Is Texas sales tax due on the finder's fee a licensed private investigator charges for locating owners of unclaimed property held by a state agency?

Plain-English summary

A licensed private investigator located claimants entitled to unclaimed property held by the State Treasurer's Office. State law (the Texas Property Code) required the investigator to be licensed by the State Board of Private Investigators and Private Security Agencies before searching for claimants. When the investigator found a claimant, they would tell the person that money or valuables belonging to them had been located; if the claimant agreed to a contract paying the investigator 10% of the property's value, the investigator would then reveal the details needed to recover it. If the claimant refused to sign, the investigator withheld the type, amount, and location of the property. Under the Texas Property Code, the investigator could not charge more than 10% of the recovered property's value, including expenses.

The Comptroller ruled that this locator/finder's-fee service is taxable in Texas because a licensed private investigator's services are a security service under Comptroller Rule 3.333. Sales tax applies to the investigator's fee (the service charge) and becomes part of the selling price of that service — the tax should be added on top of the 10% fee. Sales tax is not due on the value of the recovered property itself, only on the service fee. The Comptroller also pointed to Texas Tax Code § 151.052, which requires a seller to add sales tax to the sales price, making the tax a debt owed by the purchaser to the seller, and confirmed that tax can be built into a quoted price only if the purchaser is clearly told the price includes tax (for example, with a printed notice on an invoice or price list).

What this means for you

Private investigators and locator/finder's-fee businesses

If you are a licensed private investigator charging a fee to locate owners of unclaimed property (or performing similar investigative/locator work), your fee is taxable in Texas as a security service. You need to charge sales tax on top of your fee — you cannot absorb it into the flat percentage fee without clearly disclosing to the customer that the fee includes tax.

Claimants who use a locator service

Sales tax does not apply to the unclaimed property or money you recover — only to the investigator's service fee. Any sales tax charged should be added to (or clearly disclosed as included in) the investigator's fee, not calculated against the value of the property recovered.

Accountants and tax professionals

This ruling confirms that fee-based locator/finder services performed by a state-licensed private investigator fall under the "security services" category taxed per Comptroller Rule 3.333, and it illustrates the general collection mechanics of Texas Tax Code § 151.052 — tax must be separately stated or the price must be clearly marked as tax-included.

Common questions

Q: Is a private investigator's fee for locating owners of unclaimed property subject to Texas sales tax?
A: Yes. The Comptroller treats it as a taxable security service under Comptroller Rule 3.333.

Q: Is sales tax charged on the value of the unclaimed property that gets recovered?
A: No. Sales tax applies only to the investigator's service fee, not to the property or money recovered on the claimant's behalf.

Q: Can the investigator just keep 10% of the recovered property's value without separately charging tax?
A: Only if the price is clearly marked as including tax (for example, with a printed statement that "applicable sales tax [is] included in price marked"). Otherwise, tax must be added on top of the fee, per Texas Tax Code § 151.052.

Q: Does the license requirement from the State Board of Private Investigators and Private Security Agencies affect the tax treatment?
A: Yes — the ruling turns on the fact that the person performing the service is a licensed private investigator, which is what brings the fee within the taxable "security services" category.

Citations and references

• Texas Tax Code § 151.052 (Collection by Retailer — seller must add sales tax to the sales price)
• Comptroller Rule 3.333 (Security Services)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9410L1324G09

Original ruling text

October 10, 1994

Dear **:

This is in response to your letter dated August 25, 1994, that was mailed to
the Office of the State Treasurer. Today, the Comptroller's office received a
copy of the letter by Fax.

FACTS: You locate claimants for unclaimed property held by the State
Treasurer's Office. You are required to be licensed by the State Board of
Private Investigators and Private Security Agencies before you begin to search
for claimants.

When a claimant has been located, you advise them that you have located money
or other valuables that belong to them. If the person agrees to sign a contract
with you giving you 10% of the monetary value of the property you provide them
with the information regarding the location of such property. If they refuse,
you do not divulge the type, amount, or location of the property.

The Texas Property Code states that one may not contract for or receive from
the claimant an amount, including all expenses incurred, more than 10% of the
value of the property recovered.

RESPONSE: The services of a licensed private investigator are taxable as a
security service. See enclosed Comptroller Rule 3.333, Security Services.

The sales tax is for the service and it becomes a part of the selling price of
your service. The applicable sales tax should be added to your fee of 10%.
Sales tax is not applicable to the of recovered assets. The applicable Tax Code
is below.

Texas Tax Code 151.052 Collection by Retailer (a) A seller who makes a sale
subject to the sales tax imposed by this chapter shall add the amount of the
tax to the sales price, and when the amount of the tax is added:

(1) it becomes a part of the sales price;

(2) it is a debt of the purchaser to the seller until paid; and

(3) if unpaid, it is recoverable at law in the same manner as the original
sales price.

It is acceptable for sales tax to be included in the selling price of a taxable
item or service as long as the purchaser is aware of the fact. For example, a
marked selling price, an invoice, or a restaurant menu must have clearly
printed "applicable sales tax included in price marked".

This opinion is based on the facts you submitted. Other facts, though similar,
may yield different results. You may call me toll free at 1-800-531-5441, ext.
50330. The direct line is 512/475-0330. You may also write to Tax
Administration, Comptroller of Public Accounts.

Sincerely,

Bettie Peterson
Tax Administration Division

NOTE: Previous Accession Number 9410719L