Were a forensic engineer's accident, fire, or loss investigations taxable insurance services, and was separately stated court testimony taxable?

Plain-English summary

A consulting engineer examined and analyzed accidents, fires, disasters, or other losses connected with insurance claims. The Comptroller's March 21 modification classified those activities as taxable insurance claims adjustment or processing under Rule 3.355(a)(5).

The rule covered handling or investigating claims or losses and did not require the service provider to be licensed as an adjuster or private investigator.

Separately stated charges for testifying in court about the engineer's conclusions and opinions were not taxable.

What this means for you

Under the 1988 guidance, professional engineering status did not prevent the investigative work from being a taxable insurance service. Separately billing courtroom testimony preserved different treatment for that charge.

Common questions

Were insured-loss investigations taxable? Yes.

Did the engineer need an adjuster license for the tax rule to apply? No.

Was separately stated court testimony taxable? No.

Citations and references

• 34 Tex. Admin. Code Rule 3.355(a)(5), quoted for insurance claims adjustment or processing.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8803L0870A01

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, TX 78774

March 21, 1988

Dear *:

This letter is to modify my letter of March 15, 1988, regarding the
taxability of services you provide as a consulting engineer under Rule
3.355
Insurance Services.

After reconsideration of the facts presented, you are providing insurance
service.

Insurance claims adjustment or claim processing is defined in section
(a)(5) of Rule 3.355 as "any activities to...handle, investigate...settle
or adjust claims or losses." (Emphasis added.) The statute or rule does
not require the person performing such services to be licensed as an
adjustor or private investigator.

Separately stated charges for testifying in court about your conclusions
and
opinions are not taxable.

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, pleas call 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

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, TX 78774

January 7, 1988

Dear *:

I want to apologize for the delay in answering your letter of October 7,
1987.

Your letter explains that your services include engineering examination,
analyses and testimony about your conclusions and opinion regarding
various
accident, fire or disaster type situations.

I am enclosing a copy of proposed Rule 3.355, Insurance Services, (which
is
not a final rule). A review of the rule will help answer your general
questions.

In Subsection (a) of the rule, various insurance services are defined.
Taxable insurance services include insurance loss or damage appraisal,
insurance inspection, insurance investigation, insurance or annuity
analysis
or research, insurance claims adjustment or claim processing, and
insurance
loss prevention service.

Your service would fall within insurance claims adjustment or claims
processing and within insurance loss prevention service.

The total charge is taxable when the service is provided on behalf of an
insurance carrier, its insured, its policyholders, or others pertaining
to a
policy or policies of insurance. All of your clients appear to be
subject to
tax unless they can provide you with a resale certificate pursuant to
(h).

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

Please feel free to contact me if you have additional questions. You may
write me, call toll-free 1-800-531-5441 from any where in the U.S., or
phone (512)463-4600.

Sincerely,
Eddie Washington