Is a service that finds a judgment debtor's attachable assets for a creditor a taxable credit-reporting or private-investigation service in Connecticut?

Plain-English summary

A company located attachable assets for people who already held court judgments against a debtor. It ran telephone and computer database searches to find assets a judgment creditor could go after, and delivered a written report. It did not attach the assets, collect the debt, or offer any rating or evaluation of anyone's credit. Two of Connecticut's taxable "enumerated services" were in play, and DRS held neither applied.

Credit information and reporting services — § 12-407(2)(i)(B): No. That category (defined in Conn. Agencies Regs. § 12-426-27(b)(2)) covers "assembling and evaluating information regarding the credit standing, creditworthiness, or credit capacity" of a person or business. The asset-location company does none of that. And by the time it goes to work, the client already has a judgment — credit standing is no longer the point; the client just needs to find assets to satisfy the judgment.

Private investigation services — § 12-407(2)(i)(D): No. The regulation (§ 12-426-27(b)(5)) lists things like guarding property, "engaging in detective or investigative duties," and surveillance, but never defines "private investigation services." DRS filled the gap with a licensing test: when § 12-407(2)(i)(D) was enacted in 1975, Connecticut already required private detectives/investigators to be licensed by the Commissioner of Public Safety under Conn. Gen. Stat. §§ 29-153 through 29-161. DRS presumed the legislature meant to tax those licensed services — so a firm that does not perform work requiring that license is not selling a taxable "private investigation service." DRS reinforced this with the canon that ambiguity in a tax-imposition statute is resolved for the taxpayer (Plasticrete Corp. v. Commissioner).

Net: asset-location for judgment creditors falls outside both taxable categories. DRS later cited this Ruling in Ruling 94-10, applying the same licensing test to a casualty adjuster's insurance investigations.

What this means for you

Asset-location, skip-trace, and judgment-recovery firms

Simply finding a debtor's assets and reporting them — without evaluating credit and without doing licensed detective work — is generally not a taxable Connecticut service. The dividing line for the "private investigation" category is whether the work would require a private-detective license under §§ 29-153 through 29-161.

The licensing test is the key idea

DRS defines the taxable "private investigation" category by what the state licenses as private-detective work, not by whether an activity loosely looks like "investigating." If your service doesn't require that Public Safety license, it likely isn't taxable under § 12-407(2)(i)(D) — but if you also perform licensed investigative work, that portion can be taxable.

Don't confuse this with credit reporting

Credit information and reporting is taxable, but only when you assemble or evaluate creditworthiness. Locating assets to satisfy an existing judgment isn't that — the credit question is already resolved by the judgment.

Common questions

Q: Is finding a debtor's assets a taxable service in Connecticut?
A: Under this ruling, no — provided you only locate and report assets, don't evaluate credit, and don't perform work requiring a private-detective license.

Q: Why isn't this "credit reporting"?
A: Because the company doesn't assemble or evaluate anyone's credit standing or creditworthiness. And once the client has a judgment, credit standing is no longer the issue — the client needs assets, not a credit report.

Q: Why isn't this "private investigation"?
A: DRS reads the taxable "private investigation services" category to mean the detective/investigative work that requires a license from the Commissioner of Public Safety (§§ 29-153–29-161). Asset location that doesn't require that license falls outside the category.

Q: What if my firm also does licensed detective work?
A: Then that licensed investigative work could be taxable under § 12-407(2)(i)(D). The exemption here rests on the assumption that the company was not performing services requiring a private-detective license.

Citations and references

Statutes, regulations, and case law:

• Conn. Gen. Stat. § 12-407(2)(i)(B) (credit information and reporting services); § 12-407(2)(i)(D) (private investigation, protection, patrol, watchman, armored car services)
• Conn. Agencies Regs. § 12-426-27(b)(2) (credit information/reporting definition); § 12-426-27(b)(5) (private investigation etc. definition)
• Conn. Gen. Stat. §§ 29-153 through 29-161 (private-detective licensing by the Commissioner of Public Safety)
• Plasticrete Corporation v. Commissioner, 216 Conn. 17, 25, 579 A.2d 20 (1990)

Related guidance (described in prose, not linked):

• Ruling No. 94-10 (applies this same licensing test to a licensed casualty adjuster; cites this Ruling)

