Were independent insurance-adjuster charges taxable services or nontaxable amounts paid from insurance premiums?

Plain-English summary

The requester argued that independent-adjuster costs should be treated as part of an insurance premium. The Comptroller disagreed.

Texas Tax Code § 151.0039 expressly listed insurance claims adjustment or claims processing as taxable services. The Comptroller said the adjustment charges were too remote from premiums to be treated as paid by the premiums.

What this means for you

Under the 1988 analysis, the source of an insurer's funds did not convert a separately purchased claims-adjustment service into a premium.

Common questions

Were independent-adjuster fees taxable? Yes.

Were they treated as part of premiums? No.

Citations and references

• Texas Tax Code § 151.0039, cited for taxable 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/8803L0900C12

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, TEXAS 78774

February 3, 1988

Dear ***:

On behalf of Mr. Bullock, I hope you'll accept my apology for the delay
in
answering your question involving changes in the sales tax law. This
isn't
the way we normally do business.

Our people were, and still are, swamped by a deluge of inquiries as they
attempted to interpret provisions of the new law and draft rules which
would
not adversely impact business. In many instances, an answer to a
question
just wasn't available when the question arrived.

We have reviewed the arguments you presented on the point of whether
costs
for independent adjusters should be considered part of the premium.
However, we do not believe your interpretation is supported by the
language
of the statute or the Comptroller's rules promulgated to carry out the
statute. The enabling statute itself lists as taxable services
"insurance
claims adjustment or claims processing." TEX. TAX CODE ANN. Sec.
151.0039
(Vernon Supp. 1988). The rule whose terms you question was drafted to
carry
out the Legislature's intent that adjustment services be taxed. In our
analysis, the charges for adjustment services are too remote from the
premiums to be considered paid for by the premiums.

This opinion is based on 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 question. You may
write me, or call toll free 1-800-252-5555 from anywhere in Texas or
phone
512/463-4600.

Sincerely,
Eddie Washington
Tax Policy Division