Ezel / Tax Rulings / TX
TX 8802L0891F06 Sales and/or Use Tax (State,Local,MTA) 1988-02-24

Were claims-adjustment services exempt when provided to a federally administered flood-insurance program or to an insurer reimbursed by that program?

Short answer: A FEMA-created and administered federal flood program was exempt, but services sold to an insurance company were taxable even when the federal program reimbursed the insurer.

Apply this to your situation

This page answers the general question as of 1988. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1988
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 an official February 24, 1988 Texas Comptroller of Public Accounts letter concerning federal flood-program and insurer claims services, published on STAR. Its exemption depends on the buyer being the federal government, a wholly federal corporation, or an unincorporated federal instrumentality; reimbursement alone did not qualify the insurer. Verify current federal-instrumentality and insurance-service law before applying it today. Letters on STAR can support detrimental reliance only for the taxpayer directly issued the letter and may no longer represent current policy. Taxpayer-identifying details 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 Comptroller said Texas exempted taxable items and services purchased by the federal government itself, wholly federal corporations, and unincorporated federal instrumentalities.

The described flood-insurance program was exempt if it was created and administered by the Federal Emergency Management Agency. Claims-adjustment services sold to a separate insurance company were taxable even when the federal program reimbursed the insurer for their cost.

What this means for you

The identity of the purchaser controlled. Federal reimbursement did not turn the insurance company's own purchase into a federal exempt transaction.

Common questions

Was the federal flood program exempt? Yes, if created and administered by FEMA as stated.

Were services sold to the insurer exempt? No.

Did federal reimbursement change the insurer's result? No.

Citations and references

The letter described the federal-government exemption but did not cite a statute or rule number.

Source

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

February 24, 1988

Dear ***:

Thank you for your letter of February 11, 1988 concerning the taxability
of
claims adjustment services provided to the *** Insurance
Company
and the *** Flood Insurance Program.

The Texas Tax Code exempts sales to and purchases of taxable items and
service by the federal government itself, corporations wholly owned by
the
federal government and unincorporated instrumentalities of the federal
government. The * Flood Insurance Program is sales tax exempt if
it
is a program created by and administered by the Federal Emergency
Management
Agency.

The services provided to the ** Insurance Company are taxable
even if the federal insurance program reimburses the insurance company
for
the cost for the services you provide.

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 our
toll-free
number 1-800-531-5441. The regular number is 512/463-4600. You may
write me
at the Tax Policy Division.

Sincerely,
Eddie C. Washington
Tax Policy Division

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