Source

• Landing page: Connecticut DRS Rulings
• Ruling: Ruling 94-7

Original ruling text

Ruling 94-7, Sales and Use Taxes / Credit Information and Reporting Services / Private Investigation Services

This Ruling is cited in Ruling 94-10

FACTS:

A company (hereinafter "the Company") is a business offering asset location information. The Company conducts telephone and computer data base searches for the purpose of locating attachable assets owned by certain judgment debtors (individuals or corporations) for judgment creditors. The company furnishes a written report to the judgment creditor describing the attachable assets that it finds. The Company does not attach assets or attempt to collect judgment debts on behalf of judgment creditors. The Company offers no evaluation or rating of any individual or entity to any client.

ISSUES:

Whether the service of locating judgment debtors' attachable assets for clients who have judgments against such persons is subject to sales and use taxes as a credit information and reporting service under Conn. Gen. Stat. §12-407(2)(i)(B); or

Whether the service of locating judgment debtors' attachable assets for clients who have judgments against such persons is subject to sales and use taxes as a private investigation service under Conn. Gen. Stat. §12-407(2)(i)(D).

DISCUSSION:

Conn. Gen. Stat. §12-407(2)(i)(B) makes credit information and reporting services taxable for sales and use tax purposes. Conn. Agencies Regs. §12-426-27(b)(2) defines such services in the following manner:

Such services include but are not limited to the assembling and evaluating of information regarding the credit standing, creditworthiness, or credit capacity of any individual, corporation, partnership or other type of entity, for the purpose of furnishing and disseminating written or oral credit reports.

The services provided by the Company do not fall within the Conn. Agencies Regs. §12-426-27(b)(2) definition of "credit information and reporting services" since the Company does not assemble or evaluate information relating to creditworthiness.

At the time the Company provides its services, credit standing or creditworthiness are no longer at issue. The Company merely assists judgment creditors in locating assets with which to satisfy judgments.

Conn. Gen. Stat. §12-407(2)(i)(D) makes private investigation, protection, patrol work, watchman and armored car services taxable for sales and use tax purposes. Conn. Agencies Regs. §12-426-27(b)(5) defines these services to

mean and include providing personnel or canines to patrol or guard property; engaging in detective or investigative duties; safeguarding or maintaining a surveillance of an individual; maintaining and monitoring mechanical protective devices, such as burglar and fire alarm systems; providing armored cars for the transportation of valuables; wrapping coins; setting up a payroll; and the rendering of police services by an off-duty policeman.

Although Conn. Agencies Reg. §12-426-27(b)(5) was intended to define the scope of taxable services enumerated in Conn. Gen. Stat. §12-407(2)(i)(D), the General Assembly did not take the opportunity to further define what is meant by "private investigation services" nor does the regulation define what is meant by "engaging in detective or investigative duties."

When Conn. Gen. Stat. §12-407(2)(i)(D) was enacted in 1975, Conn. Gen. Stat. §§ 29-153 through 29-161, inclusive, already required persons who were engaged in the business of furnishing private detective or investigative services to be licensed by the Commissioner of Public Safety. Presumably, therefore, it is the services for which the General Assembly required a license under Conn. Gen. Stat. § § 29-153 through 29-161, inclusive, that the General Assembly intended to be taxable as "private investigation services" under Conn. Gen. Stat. § 12-407(2)(i)(D). Assuming that the Company is not providing the types of services for which a license is required under Conn. Gen. Stat. §§ 29-153 through 29-161, inclusive, the Company is not selling services that are described in Conn. Gen. Stat. §12-407(2)(i)(D).

Furthermore, as a matter of statutory construction, when an imposition statute such as Conn. Gen. Stat. §12-407 is involved, any ambiguity must be resolved by construing the statute against the taxing authority and in favor of the taxpayer. See, e.g., Plasticrete Corporation v. Commissioner, 216 Conn. 17, 25, 579 A. 2d 20 (1990).

RULING:

The Company's service of locating judgment debtors' attachable assets for clients who have judgments against such persons is not a credit reporting service under Conn. Gen. Stat. §12-407(2)(i)(B).

The Company's service of locating judgment debtors' attachable assets for clients who have judgments against such persons is not a taxable private investigation service under Conn. Gen. Stat. §12-407(2)(i)(D).

LEGAL DIVISION

March 7, 1994