Does a company that fetches and delivers police accident reports to insurance companies owe Texas sales tax on those charges?

Subject

Police Accident Reports

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9402193L

Plain-English Summary

The Comptroller addressed a company (COMPANY A) that, at an insurance company's request, obtains a copy of an accident report from a city police department, pays the police department's fee for the report, and then hand-delivers or faxes the report to the insurance company. COMPANY A billed the insurance company two separate amounts: (1) a straight pass-through of the cost of the report, with no markup or profit added, and (2) a separate delivery charge — a fee for picking up and delivering the document.

The Comptroller ruled that COMPANY A is not required to charge sales tax on the amount it passes through for the cost of the report itself, since that is simply reimbursement of what the police department charged, without markup. However, COMPANY A is required to charge sales tax on the delivery or fax charge, and on any other amount charged above what was paid to the police department for the report. The Comptroller cited Rule 3.342(d)(3), which concerns information services, as the basis for taxing that portion of the charge.

What This Means For You

If you obtain public records (like police reports) for clients and pass along the cost: The pure reimbursement portion — what you paid the issuing agency, with no markup — is not subject to Texas sales tax. Keep that charge separately stated and free of any added profit to preserve this treatment.

If you also charge a separate fee for retrieving or delivering the document: That fee (e.g., a delivery or fax charge) is taxable as an information service under Rule 3.342(d)(3). This applies whether the extra charge is labeled a "delivery charge" or shows up as any amount above the agency's own fee.

If you bundle the reimbursement and the service fee into one charge: Based on this ruling, keeping the two charges separate and clearly itemized (report cost vs. delivery/service fee) is what allowed COMPANY A to avoid tax on the pass-through portion — combining them without itemization could put the whole charge at risk of being taxed.

Q&A

Q: Do I owe sales tax on the amount I bill a client for the police department's own fee for an accident report?
A: No — as long as you pass through only the police department's actual cost with no markup or profit added, that portion is not subject to Texas sales tax.

Q: Do I owe sales tax on the fee I charge for picking up and delivering (or faxing) the report to my client?
A: Yes. The Comptroller ruled that the delivery or fax charge — or any amount charged over the police department's own fee — is taxable under Rule 3.342(d)(3), which covers information services.

Q: Does it matter that COMPANY A isn't required to be licensed by the state to provide this service?
A: The ruling doesn't tie the tax result to any state licensing requirement; it focuses on how the charges are structured (pass-through cost vs. delivery/service charge), not on whether the company is licensed.

Original ruling text

February 1, 1994

Dear Mr. **:

Thank you for your letter of January 17, 1994, concerning COMPANY A's Texas
sales and use tax responsibilities.

** (COMPANY A) gets a copy of an accident report from a city police
department at an insurance company's request. COMPANY A pays the police
department for the report (its cost) and hand delivers or faxes the report to
the insurance company. COMPANY A makes two charges for the service to the
insurance company: (1) the cost of the report (no mark-up or profit added) and
(2) a delivery charge (a fee for picking up and delivering the document).

COMPANY A is not required to charge sates tax on the amount paid to the police
department for the accident report However, COMPANY A is required to charge
sales tax on the delivery or fax charge or any other charge over the amount
paid to the police department for the accident report. See Rule 3.342(d)(3)
concerning information services

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

You may call toll free 1-800-531-5441, 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

January 17, 1994

Ms. Adina Whittemore
Tax Administration Section
P.O. Box 13528
Austin, TX 78711-3528

Reference: Taxability Inquiry Sales and Use Tax

Dear Ms. Whittemore:

The purpose of this letter is to request a ruling on the application of the
Texas Sales and Use Tax on COMPANY A. In order to obtain a written response,
this letter of inquiry is being sent to your department. The facts are as
follows:

1. An insurance company calls and requests an accident report to be obtained
   from the police department in a nearby city.

2. COMPANY A pays the police department for the report (its cost) and then
   delivers it (hand-deliver or fax) to the insurance company.

3. For the above service, two charges are made by COMPANY A to the insurance
   company:

1) Cost reimbursement: for the cost of the report. There is no mark-up or
profit involved.

2) Delivery charge: a fee for the labor to pick-up and deliver the document to
the insurance company.

4. COMPANY A is not required to be licensed by the State to provide this
   service.

Question: Based on the above facts, should COMPANY A be required to collect and
remit sales tax on any part of its service?

Please call me at **, if you have any questions or need additional
information.

Very truly yours,