A company's licensed insurance adjuster works full-time at an insurance company's office, under that company's total supervision, on an open-ended assignment -- is billing for that adjuster still taxable after the 2001 law change?

Plain-English summary

This is a companion letter to another Texas Letter Ruling (200110563L) issued one day earlier by the same Tax Policy Division analyst on the same general question, addressing a taxpayer's harder fact pattern: a company's licensed insurance adjuster works full-time out of a large insurance company's own office, on an open-ended assignment, under the insurance company's total day-to-day supervision (method of work, standards, direction), with the insurance company furnishing all supplies and able to end the arrangement at any time. The company bills the insurer weekly by the hour and pays the adjuster as its own employee.

The taxpayer had previously been told this arrangement WAS exempt temporary help, citing a 1996 Comptroller hearing (Hearing 32,141, STAR document 9611818H). The Comptroller's response: that hearing is no longer valid, because Texas Tax Code § 151.057(2) was amended (Senate Bill 1125, effective October 1, 2001) to require that a temporary-help service perform work "normally performed by the employer's own employees." Because this company's own business is licensed insurance-claims adjusting -- not lending generic staff to do a client's routine work -- the exemption doesn't apply even though the client insurer controls the adjuster's day-to-day work. The company must resume charging and collecting sales tax on these charges.

What this means for you

Staffing and adjusting companies with long-running "temp" placements

The degree of client control over a worker's day-to-day tasks does NOT by itself make a placement exempt "temporary help." What matters (after October 1, 2001) is whether the work is the kind normally done by the client's own employees. A specialized professional service -- like licensed insurance claims adjusting -- supplied by a company whose own business is that service stays taxable, even under a long, exclusive, client-supervised assignment.

Anyone relying on pre-2001 Comptroller guidance

If you were told your arrangement was exempt temporary help based on older guidance (like the 1996 hearing referenced here), that guidance may no longer be valid after the 2001 statutory amendment -- don't assume old rulings still control without checking for a later law change.

Accountants and tax professionals

This letter is useful specifically because it names and expressly disavows a prior authority (Hearing 32,141 / STAR 9611818H) as superseded by the 2001 amendment -- helpful if you're tracing how the temporary-help exemption's scope narrowed around that date.

Common questions

Q: Does it matter that the client insurance company controlled the adjuster's day-to-day work?
A: Not under this letter's reasoning. The key question is whether the work is normally performed by the client's own employees -- since this taxpayer's business is licensed claims adjusting, not the insurance company's ordinary business function performed by its own staff, the exemption did not apply regardless of the level of client supervision.

Q: Is a prior favorable ruling always safe to rely on?
A: No. Here the Comptroller expressly told the taxpayer that a 1996 hearing they had previously relied on was superseded by the 2001 statutory amendment. Always check whether cited guidance predates a relevant law change.

Q: Does this letter bind the Comptroller for my company?
A: No -- this is an informal 2001 letter to one taxpayer on specific facts, not a modern Private Letter Ruling or General Information Letter, and cannot be relied on by anyone else.

Citations and references

Statutes:

• Tex. Tax Code § 151.057(2), as amended by S.B. 1125 (77th Legislature), effective October 1, 2001 (temporary employment services exemption)

Prior authority discussed (and superseded by the above amendment):

• Comptroller's Hearing No. 32,141 (1996); STAR document 9611818H

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/200110564L

Original ruling text

October 23, 2001

Sales Tax Help Needed

Dear **:

This is to notify you of a recent change in the sales tax law that affects your
Texas sales tax responsibilities as an insurance claims adjuster when you
provide an insurance adjuster under the following scenario:

A large insurance company has requested that you provide the services of an
employee, in their office in CITY, on a temporary basis, because of work
overflow and employees out on medical leave. The length of the assignment is
undetermined. All work will be performed at the office of the insurance
company, all services will be subject to the supervision of the department
supervisor as will method of work performance, standards, direction, etc. The
insurance company will provide all supplies and work tools and. the insurance
company will have the right to discontinue the services at anytime. The
employee being provided is a licensed insurance adjuster. The duties will
vary, but will include clerical as well as adjusting services. The CITY claims
office of this company provides claims services to a six-state area, including
Texas.

Your corporation will bill the insurance company for the services of the
adjuster on a weekly basis, based on an hourly rate for hours worked per week.
Your corporation will receive payment from the insurance company and will then
pay the employee, applying all appropriate employment taxes.

Questions: Is the amount billed to the insurance company for the services of
this adjuster, as a temporary employee under the total control of the client
insurance company, subject to sales tax? When my corporation bills the
insurance company for the services performed by this temporary employee do I
need to charge sales tax ?

Answer: I advised you that your company provided temporary employees to
supplement clients' existing employees' work to process insurance claims. At
the time, the sales tax law [Texas Tax Code Section 151.057(2) ] exempted
taxable services performed by temporary employees for an employer who provides
all equipment and supplies necessary to perform the services and the temporary
employees are under the employer's direct or general supervision. I also
referred you to Hearing 32,141 (1996), STAR document 9611818H. This hearing is
no longer valid because of the statutory change.

Texas Tax Code Section 151.057(2) was amended by Senate Bill 1125 effective
October 1, 2001, to read:

"...a service performed by an employee of a TEMPORARY EMPLOYMENT SERVICE AS
DEFINED BY SECTION 93.001, LABOR CODE, for an employer to supplement the
employer's existing work force on a temporary basis, when the service is
normally performed by the employer's own employees, the employer provides all
supplies and equipment necessary, and the help is under the direct or general
supervision of the employer to whom the help is furnished..."

(Emphasis added.)

This amendment requires you to resume charging and collecting sales tax on the
adjusters that you provide to insurance carriers and others to adjust insurance
claims on a temporary basis. Your company employs licensed insurance adjusters
to adjust insurance claims, not to furnish temporary employees.

You may view or down load the sales tax law by clicking on the following URL
and then click on the following:

1. Texas Taxes
2. Tax Code under Texas Laws and Rules
3. Tax Code
4. Scroll down to referenced statutory cite

You may view or down load the reference STAR document at:
. Then click on: "Document Collection."
Enter the STAR document number 9611818H and click "search."

This opinion is based on the facts presented. If there are additional or
different facts, the opinion may change.

You may call me toll free 1-800-531-5441, extension 3-4683, if you have any
questions or need more information. You may write to Tax Policy Division,
Comptroller of Public Accounts, P.O. Box 13528, Austin, Texas 78711-3825. My
email address is .

Sincerely,

Eddie C. Washington
Tax Policy Division