A firm charges insurance adjusters for accident-scene photos, travel time, mileage, diagrams, measurements, traffic-signal timing, witness canvassing, and obtaining police reports -- which of these itemized charges are subject to Texas sales tax?

Plain-English summary

A service firm provides photo and information reports to insurance claims adjusters after vehicle accidents, and asked the Comptroller which of its nine itemized charges are subject to Texas sales tax: (1) a basic report charge (going to the scene, taking and processing photos, preparing/delivering the report), (2) additional time beyond the usual one-hour allotment, (3) mileage, (4) per-photo charges, (5) diagramming the accident scene, (6) taking street/skid-mark measurements, (7) timing traffic signals, (8) canvassing for witnesses, and (9) obtaining a copy of the police accident report. The Comptroller confirmed the firm was already correctly taxing the full amount, but explained the charges fall into three separate taxable categories rather than one blanket rule. Photos (and the travel time/mileage bundled into producing them) are taxable as the sale of a taxable item -- the taxable sales price sweeps in all the expenses of producing the photos. Diagramming the scene is taxable as a graphic arts service under Rule 3.312(a)(3). Measurements, signal-timing, and witness canvassing are taxable insurance investigation services under Rule 3.355(a)(3) and (b) -- notably, even though the firm doesn't need an insurance adjuster's license to do this work, performing these specific tasks makes the charge taxable as an insurance service (canvassing may separately require its own private-investigator license from the Board of Private Investigators and Private Security Agencies, a licensing question distinct from the sales tax question). Finally, obtaining the police report is taxable as an information service under Rule 3.342(d)(3), with a special pass-through rule: if the firm gets the police report for free, its whole charge to the customer is taxable, but if the police department itself charges a fee for the report, the firm should separately state that pass-through amount and only collect sales tax on what it charges ABOVE the police department's fee.

What this means for you

Accident-investigation and insurance-report service firms

Break your invoice into these tax categories rather than assuming one uniform rule: photography and its incidental travel/mileage costs (taxable sale of a photo), diagramming (taxable graphic arts service), measurements/signal-timing/canvassing (taxable insurance investigation service), and obtaining a police report (taxable information service, with a pass-through carve-out if the police department itself charges a separate fee).

Firms that canvass accident scenes for witnesses

Confirm with the Board of Private Investigators and Private Security Agencies whether canvassing for witnesses requires its own license -- that's a separate regulatory question from whether the charge is subject to sales tax (which it is, per this letter).

Insurance adjusters and companies hiring these services

Expect the full charge for accident photos, diagrams, measurements, signal timing, canvassing, and police-report retrieval to carry Texas sales tax -- except that if the vendor separately states a pass-through police department fee, only the vendor's markup above that fee is taxed.

Common questions

Q: Is the charge for accident-scene photos, including travel time and mileage, taxable?
A: Yes, per this letter -- the taxable sales price for the photos includes all expenses incurred in producing them, including travel time and mileage.

Q: Is diagramming an accident scene taxable?
A: Yes, per this letter, as a graphic arts service under Rule 3.312(a)(3).

Q: Are measurements, traffic-signal timing, and witness canvassing taxable?
A: Yes, per this letter -- taxable as insurance investigation services under Rule 3.355(a)(3) and (b), even though the firm isn't a licensed insurance adjuster.

Q: Is the charge for obtaining a police accident report taxable?
A: Yes, per this letter, as an information service under Rule 3.342(d)(3) -- but if the police department itself charges for the report and the firm separately states that pass-through cost, tax applies only to the amount charged above the police department's fee.

Citations and references

Statutes and rules:

• 34 Tex. Admin. Code Rule 3.312(a)(3) (graphic arts services)
• 34 Tex. Admin. Code Rule 3.355(a)(3) and (b) (taxable insurance services)
• 34 Tex. Admin. Code Rule 3.342(d)(3) (information 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/9705365L

Original ruling text

May 2, 1997

Dear ***:

Thank you for your recent letter concerning your firm's Texas sales and use tax
responsibilities.

Facts:

You are a service company which provides photo and information reports to
insurance
claims adjuster. You are not a licensed investigator nor do you do work for
which a license is required. You would like to know which of your services are
subject to sales tax.

You charge for the following:

1. Basic report - This charge is for going to the scene of a past accident or
   the location of a vehicle and taking photographs, having these photos
   processed, the preparation of a report and the delivery of the report.

2. Additional Time - This charge is for any additional time it takes to travel
   and take the photos above our usual 1 hour allotment.

3. Mileage - This charge is for travel to and from the location.

4. Photos - You charge for each photo taken, processed and delivered.

5. Diagram - When requested you draw a diagram of the accident scene.

6. Measurements - When requested you take measurements of street lane widths
   and skid marks.

7. Signal Sequence - When requested you time and report the timing of the
   traffic signals.

8. Canvas - When requested, you also canvas the scene area for possible
   witnesses.

9. Police Reports - As required, you also go to the police station of the
   investigating officer and obtain a copy of the police accident investigation
   report.

Question: Which of the itemized charges should you also charge tax for?
Currently, you are charging sales tax for all of the above.

Response: The charge for the photos is taxable as the sale of taxable items.
The sales price on which the sales tax is computed includes all expenses you
incur in producing the photos, e.g., travel time and mileage charge. The
charge for diagramming an accident scene and the related expenses are also
taxable. See Rule 3.312(a)(3) concerning graphic arts.

Although you are not required to be licensed as an insurance adjuster under the
Texas Insurance Code, you are performing an insurance investigation when you
take measurements at an accident scene, time traffic signals, or canvas the
scene area for possible witnesses. See Section 3.355(a)(3) and (b) concerning
insurance services.
Canvassing is an insurance investigation service unless you are required to be
licensed by the Board of Private Investigators and Private Security Agencies
("the Board") to canvass for witnesses. You should contact the Board to find
out whether you need a license to canvass for witnesses. The Board's mailing
address is P.O. Box 13509, Austin, Texas 78711. You may call the Board at
512/475-4870.

The charge made for the accident report is taxable as follows:

¡ if you get the reports free from the police department, the total charge made
is taxable

¡ if the police department charges for the accident report, you should
separately state
the charge paid to the police department then collect sales tax on the amount
over and
above the cost of the driving records.

See Rule 3.342(d)(3) concerning information services.

It appears that you are correctly charging tax on the total amount charged to
your customers.

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

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

Sincerely,

Eddie C. Washington
Tax Policy Division