Is a consultant who uses handwriting analysis, body language, statement analysis, and human behavior analysis to evaluate individuals for jury profiling or employment screening providing a taxable service in Texas?

Plain-English summary

The Texas Comptroller's Tax Policy Division responded to a consultant who uses handwriting analysis, body language, statement analysis, and human behavior analysis to evaluate individuals for jury profiling, employment screening, or individual evaluation. The consultant occasionally uses a computer to prepare a professional report for clients, but sells no copies or texts of any kind, and also conducts seminars on profiling techniques.

The Comptroller confirmed two main points. First, merely using a computer to write or compile an analysis report for a client does not turn the work into taxable "data processing services" — the computer is just a tool used to produce the consultant's own analysis, not a service being sold in itself. Second, the underlying consulting services themselves are not taxable, unless the consultant performs those services on behalf of an insurance carrier, its insured, its policyholders, or others in connection with a policy or policies of insurance — in which case the rules on insurance services (Rule 3.355) would apply instead.

The letter also reminds the consultant that, regardless of how the consulting income is taxed, sales tax must still be paid to vendors on tangible property used in the business, such as paper and computer equipment. Finally, the Comptroller noted that if the consultant does not provide insurance-related services, the consultant should contact the office to close out the sales tax permit — implying no ongoing sales tax collection obligation for this line of work.

What this means for you

Consultants using specialized analysis services (handwriting, behavioral, etc.)

If your consulting work involves personal expertise or judgment — like handwriting analysis, behavior analysis, or similar evaluation services — and you occasionally use a computer to draft or compile your findings into a report, that alone doesn't convert your services into taxable data processing. The computer is treated as a tool of your trade, not as a taxable service you're selling.

Consultants who work with or for insurance companies

If you ever perform these same evaluation services on behalf of an insurance carrier, an insured person, policyholders, or anyone else in connection with an insurance policy, the analysis changes: Texas's insurance services rule (Rule 3.355) would then govern whether tax applies, rather than the general consulting/data-processing analysis in this letter.

Business owners buying equipment and supplies for their consulting practice

Even when your consulting services aren't taxable, you still owe sales tax as the end consumer on the tangible personal property you buy to run your business — for example, paper and computers. That tax liability doesn't go away just because your services are exempt.

Common questions

Q: Does using a computer to prepare client reports make a consulting service taxable as "data processing"?
A: No. According to this letter, using a computer only to write or compile an analysis report you're already providing doesn't make you a data processing service provider.

Q: Are handwriting analysis, body language analysis, and human behavior analysis consulting services taxable in Texas?
A: Generally no, based on this letter — unless the services are performed on behalf of an insurance carrier, insured, policyholder, or others regarding an insurance policy, in which case the insurance services rule (Rule 3.355) applies instead.

Q: Do I still owe sales tax on business supplies if my consulting services aren't taxable?
A: Yes. The letter states the consultant must pay sales tax to vendors on property used in the business, such as paper and computers.

Q: What if I never provide insurance-related services?
A: The letter tells the consultant to contact the Comptroller's office to close out the sales tax permit if insurance services aren't provided, suggesting no sales tax needs to be collected from clients for this type of consulting.

Q: Can another business rely on this letter?
A: No. This opinion is based on the specific facts submitted by this taxpayer; the letter itself notes other facts, though similar, may yield different results, and STAR letters generally may be relied on only by the taxpayer to whom they were issued.

Citations and references

Statutes and rules:

• 34 Tex. Admin. Code Rule 3.355 (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/9511870L

Original ruling text

November 29,1995

Dear **:

Thank you for your letter concerning the taxability of the services you provide
your clients.

You work as a consultant where you use handwriting analysis, body language,
statement analysis, and human behavior analysis to evaluate individuals for
jury profiling, employment screening, or individual evaluation. As a
professional, you occasionally use a computer to prepare a professional report
for clients when time permits. You only use the computer to further what you
do for clients. No copies or texts of any kind are sold. You also do seminars
relating to profiling techniques.

You are not providing data processing services just because you use a computer
to write or compile a report to your client with your analysis. However, you
must pay sales tax to vendors on property used in your consulting business
(i.e., paper, computer, etc.).

The consulting services you provide clients are not taxable unless you perform
these services on behalf of an insurance carrier, its insured, its
policyholders, or others pertaining to a policy or policies of insurance. See
enclosed Rule 3.355 on insurance services. If you do not provide insurance
services, please contact our office so that we can close out your sales tax
permit.

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. 5-0030. The direct line is
512/475-0030. You may also write to Tax Policy, Comptroller of Public
Accounts.

Sincerely,

David Somerville
Tax Policy Division

Enclosure