Were an investigator's unarmed process-serving and document-delivery charges taxable Texas security services?

Plain-English summary

The requester hired a licensed private investigator to serve subpoenas and other legal notices without a weapon and to deliver documents from place to place without a weapon.

The Comptroller said those charges were not taxable. Rule 3.333(g) classified the work as "unrelated" services, and the Private Investigators and Private Security Agencies Act did not require a license for a person providing the described unarmed services.

The investigator's records needed to describe the services clearly enough to show they fell outside the licensed activities. Within the four-year refund period, the investigator could refund tax previously collected on those nontaxable services and recover it through amended reports or reductions of taxable sales on later returns under Rule 3.325.

Services that did require a license remained taxable. The investigator could still exclude separately stated charges for the unrelated services from the tax base.

What this means for you

Holding a private-investigator license did not make every service the investigator performed taxable. The letter tied taxability to whether the particular activity required licensing under the Act.

Detailed records and separate billing were central. They supported the nontaxable classification and preserved the ability to separate unrelated services from taxable licensed work.

Common questions

Was unarmed service of subpoenas taxable? No, on the stated facts.

Was unarmed document delivery taxable? No.

Why were the services nontaxable? They were unrelated services under Rule 3.333(g) and did not require a license under the named Act.

What if the investigator also performed licensed services? Those services were taxable, but separately stated unrelated-service charges could remain outside the tax base.

Could previously collected tax be refunded? Yes, within the four-year limitation period and using the recovery methods described in Rule 3.325.

Citations and references

• 34 Tex. Admin. Code Rule 3.333(g) — unrelated services.
• Private Investigators and Private Security Agencies Act, Article 4413(29bb), V.A.C.S. — licensing law cited in the letter.
• 34 Tex. Admin. Code Rule 3.325 — recovery of tax refunded to the customer.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9108L1123G11

Original ruling text

August 2, 1991

Dear ****:

Thank you for your recent letter. As I understand it, you contract with
a licensed private investigator to serve, unarmed, subpoenas and other legal
notices, and to deliver documents, unarmed, from place to place.

You are correct that the private investigator is not required to collect
tax on the described services. These are "unrelated" services, within the
meaning of Rule 3.333 (g) (enclosed). Also, a person who, unarmed, provides
the services you describe, is not required to hold a license under the Private
Investigators and Private Security Agencies Act (Art. 4413 [29bb] V.A.C.S.).

The investigator's records should clearly describe the services he
provides on your behalf, to document that they fall outside the range of
services for which he is required to be licensed under the Act. Within the
four year statute of limitations on refunds, the investigator may refund to you
tax he has collected on nontaxable, unrelated services. He may then recover
such amounts refunded by filing amended tax reports for past periods, or by
reducing his reported taxable sales on future returns until he has recovered
the amount refunded. See enclosed Rule 3.325 for more on this.

The investigator must collect tax from you if and when he provides
services for which he is required to be licensed under the Act. However, he
may continue to exclude from the tax base separately stated charges for
unrelated services.

This opinion is based on the facts presented. Different facts, though
similar, might lead to different answers. If you have further questions, feel
free to write or call me at 1-800-252-5555, ext. 3-3889.

Sincerely,

John Christian
Attorney
Tax Administration