Are a risk management consultant's services taxable as insurance services under Texas sales and use tax?

Subject

Risk Management Insurance Services Performed By Risk Manager

Plain-English summary

A risk management consultant wrote to the Texas Comptroller asking about their sales and use tax responsibilities. The Comptroller's response confirmed a long-standing position: services performed by a risk manager are taxable as insurance inspection and/or insurance loss prevention services under Rule 3.355(a)(2) and (a)(6), which covers insurance services generally.

This wasn't a new determination. The Comptroller pointed back to a March 14, 1988 letter it had sent to the State Board of Insurance (the Insurance Commission) taking the same position, and to Taxability Response (TR) 1209, which reaffirmed that 1988 letter (see paragraphs 1 through 4 on page 3 of TR 1209). The letter also notes that TR 1209 supersedes an earlier microfiche document (9004L1027A06) that the taxpayer had referenced, and that a letter conforming to TR 1209 was being sent separately to the original recipient of that superseded document.

As with all Comptroller letter rulings, the answer is stated to be based on the facts presented — if the taxpayer's facts differ, the conclusion could change.

What this means for you

Risk management consultants and risk managers

If you perform risk management services in Texas — the kind of work described here as insurance inspection or insurance loss prevention services — the Comptroller treats those services as taxable insurance services under Rule 3.355. That means you generally need to collect and remit Texas sales and use tax on charges for this work, the same as any other taxable insurance service provider.

Businesses that hire risk managers

If your business pays an outside risk management consultant for services like insurance inspections or loss-prevention reviews, expect sales tax to apply to those charges, consistent with the Comptroller's treatment of insurance services more broadly.

Accountants and tax professionals

This letter is a good example of the Comptroller reaffirming policy through a chain of internal documents — a 1988 letter to the Insurance Commission, then TR 1209, then this 1992 letter — rather than issuing new guidance. If you're researching an older determination on risk management services, TR 1209 is the key document to track down, since it superseded a 1990 microfiche letter (9004L1027A06) on the same topic.

Common questions

Q: What kind of risk management services does this ruling cover?
A: The letter describes them as insurance inspection and/or insurance loss prevention services, taxable under 34 Tex. Admin. Code Rule 3.355(a)(2) and (a)(6), which governs insurance services.

Q: Is this a new policy from the Comptroller?
A: No. The Comptroller is reaffirming a position first stated in a March 14, 1988 letter to the State Board of Insurance and later confirmed in Taxability Response (TR) 1209.

Q: What happened to the earlier letter the taxpayer referenced?
A: The taxpayer referenced microfiche document 9004L1027A06. That document was superseded by TR 1209, and the Comptroller notes a letter conforming to TR 1209 was being sent to the original recipient of the superseded letter.

Q: Can I rely on this letter for my own risk management business?
A: Only if you were the taxpayer who received it. Under STAR's rules, a letter ruling supports a detrimental-reliance claim only for the taxpayer it was directly issued to, and older letters like this one may no longer reflect current Comptroller policy. Confirm current treatment with a Texas tax professional or the Comptroller's office.

Citations and references

• 34 Tex. Admin. Code Rule 3.355(a)(2) and (a)(6) (insurance services)
• Comptroller letter to the State Board of Insurance, March 14, 1988 (referenced, not separately reproduced)
• Taxability Response (TR) 1209 (referenced, not separately reproduced)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9209L1190G05

Original ruling text

September 4, 1992

Dear ***:

Thank you for your letter of July 31, 1992, concerning your Texas sales and use
tax responsibilities as a risk management consultant.

Enclosed are edited documents addressing the sales and use tax responsibilities
of risk managers. In a letter to the State Board of Insurance (the Insurance
Commission) dated March 14, 1988, the Comptroller informed the commission that
the services of a risk manager are taxable as insurance inspections and/or
insurance loss prevention service under Rule 3.355(a)(2) and (a) (6) concerning
insurance services.

In Taxability Response (TR) 1209, the Comptroller reaffirmed the March 14, 1988
letter ruling. Please note paragraphs 1 through 4 on page 3 of this document.
Also, note that this document was approved after the date of the letter you
referenced (microfiche document 9004L1027A06) was written. TR 1209 supercedes
microfiche document 9004L1027A06, and a letter conforming with TR 1209 is being
sent to the recipient of the original letter (9004L1027A06).

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

You may call toll free 1-800-252-5555, extension 3-4683 if you have any
questions or need more information. You may write to Tax Administration
Division, Comptroller of public Accounts.

Sincerely,

Eddie C. Washington
Tax Administration Division