Were stand-alone polygraph examinations used to investigate internal embezzlement subject to Texas sales tax?

Plain-English summary

The requester performed polygraph examinations to determine internal embezzlement. Personnel from the State Board of Private Investigators told the Comptroller that the described function did not require a license under their statute.

Because of that licensing conclusion, the Comptroller said the examiner did not have to charge sales tax when the polygraph examination was billed by itself.

The result changed when the examination was rebilled as part of an investigation that required the investigator to be licensed under Section 13 of the Private Investigators and Private Security Agencies Act. In that setting, the polygraph charge was taxable as a service connected with a taxable sale.

What this means for you

The billing context and the nature of the broader engagement controlled the result. A stand-alone polygraph was nontaxable under the stated facts, but incorporating the same charge into a taxable licensed investigation made it taxable.

Common questions

Was a stand-alone internal-embezzlement polygraph taxable? No, under the facts described.

Why not? The described function did not require a private-investigator license, according to the agency personnel consulted by the Comptroller.

When did the polygraph charge become taxable? When rebilled as part of an investigation requiring a licensed investigator.

Citations and references

• Section 13, Private Investigators and Private Security Agencies Act (Article 4413 (29bb), Vernon's Texas Civil Statutes)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9104L1106E04

Original ruling text

April 25, 1991

Dear **:

Thank you for your recent letter regarding the polygraph
examinations you perform.

I have discussed your facts with personnel from the State Board
of Private Investigators and was told that performing the
function you describe (polygraph examination to determine
internal embezzlement) does not require a license under their
statute. For that reason you will not be required to charge
sales tax to your customers.

If the examination is re-billed as part of an investigation that
required the investigator to be licensed under Section 13,
Private Investigators and Private Security Agencies Act (Article
4413 (29bb), Vernons Texas Civil Statutes), the charge for the
polygraph examination would be subject to sales tax as a service
in connection with a taxable sale. But, billed by itself it
would not be taxable.

This opinion is based on the facts you presented. Other facts,
though similar, may yield different results.

If you have questions or need more information, please call our
toll-free number 1-800-531-5441. My direct line number is 512-
463-4680 (FAX (512) 474-2643). You may write to me in care of
Tax Administration Division.

Sincerely,

Al Van Allen
Tax Administration Division