Is a private investigation firm's charges for detective and surveillance work taxable, whether billed to an individual, directly to an insurance company, or to an insurance adjusting company?

Plain-English summary

VR Investigations Inc. provides detective and surveillance services to three kinds of clients: individuals, insurance companies directly, and adjusting companies that insurance companies hire to investigate claims. New York taxes "protective and detective services" broadly (§ 1105(c)(8)), and the Department confirmed all three billing scenarios are taxable, though for slightly different reasons:

• Individuals: When VR performs activities requiring a private investigator's license under Article 7 of the General Business Law (which covers surveillance activities), those charges are taxable — full stop.
• Insurance companies directly: Same result. Insurance companies typically use investigative reports to settle claims rather than resell them, so VR's licensed detective/surveillance work billed directly to an insurer is taxable.
• Adjusting companies: This is the more nuanced case. Companies licensed as insurance adjusters under Article 21 of the Insurance Law are doing something legally distinct from private investigation — investigating and settling insurance claims on an insurer's or insured's behalf — and don't need a separate private investigator license to do that adjusting work. Because VR's adjusting-company clients are using VR's detective services to perform their own nontaxable adjusting service (not reselling VR's detective services as such), they can't issue VR a resale certificate. VR must still collect sales tax from them on its detective/surveillance charges, regardless of whether the adjuster ultimately reports to an insurance company.

The opinion does flag one exception worth knowing: if a client is itself a licensed private investigator (under Article 7) subcontracting detective work to VR as part of reselling that same protective/detective service to its own customers, that client could properly issue a resale certificate. But VR provided no facts suggesting any of its clients operate that way, so the Department presumed all of VR's detective-service receipts are taxable.

What this means for you

Private investigation and detective agencies

Don't assume billing an insurance adjuster instead of an individual or insurer changes your tax obligations — unless your client is itself a licensed private investigator reselling your services as part of its own detective/protective service offering (and can properly document that with a resale certificate), you must collect sales tax regardless of who's paying the bill.

Insurance adjusting companies

You generally can't issue a resale certificate to a detective agency for surveillance/investigative work you use to perform your own adjusting services — that's a taxable purchase you consume, not a resale, since your adjusting services themselves aren't a taxable enumerated service.

Insurance companies

Whether you hire a private investigator directly or route the work through an adjusting company, expect the underlying detective/surveillance charges to carry sales tax either way (assuming the investigator's work requires private-investigator licensure).

Common questions

Q: Does billing through an insurance adjuster instead of billing an individual avoid sales tax on detective services?
A: No. The adjusting company is using the investigator's services to perform its own nontaxable adjusting work, not reselling the detective services, so tax still applies on the investigator's charges to the adjuster.

Q: When could a client properly issue a resale certificate for detective/surveillance services?
A: Only if the client is itself a licensed private investigator (under Article 7 of the General Business Law) subcontracting the work as part of reselling a protective/detective service to its own customers — not when the client is simply an adjuster or insurer consuming the investigative work.

Q: Are all "adjuster" activities exempt from needing a private investigator license?
A: Adjusting activities under Article 21 of the Insurance Law don't require Article 7 private-investigator licensure. But a person could hold both licenses and actually be performing licensed detective work rather than adjusting work — that's a fact-specific determination.

Q: Does this ruling apply to any private investigation firm?
A: This is a fact-specific Advisory Opinion binding only on VR Investigations Inc. and the client relationships described. Firms with different client licensing arrangements (e.g., genuinely reselling to another licensed investigator) could see a different result.

Citations and references

• Tax Law § 1105(c)(8) (protective and detective services)
• Tax Law § 1110(a)(C) (compensating use tax on enumerated services)
• General Business Law § 70 (private investigator licensing)
• General Business Law § 71(1) (definition of private investigator)
• Insurance Law § 2101(g) (definition of independent/public adjuster)
• Marvin Rosenthal, Adv Op Comm T&F, Jan. 24, 1997, TSB-A-97(2)S
• Compass Adjusters and Investigators v. Commissioner of Taxation and Finance, 197 A.D.2d 38

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2008.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a08_19s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-08(19)S
Sales Tax
April 28, 2008

Office of Tax Policy Analysis
Taxpayer Guidance Division
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S070208B

On February 8, 2007, the Department of Taxation and Finance received a Petition for
Advisory Opinion from VR Investigations Inc., 200 Old Country Road, Suite 680, Mineola,
New York 11501.
The issues raised by Petitioner, VR Investigations Inc., are:
1.
Whether Petitioner's charges for providing detective and surveillance
services to an individual are subject to sales tax.
2.
Whether Petitioner's charges for providing detective and surveillance
services directly for an insurance company are subject to sales tax.
3.
Whether Petitioner's charges for providing detective and surveillance
services for an adjusting company that may report to an insurance company are
subject to sales tax.
Petitioner submitted the following facts as the basis for this Advisory Opinion.
Petitioner is a corporation engaged in the business of providing detective and surveillance
services for individuals, insurance companies, and adjusting companies that are hired by
insurance companies to look into various claims.
Applicable law and regulations
Section 1105 of the Tax Law provides, in part:
Imposition of sales tax. On and after June first, nineteen hundred seventy-one,
there is hereby imposed and there shall be paid a tax . . . upon:
*

