Is a company that supplies licensed insurance adjusters to insurance companies after a catastrophe providing exempt temporary help, or a taxable insurance service?

Plain-English summary

A company supplied licensed insurance adjusters to insurance companies on a temporary basis after natural catastrophes, under annual contracts, with the adjusters working out of the insurance companies' own offices to adjust property damage claims. The company asked whether it should be charging Texas sales tax, or whether its work instead qualified as an exempt "temporary help service" under Tax Code § 151.057(2).

The Comptroller said the charges are taxable. Supplying licensed insurance adjusters to adjust claims is a taxable insurance damage-appraisal/claims-adjustment service under Rule 3.355, not temporary help. The temporary-help exemption in § 151.057(2) had just been amended (effective October 1, 2001, by Senate Bill 1125) to require that the work be of a kind "normally performed by the employer's own employees" and that the client furnish all supplies and equipment. Because this company's business is adjusting insurance claims with its own licensed adjusters — not lending out generic staff to do the client's own ordinary work — it doesn't fit the narrowed exemption. The company had to start charging and collecting sales tax on these charges going forward.

What this means for you

Staffing and claims-adjusting companies

If your business supplies specialized, licensed professionals (like insurance adjusters) to perform your own line of work at a client's site, that's generally a taxable service in its own right — not exempt "temporary help" — even if the workers are under the client's day-to-day supervision. The exemption is aimed at generic staffing to supplement a client's existing workforce doing the client's own normal work, not at outsourcing a specialized service.

Insurance companies and their vendors

If you're paying an outside firm for claims-adjusting or damage-appraisal help (a common need after a hurricane or other catastrophe), expect Texas sales tax to apply to those charges, since October 1, 2001.

Accountants and tax professionals

This is a direct, contemporaneous application of the 2001 amendment to § 151.057(2) narrowing the temporary-help exemption — useful context if you're researching that provision's legislative history or auditing pre-/post-amendment claims-adjusting charges.

Common questions

Q: Is hiring temporary insurance adjusters ever tax-exempt as "temporary help"?
A: Not under these facts. Because the company's core business was performing claims-adjustment services with its own licensed staff (not supplementing the client's workforce with generic help doing the client's own ordinary work), it was a taxable insurance service.

Q: When did this change?
A: The Comptroller's answer relies on a Tax Code § 151.057(2) amendment (Senate Bill 1125) effective October 1, 2001, which narrowed what counts as exempt temporary help.

Q: Does this ruling bind the Comptroller for my business?
A: No — this is an informal 2001 letter responding to one taxpayer's specific facts, not a modern Private Letter Ruling or General Information Letter, and it cannot be relied on by anyone else. Confirm current treatment with a tax professional.

Citations and references

Statutes and rules:

• Tex. Tax Code § 151.057(2), as amended by S.B. 1125 (77th Legislature), effective October 1, 2001 (temporary employment services exemption)
• 34 Tex. Admin. Code Rule 3.355(a)(2), (5), (b) (insurance 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/200110563L

Original ruling text

October 22, 2001

Subject: Taxability of Services

Dear ***:

Thank you for your recent email concerning the taxability of insurance
adjusting services. Your company provides claims adjusting services to large
corporate clients or customers (insurance companies) on a temporary basis after
natural catastrophes.

Your company signs a contract annually with various insurance companies to
provide your employees in catastrophic situations when the client has a
staffing deficit. Your employees work out of the insurance companies' offices
to adjust property damage claims and your company is paid a fee for this
service.

Recently, one of your customers asked if it is appropriate for you to be
collecting a sales tax given the temporary nature of your work on jobs in
Texas. After researching this issue and speaking with several of Comptroller
representatives over the phone, you are requesting guidance in writing as to
the applicability of your collecting sales tax for insurance services rendered
by your employees while in Texas. You also asked whether the services were
exempt temporary help services under Sec. 151.057 (2).

Response: Your company is not providing temporary employees when it furnishes
claims adjusters to insurance companies on a temporary basis. Your company is
performing taxable insurance damage appraisal or claims adjustment services
when it performs such services for others pertaining to a policy of insurance
[see Rule 3.355(a)(2) and (5) and (b) concerning insurance services].

Texas Tax Code Section 151.057(2) exempts taxable services performed by
temporary employees for an employer who provides all equipment and supplies
necessary to perform the services and the temporary employees are under the
employer's direct or general supervision.

Texas Tax Code Section 151.057(2) was amended by Senate Bill 1125 effective
October 1, 2001, to read:

"...a service performed by an employee of a temporary employment service as
DEFINED BY SECTION 93.001, LABOR CODE, for an employer to supplement the
employer's existing work force on a temporary basis, when the service is
normally performed by the employer's own employees, the employer provides all
supplies and equipment necessary, and the help is under the direct or general
supervision of the employer to whom the help is furnished..."

(Emphasis added.)

This amendment requires you to charge and collect Texas sales and use tax on
the adjusters that you provide to insurance carriers and others to adjust
insurance claims on a temporary basis. Your company appears to employ licensed
insurance adjusters to adjust insurance claims, not to furnish temporary
employees.

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, if you have any
questions or need more information. You may write to Tax Policy Division,
Comptroller of Public Accounts, P.O. Box 13528, Austin, Texas 78711-3825. My
email address is .

Sincerely,

Eddie C. Washington
Tax Policy Division