Are accident reconstruction investigation services for attorneys and insurers subject to New York sales tax?

Plain-English summary

Robert W. Burns operates an accident reconstruction business serving attorneys and insurance companies. After the police finish, he goes to accident scenes, takes photographs and measurements, interviews drivers and witnesses, and delivers a confidential written or oral report of his findings. New York's Department of State required him to obtain a Private Investigator License. He asked whether these activities are subject to sales and use tax.

The Department held they are taxable, as protective and detective services under § 1105(c)(8) (enacted by Chapter 190 of the Laws of 1990):

• The statute taxes protective and detective services, including detective agencies and investigative services of every nature.
• Detective services generally include activities of an individual who, among other things, makes investigations to obtain information regarding the causes of accidents, damage or injury, or secures evidence to be used in trials or hearings (13 NY Jur 2d, Businesses and Occupations § 284).
• § 1105(c)(8) is substantially similar to the New York City protective/detective-services tax (§ 1212-A(b)(2)(i)(B)), and the Department's Publication 846 confirms that trial-preparation investigating — to evaluate a claim's merits and fix settlement value — is taxable (in the City context, when the report is delivered to a client there).
• Accordingly, Burns's accident-investigation work for attorneys and insurers falls within protective and detective services and is subject to state and local sales and use tax (following Stanley Greenfield, TSB-A-90(35)S).

What this means for you

Investigative work for litigation and claims is a taxable service in New York

The 1990 addition of protective and detective services to New York's taxable-services list is broad. Accident reconstruction, claims investigation, and evidence-gathering for trials or hearings are taxable — even when the client is a law firm or insurer and the deliverable is a report or expert opinion. Holding a Private Investigator License is a signal you're in this taxed category.

Expect to collect sales tax on your investigation fees

If you provide these services, you generally must register and collect state and local sales tax on your charges. The nature of the work — detective/investigative — controls, not the professional-sounding label or the litigation context.

The rule tracks the New York City tax and prior guidance

The state provision mirrors the long-standing New York City protective/detective-services tax, and the Department has consistently treated trial-preparation and claims investigation as taxable (Publication 846; Stanley Greenfield). This isn't a novel or borderline call.

Common questions

Q: Is accident reconstruction or claims investigation taxable in New York?
A: Yes. It is a protective and detective service taxable under § 1105(c)(8).

Q: Does it matter that my clients are attorneys and insurance companies?
A: No. Investigative/detective work is taxable regardless of whether the client is a law firm or insurer; the taxability follows the nature of the service.

Q: I deliver only a report or expert opinion — is that still taxable?
A: Yes. Detective services include investigating causes of accidents and securing evidence for trials or hearings; delivering the findings as a report does not remove it from tax.

Citations and references

Statutes and guidance:

• Tax Law § 1105(c)(8) — tax on protective and detective services (enacted by Chapter 190 of the Laws of 1990)
• Tax Law § 1212-A(b)(2)(i)(B) — parallel New York City protective/detective-services tax
• Publication 846, Sales Tax Information on Selected Services in New York City (trial-preparation investigating is taxable); Stanley Greenfield, TSB-A-90(35)S
• 13 NY Jur 2d, Businesses and Occupations § 284 (scope of detective services)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1991.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a91_39s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-91 (39)S
Sales Tax
May 9, 1991

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S910325A

On March 25, 1991, a Petition for Advisory Opinion was received from Robert W. Burns,
48 Harper Drive, Pittsford, New York 14534.
The issue raised by Petitioner, Robert W. Burns, is whether his professional activities in
conducting accident reconstruction investigations constitute a service subject to the imposition of
State and local sales and use taxes.
Petitioner operates an accident reconstruction business for attorneys and insurance
companies. Petitioner goes to scenes of accidents after the police have investigated. He takes
photographs and measurements and interview drivers and witnesses. Petitioner then provides his
clients with a confidential written or oral report of the findings of his investigation.
At the request of the New York State Department of State, Petitioner was required to obtain
a Private Investigators License.
Section 1105(c)(8) of the Tax Law as, enacted by Chapter 190 of the Laws of 1990, imposes
sales tax upon:
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
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.
Generally detective services include activities by an individual who among other things
makes investigations to obtain information regarding the causes of accidents, damage or injury or
is engaged in securing evidence to be used in trials or hearings. (13 New York Jurisprudence 2d,
Businesses and Occupations § 284, at 103.)
Section 1105(c)(8) of the Tax Law is substantially similar to Section 1212-A(b)(2)(i)(B) of
the Tax Law allowing New York City to impose sales tax on protective and detective services.
New York State Department of Taxation and Finance, Sales Tax Information on Selected
Services in New York City, Publication 846 (1/89) in listing protective and detective services subject
to the New York City sales tax states at page 8:

-2­
TSB-A-91 (39)S
Sales Tax
May 9, 1991

"Q.

Are the services of trial preparation investigating, for the purpose of evaluating the
merits of a claim with respect to fixing a settlement values, subject to the 4% sales
tax imposed by New York City?

A.

Yes, when the reports are delivered to a client in New York City."

Accordingly, Petitioner's activities in conducting investigations and obtaining information
regarding automobile accidents for use by attorneys and insurance companies comes within the
definition of protective and detective services as intended by Section 1105(c)(8) of the Tax Law and
therefore such activities are subject to State and local sales and use tax. Stanley Greenfield, Adv Op,
Comm T & F, July 24, 1990, TSB-A-90(35)S.

DATED: May 9, 1991

s/PAUL B. COBURN
Deputy Director
Taxpayer Services Division

NOTE: The opinions expressed in Advisory Opinions
are limited to the facts set forth therein.