*

*

(c) The receipts from every sale, except for resale, of the following services:
*

*

*

(8) Protective and detective services, including, but not limited to, all services
provided by or through alarm or protective systems of every nature, including, but not
limited to, protection against burglary, theft, fire, water damage or any malfunction of
industrial processes or any other malfunction of or damage to property or injury to

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persons, detective agencies, armored car services and guard, patrol and watchman
services of every nature other than the performance of such services by a port watchman
licensed by the waterfront commission of New York harbor, whether or not tangible
personal property is transferred in conjunction therewith.
Section 1110(a)(C) of the Tax Law imposes compensating use tax on “any of the services
described in paragraphs (1), (7) and (8) of subdivision (c) of section eleven hundred five.”
Section 70 of the General Business Law provides, in part:
Licenses

1. The department of state shall have the power to issue separate licenses to
   private investigators, bail enforcement agents and to watch, guard or patrol agencies. . . .
   *

*

*

3. No person, firm, company, partnership, limited liability company or
   corporation shall engage in the business of furnishing or supplying for fee, hire or any
   consideration or reward information as to the personal character or activities of any
   person, firm, company, or corporation, society or association, or any person or group of
   persons, or as to the character or kind of the business and occupation of any person, firm,
   company or corporation, or own or conduct or maintain a bureau or agency for the above
   mentioned purposes . . . . without having first obtained from the department of state, as
   hereafter provided, a license so to do as private investigator for each such bureau or
   agency and for each and every sub-agency, office and branch office to be owned,
   conducted, managed or maintained by such persons, firm, limited liability company,
   partnership or corporation for the conduct of such business. Nothing contained in this
   section shall be deemed to include the business of adjusters for insurance companies, nor
   public adjusters licensed by the superintendent of insurance under the insurance law of
   this state.
   Section 71(1) of the General Business Law provides, in part:
   “Private investigator” shall mean and include the business of private investigator
   and shall also mean and include, separately or collectively, the making for hire, reward or
   for any consideration whatsoever, of any investigation, or investigations for the purpose
   of obtaining information with reference to any of the following matters, notwithstanding
   the fact that other functions and services may also be performed for fee, hire or reward . .
   . the identity, habits, conduct, movements, whereabouts, affiliations, associations,
   transactions, reputation or character of any person, group of persons, association,
   organization, society, other groups of persons, firm or corporation; the credibility of
   witnesses or other persons; the whereabouts of missing persons; the location or recovery
   of lost or stolen property; the causes and origin of, or responsibility for fires, or libels, or

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losses, or accidents, or damage or injuries to real or personal property . . . or with
reference to the conduct, honesty, efficiency, loyalty or activities of employees, agents,
contractors, and sub-contractors; or the securing of evidence to be used before any
authorized investigating committee, board of award, board of arbitration, or in the trial of
civil or criminal cases. The foregoing shall not be deemed to include . . . persons engaged
in the business of adjusters for insurance companies nor public adjusters licensed by the
superintendent of insurance under the insurance law of this state.
Section 2101(g) of the New York State Insurance Law provides, in part:
In this article, “adjuster” means any “independent adjuster” or “public adjuster” as
defined below:
(1) The term “independent adjuster” means any person, firm, association or
corporation who, or which, for money, commission or any other thing of value, acts in
this state on behalf of an insurer in the work of investigating and adjusting claims arising
under insurance contracts issued by such insurer and who performs such duties required
by such insurer as are incidental to such claims and also includes any person who for
compensation or anything of value investigates and adjusts claims on behalf of any
independent adjuster . . .
*

*

*

(2) “Public adjuster” means any person, firm, association or corporation who, or
which, for money, commission or any other thing of value, acts or aids in any manner on
behalf of an insured in negotiating for, or effecting, the settlement of a claim or claims for
loss or damage to property of the insured in this state caused by, or resulting from, any of
the risks as enumerated in paragraphs four, five, six, seven, eight, nine and ten and
subparagraphs (B) and (C) of paragraph twenty of subsection (a) of section one thousand
one hundred thirteen of this chapter, not including loss or damage to persons under
subparagraph (B) of paragraph twenty of subsection (a) of such section or who, or which,
advertises for, or solicits employment as an adjuster of such claims, and shall also include
any person who, for money, commission or any other thing of value, solicits, investigates,
or adjusts such claims on behalf of any such public adjuster . . .
Opinion
Issue 1
Petitioner asks whether its charges for providing detective and surveillance services to an
individual are subject to sales tax.
Sales tax is imposed on the receipts from every sale of tangible personal property unless
specifically exempted in the Tax Law and on sales of services specifically enumerated in section

