Is an investigation company's services taxable as security services under Texas sales tax, and does the company need a sales tax permit?

Subject

Investigation Company Services Are Taxable As Security Services — Sales Tax Permit Required

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9312L1282F11

Plain-English Summary

This is a short, dated December 28, 1993 letter from the Comptroller's Tax Administration Division to a taxpayer running an investigation company. The letter references an earlier meeting or inquiry, and encloses a copy of a response the Comptroller's office had received from the Texas Board of Private Investigators and Private Security Agencies about the Investigation Company License the taxpayer needed to obtain. That underlying licensing-board response itself is not reproduced in the text of this letter — only the Comptroller's cover letter is.

The core tax holding is one sentence: the taxpayer's services are taxable as security services. Because of that classification, sales tax is due on the total charge billed to customers for those services. To help the taxpayer come into compliance, the Comptroller enclosed a sales tax permit application along with the letter.

The letter closes with the Comptroller's standard caveat that the opinion is based on the specific facts the taxpayer submitted, and that other facts, even if similar, could produce a different result. It is signed by David Somerville of the Tax Administration Division, and includes a note referencing a prior accession number (9402033L.5 and/or 9402033L), indicating this letter is connected to or was later cross-referenced with that other STAR document.

What This Means For You

If you run an investigation company in Texas: This letter is a direct, on-point example of the Comptroller classifying investigation services as taxable "security services." If your business performs comparable services, sales tax is generally due on your total charge to customers, and you would need a Texas sales tax permit to collect and remit it.

If you're licensed (or need to be licensed) by the Texas Board of Private Investigators and Private Security Agencies: Note that this letter treats the investigation-company licensing requirement (a regulatory/licensing matter handled by that Board) as a separate issue from the sales tax question (handled by the Comptroller). Obtaining or holding that license does not appear in this letter to change the sales tax outcome — the letter simply forwards the Board's licensing response for the taxpayer's reference while separately confirming the tax treatment.

Note on scope: This letter cites no statute or administrative rule for its "taxable as security services" conclusion — it states the classification without stating the legal basis. It also does not include the text of the Board's licensing determination that was enclosed with the original letter, so no detail about the specific licensing requirements is available here. As with any STAR letter, this opinion was based only on the facts the taxpayer submitted, and the Comptroller specifically warns that different facts could yield a different result.

Q&A

Q: What did the Comptroller decide about this taxpayer's investigation services?
A: That they are taxable as security services, meaning Texas sales tax is due on the total charge for the services sold to customers.

Q: Did the Comptroller also address the Investigation Company License itself?
A: The Comptroller's letter forwards a copy of the response received from the Texas Board of Private Investigators and Private Security Agencies about the license the taxpayer needed to obtain, but the text of that licensing-board response is not included in this letter — only the Comptroller's cover letter about the sales tax consequence is reproduced here.

Q: Did the taxpayer already have a sales tax permit?
A: The letter doesn't say explicitly, but it encloses an application for a sales tax permit "with this letter," which indicates the Comptroller was helping the taxpayer register to collect and remit the tax going forward.

Q: Does this letter cite any statute or rule for the "taxable as security services" conclusion?
A: No. The letter states the conclusion directly without citing a specific statute or administrative rule.

Original ruling text

December 28, 1993

Dear **:

I have enclosed a copy of the response received from **
of the Texas Board of Private Investigators and Private Security
Agencies concerning the Investigation Company License that you must
obtain.

Your services are taxable as security services.

Sales tax is due on the total charge for security services sold to
your customers. An application for a sales tax permit is included
with this letter.

This opinion is based on the facts you submitted. Other facts,
though similar, may yield different results.

You may call me toll free at 1-800-531-5441, ext. 50030. The direct
line is 512/475-0030. You may also write to Tax Administration,
Comptroller of Public Accounts.

Sincerely,

David Somerville
Tax Administration Division

NOTE: Previous Accession Number 9402033L.5 and/or 9402033L