If a registered/professional engineer performs forensic investigations of accidents, fires, or structural damage in connection with an insurance claim, does Texas sales tax apply to that service?

Subject

Forensic Engineers — Evaluations/Investigations Of Accidents, Fires, Structural Damages Connected With Insurance Claims

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9408L1436G13

Plain-English Summary

A registered/professional engineer asked the Comptroller whether sales tax applies to the engineer's own services when those services — evaluating and investigating accidents, fires, and structural damage in connection with insurance claims — might qualify as "insurance services" taxable under 34 Tex. Admin. Code Rule 3.355. The engineer was essentially asking whether being a licensed professional engineer exempted the work from sales tax.

The Comptroller said no exemption exists. Nothing in the Texas Engineering Practice Act (Article 3271a, including its sections 13, 13B, and 20) or in Chapter 151 of the Tax Code exempts professional engineers from charging or collecting sales tax on insurance services as defined and taxed under Rule 3.355. The Comptroller reasoned by analogy to two Attorney General opinions: JM-823 (holding that whether an attorney's work is taxable as "debt collection service" turns on what the professional is actually doing, not the professional's title) and JM-1016 (holding that the insurance-services tax makes no distinction based on who purchases the service — the insurer, the insured, or an attorney). Rule 3.355(b) likewise draws no distinction based on who performs or requests the service. The Comptroller also noted that the Legislature narrowed the Comptroller's authority to define "personal services" (Tax Code § 151.0045, tied to SIC Group 721/729) but did not similarly narrow the Comptroller's exclusive authority under § 151.0101(b) to interpret what counts as a taxable "insurance service." Because engineers performing this kind of work are not required to be licensed under the Insurance Code (unlike, for example, security services, which do require a specific license), that also did not create a carve-out. The bottom line: if the engineer's forensic accident/fire/structural-damage investigation work functionally falls within the definition of "insurance services" under Rule 3.355, sales tax applies — the engineer's professional license does not change that result.

What This Means For You

Forensic engineers and professional engineers who do insurance-related work

If you are a registered/professional engineer performing evaluations or investigations of accidents, fires, or structural damage for insurers, insureds, or their attorneys in connection with a claim, do not assume your professional license shields you from sales tax. The relevant question is whether your service fits the definition of "insurance services" under Rule 3.355 — not your professional title or licensure status. If it does, you are expected to charge and collect Texas sales tax on that service.

Insurers, insureds, and attorneys who purchase forensic engineering services

The Comptroller confirmed (citing AG Opinion JM-1016) that the tax on insurance services applies regardless of who is buying the service — the insurance company, the policyholder, or an attorney representing either side. You cannot avoid the tax by having a different party engage the engineer.

Accountants and tax professionals

This ruling is a useful data point on how the Comptroller analyzes professional-services taxability questions generally: it looks at the substance of what is being done (functional analysis), not the professional credential of who is doing it, and it leans on the Comptroller's exclusive statutory authority under Tax Code § 151.0101(b) to interpret "insurance services." Note this is a fact-specific 1994 letter ruling, not a rule of general application, and the letter itself states the conclusion could change on different facts.

Q&A

Q: Does having a professional engineering license exempt forensic investigation work from Texas sales tax?
A: No. The Comptroller found no provision in the Texas Engineering Practice Act or Chapter 151 of the Tax Code that exempts registered/professional engineers from charging sales tax on services that otherwise qualify as taxable insurance services under Rule 3.355.

Q: What makes a forensic engineering service taxable here?
A: Whether the service functionally qualifies as an "insurance service" as defined and taxed under Rule 3.355 and Tax Code §§ 151.0039 and 151.0101(a)(3) — for example, evaluating or investigating accidents, fires, or structural damage in connection with an insurance claim — regardless of the credentials of the person performing it.

Q: Does it matter whether the insurer, the insured, or an attorney hires the engineer?
A: No. Citing Attorney General Opinion JM-1016, the Comptroller noted the statute provides no basis for distinguishing among purchasers of insurance services, and Rule 3.355(b) makes no such distinction either.