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1105 of the Tax Law. Among the enumerated services are protective and detective services. See
section 1105(c)(8) of the Tax Law. When Petitioner performs activities requiring a private
investigator’s license issued under Article 7 of the General Business Law, Petitioner’s services
are subject to sales and use tax imposed under sections 1105(c)(8) and 1110(a)(C) of the Tax
Law. Such services are described in section 71(1) of the General Business Law and would
include, for example, surveillance activities. See Marvin Rosenthal, Adv Op Comm T&F,
January 24, 1997, TSB-A-97(2)S.
Therefore, charges to an individual for detective and
surveillance services are subject to sales tax at the rate in effect where the report is delivered.
Issue 2
Petitioner asks whether its charges for providing detective and surveillance services
directly for an insurance company are subject to sales tax.
Insurance companies typically do not resell the investigative reports but use such reports
to settle insurance claims brought by their clients. When Petitioner performs activities requiring
a private investigator’s license issued under Article 7 of the General Business Law, Petitioner’s
services are subject to sales and use tax imposed under sections 1105(c)(8) and 1110(a)(C) of the
Tax Law, including when performed for an insurance company. Such services are described in
section 71(1) of the General Business Law and would include, for example, surveillance
activities. See Marvin Rosenthal, supra. Accordingly, Petitioner is required to collect sales tax
on its charges for providing detective and surveillance services directly for an insurance
company.
Issue 3
Petitioner asks whether its charges for providing detective and surveillance services for
an adjusting company that may report to an insurance company are subject to sales tax.
Companies licensed as adjusters, pursuant to Article 21 of the New York State Insurance
Law, are entities who, for compensation, either investigate and adjust claims arising under
insurance contracts on behalf of the insurer; act on behalf of an insured person in negotiating or
effecting the settlement of a claim; or solicit, investigate, or adjust such claims on behalf of a
public adjuster. See section 2101(g) of the Insurance Law. A company licensed as an adjuster is
not required to register as a private investigator under the provisions of Article 7 of the General
Business Law when investigating claims arising under insurance contracts as provided in Article
21 of the New York State Insurance Law. See sections 70 and 71 of the General Business Law.
The services of an adjuster licensed pursuant to Article 21 of the New York State Insurance Law
are not enumerated services subject to sales tax under section 1105(c) of the Tax Law. See
Compass Adjusters and Investigators v Commissioner of Taxation and Finance, 197AD2d 38;
Marvin Rosenthal, supra.
It appears, therefore, that Petitioner's clients are purchasing Petitioner's services so the
clients can perform adjusting services for their customers. As such, Petitioner's clients are not

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making purchases of Petitioner's taxable services for resale. Since Petitioner's clients are using
Petitioner's detective service to provide a nontaxable adjusting service, Petitioner is required to
collect, and clients are required to pay, sales tax on the receipts from Petitioner’s sale of
detective and surveillance services described in section 1105(c)(8) of the Tax Law, regardless of
whether the client is reporting to an insurance company. Under these circumstances, Petitioner's
clients cannot properly issue resale certificates to purchase Petitioner's detective or surveillance
services.
It should be noted, however, that pursuant to section 1105(c) of the Tax Law, protective
and detective services may be purchased for resale. Thus, if Petitioner's client were a protective
and detective service or some other service taxable pursuant to section 1105(c)(8) of the Tax
Law, and such client subcontracted to Petitioner its duty to perform such protective and detective
services to its customers, the client would be eligible to purchase Petitioner's subcontracted
services for resale.
A person licensed as an insurance adjuster under Article 21 of the Insurance Law may
also be licensed as a private investigator to perform detective services pursuant to Article 7 of the
General Business Law. (See Compass Adjuster and Investigators v Commissioner of Taxation
and Finance, 197AD2d 38). Such person might not be using Petitioner’s services in the
performance of adjusting services or other nontaxable services but could actually have contracted
to perform detective service pursuant to licensure under Article 7 of the General Business Law.
Petitioner's client could be reselling Petitioner's detective services as such. However, Petitioner
has provided no information that indicates it has been hired as a subcontractor by another
investigator licensed pursuant to Article 7 of the General Business Law, which investigator is, in
turn, reselling Petitioner’s services as part of a protective or detective service. Therefore, all of
Petitioner’s receipts from the sale of detective services, as described in this Opinion, are
presumed subject to sales tax imposed under section 1105(c)(8) of the Tax Law.

DATED: April 28, 2008

NOTE:

/s/
Jonathan Pessen
Tax Regulations Specialist IV
Taxpayer Guidance Division

An Advisory Opinion is issued at the request of a person or entity. It is
limited to the facts set forth therein and is binding on the Department only
with respect to the person or entity to whom it is issued and only if the
person or entity fully and accurately describes all relevant facts. An
Advisory Opinion is based on the law, regulations, and Department
policies in effect as of the date the Opinion is issued or for the specific
time period at issue in the Opinion.