Ezel / Tax Rulings / TX
TX 8712L0850E13 Sales and/or Use Tax (State,Local,MTA) 1987-12-11

Were engineering inspections, investigations, research, analysis, and failure-cause work taxable when connected to an insurance policy?

Short answer: Yes. Each listed engineering function was taxable when performed for an insurance carrier, its insured, its policyholders, or others if the work pertained to a policy issued by an insurance company.

Apply this to your situation

This page answers the general question as of 1987. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1987
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is a taxpayer-specific December 1987 Texas Comptroller letter based on a professional engineering corporation's inspections, investigations, analysis, research, and failure-cause work. It says the opinion may change if the facts differ. Although the STAR caption mentions buyers and sellers of homes or buildings, the operative response conditions taxability on the function pertaining to an insurance policy and being performed for a carrier, insured, policyholder, or other person. Rule 3.355 and insurance-service classifications may have changed substantially; verify current law and the engagement's purpose. STAR documents may no longer represent current policy even when not marked superseded. Identities are redacted. This summary is informational only and is not legal or tax advice.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page) is the authoritative source for any reliance.

Plain-English summary

The engineering corporation performed inspections and investigations, analysis and research, and work to determine the cause of failures for insurance companies, attorneys, general contractors, and others.

The Comptroller said each function was taxable when it pertained to an insurance-company policy and was performed for an insurance carrier, its insured, its policyholders, or others.

What this means for you

The historical letter ties taxability to the work's insurance-policy connection. It does not say every engineering inspection or failure analysis was taxable regardless of purpose.

Common questions

Were inspections and investigations taxable? Yes, when they met the insurance-policy condition.

What about analysis, research, and failure-cause work? The same conditional answer applied.

Did the client's identity alone control? No. The response also required that the function pertain to a policy issued by an insurance company.

Citations and references

  • 34 Tex. Admin. Code Rule 3.355 — historical insurance-services rule enclosed with the letter.

Source

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller December 11, 1987

Dear ***:

Thank you for your recent letter which is restated in part with response
below.

Facts:
A professional engineering corporation performs the following services
for insurance companies, attorneys and general contractors, etc.:

Inspections and investigations
Analysis and research
Work to determine cause of failures

Request:
Is the professional engineering corporation as described above subject to
the new sales tax laws effective October 1, 1987 to collect sales tax on the
services as outlined above?

Response: Each of the functions mentioned would be taxable if performed
for an insurance carrier, its insured, its policyholders or others if the
function pertained to a policy issued by an insurance company. I am enclosing
Rule 3.355 for your reference.

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

If you have any questions or need more information, please call me at
1-800-252-5555 toll free from anywhere in Texas. The regular number is
512/463-4600. You may write me at the Tax Policy Division.

Sincerely,
Al Van Allen
Tax Policy Division

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