Rule 3.355(a)(2) defines an "insurance inspection" broadly as any activity performed to evaluate risks to property, to survey or value property in connection with furnishing insurance coverage, or any similar activity — and this kind of work may also be classified as an "insurance investigation" under Rule 3.355(a)(3).

But a sale/purchase inspection is NOT a taxable insurance service — even if it's later used for insurance too. Rule 3.355(f) carves out inspections performed for the purpose of selling or buying a home or building: that inspection stays nontaxable as an insurance service, even if the same inspection report ends up being used to help secure insurance coverage. The purpose behind commissioning the inspection is what controls, not every possible downstream use of the results.

Termite/pest inspections are a separate, taxable category. If the inspector performs termite inspections, they need to be licensed by the Texas Structural Pest Control Board. Under Texas sales tax law, services that require a license from that board are taxable real property services under Rule 3.356 — a completely separate basis for taxability from the insurance-inspection rules above.

Bottom line on permits: the inspector needs a sales tax permit if they perform inspections pertaining to an insurance policy, or if they perform pest control inspections requiring the Structural Pest Control Board license — but a pure buy/sell home inspection, without either of those elements, doesn't trigger that requirement on its own.

What this means for you

Home and building inspectors

Sort your inspection work by its actual purpose: insurance-risk inspections are taxable insurance services, buy/sell inspections are not taxable (even if the buyer later uses the report for insurance), and termite/pest inspections are taxable real property services requiring a separate state pest control license.

Real estate buyers and sellers commissioning home inspections

A standard pre-purchase or pre-sale home inspection is not taxed as an insurance service under this letter, even though the inspection report might later be shared with an insurer.

Pest control and termite inspection businesses

Your termite inspection work is a taxable real property service specifically because it requires a Texas Structural Pest Control Board license — track this as a distinct taxability category from general home inspections.

Accountants and tax professionals advising inspection businesses

This letter shows three parallel bases for taxability determination in one business: insurance-purpose inspections (taxable, Rule 3.355), buy/sell-purpose inspections (not taxable, Rule 3.355(f)), and licensed pest control inspections (taxable, Rule 3.356) — a single inspector may need to track all three categories separately depending on their client mix.

Common questions

Q: Are home inspections done for insurance purposes taxable in Texas?
A: Yes — they're taxable insurance services (inspection or investigation) under Rule 3.355.

Q: Is a home inspection done to help someone buy or sell a house taxable?
A: No — Rule 3.355(f) specifically excludes buy/sell-purpose inspections from taxable insurance service treatment, even if the report is later also used for insurance.

Q: Are termite inspections taxable?
A: Yes — because they require a Texas Structural Pest Control Board license, they're taxed as real property services under Rule 3.356.

Q: Do I need a sales tax permit as a home inspector?
A: Only if you perform insurance-related inspections or licensed pest control inspections — not solely for buy/sell home inspections.

Q: Can I rely on this letter for my own inspection business?
A: No. This opinion is based on the facts submitted and current law at the time, and other facts, though similar, may result in different answers; it can be relied on only by the taxpayer it was issued to.

Citations and references

Statutes and rules:

• 34 Tex. Admin. Code Rule 3.355(a)(2) (insurance inspection defined)
• 34 Tex. Admin. Code Rule 3.355(a)(3) (insurance investigation)
• 34 Tex. Admin. Code Rule 3.355(b) (insurance services — taxability)
• 34 Tex. Admin. Code Rule 3.355(f) (buy/sell-purpose inspections excluded from taxable insurance service treatment)
• 34 Tex. Admin. Code Rule 3.356 (real property services — licensed pest control inspections taxable)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/200001008L

Original ruling text

TO:

FROM: Bettie Peterson

DATE: January 27, 2000

Thank you for your recent email.

Inspections performed for buyers, sellers or others for insurance purposes are
taxable services (see Rule 3.355(b) concerning insurance services). Rule
3.355(a)(2) defines an insurance inspection as "any activity performed to
evaluate risks to property, to survey or value property in connection with the
furnishing of insurance coverage, or any other similar activity." Your
activities may also be classified as an insurance investigation [Rule
3.355(a)(3)].

An inspection for the purpose of selling or buying a home or building is not a
taxable insurance service even though the inspection also may be used to secure
insurance [see Rule 3.355(f)].

As we understand, if you perform termite inspections, you will need to be
licensed by the Texas Structural Pest Control Board. Under the sales tax law,
services provided that require a license issued by this board are taxable
services (see Rule 3.356 concerning real property services). You will need a
sales tax permit if you perform inspections pertaining to a policy or policies
of insurance or perform inspections requiring a license from the Texas
Structural Pest Control Board.

The referenced Comptroller rules are available at
.

The State Tax Automated Research system, which provides viewing an downloading
of rules, edited letter rulings, hearings, AG Opinions, etc., may be accessed
on the Internet at: http://www.window.state.tx.us/

This opinion is based on the facts you submitted and current law. Other facts
though similar, may result in different answers.

If you have questions or need more information, our email address is
.