Q: Can taxpayers rely on this 1994 letter today?
A: Only the original requestor could rely on it directly, and even then only for the facts presented — the letter itself says the opinion could change on different facts. Letters on the STAR system may also no longer reflect current Comptroller policy even if not marked superseded, so current guidance or a new ruling request should be checked before relying on this analysis.

Citations

• 34 Tex. Admin. Code Rule 3.355 (insurance services)
• Tex. Tax Code § 151.0101(a)(3), (b) (taxable services; Comptroller's exclusive authority to interpret insurance services)
• Tex. Tax Code § 151.0039 (insurance service defined)
• Tex. Tax Code § 151.0045 (personal services defined; SIC Group 721/729)
• Article 3271a, §§ 13, 13B, 20, Vernon's Civil Statutes (Texas Engineering Practice Act)
• Attorney General Opinion JM-823 (professional services/debt collection taxability analysis)
• Attorney General Opinion JM-1016 (no distinction among purchasers of insurance services)
• Attorney General Opinion JM-211 (Comptroller's exclusive interpretive authority)

Original ruling text

August 29, 1994

Dear**:

Thank you for your letter of July 26, 1994, concerning the applicability of
sales tax to services provided by a registered engineer that may be considered
insurance services under Rule 3.355.

We can find no provision in Article 3271a, 13, 13B, 20 or in Chapter 151 of
the Texas Tax Code that exempts or prohibits professional engineers from
charging or collecting sales tax on insurance services as defined and taxed
under Rule 3.355.

While not exactly analogous to your query, Attorney General Opinion JM-823
gives some insight as to whether services provided by "professionals" should be
taxed. The Comptroller asked the Attorney General if an attorney's fees in
certain circumstances would be taxable as debt collection services. In looking
at the legislative intent, the Attorney General noted the rejection of two floor
amendments in the House attempting to amend House Bill 61 to extend sales tax to
legal services. Also noted was the refusal by the House to concur with the
Senate's proposal to exclude from the sales tax those services labeled as
"professional."

The only referenced debate the Attorney General found on the bill that produced
the statutory definition of "debt collection service" reveals that if a lawyer
is doing what debt collectors do, and that is all, then he would be treated as
a debt collector. If the lawyer was involved in some other aspect of the case
relative to establishing a claim or receiving the judgment, that individual
would not be providing debt collection services.

In Attorney General Opinion JM-1016, the Comptroller asked if sales tax applied
to insurance services bought by the insured or an attorney rather than the
insurer to determine whether a settlement offer should be accepted. The
Attorney General replied: "The statute provides no basis for distinguishing
among purchasers of insurance services." Rule 3.355(b) makes no such
distinction.

In narrowing the Comptroller's authority to interpret what constitute
"personal services" as taxed under 151.0101(a)(3), the Legislature added
151.0045 defining "personal services" to mean "those listed as personal
services under Group 721, Major Group 72 of the Standard Industrial
Classification Manual, 1972, and includes massage parlors, escort services,
and Turkish baths under Group 729...but does not include any other services
under Group 729..." The Legislature did not narrow the Comptroller's
jurisdiction in interpreting insurances services defined and taxed under
151.0039 and 151.0101(9).

The Legislature defined a "security service" as a service for which a
license is required under Section 13, Private investigators and Private
Security Agencies Act (Article 4413(29bb) Vernon's Civil Statutes). In the
area of insurance services, the Legislature did not require persons
performing insurance services to be licensed under the Insurance Code.

The Legislature added subsection (b) to Texas Tax Code 151.0101, that gives
the Comptroller the exclusive jurisdiction to interpret subsection (a). In
answering the Comptroller's inquiry about the taxability of country club
membership dues as an amusement service, the Attorney General wrote in
Opinion JM-211: "The attorney general will not a matter of policy answer
a question whose initial determination the legislature has clearly
indicated shall be left to the Comptroller."

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

You may call toll me free 1-800-531-5441, extension 3-4683. The direct
line is 512/463-4683. You may also write to Tax Administration Division,
Comptroller of Public Accounts.

Sincerely,

Eddie C. Washington
Tax Administration Division

NOTE: Previous Accession Number 9408673L