Is the Texas Workers' Compensation Insurance Fund (successor to the Workers' Compensation Facility) exempt from sales tax on insurance services because it's a state-created entity?

Plain-English summary

Following up on a phone call, the Comptroller confirmed in writing that the Texas Workers' Compensation Insurance Fund — the state-created successor to the earlier Workers' Compensation Facility — is not exempt from Texas sales tax on insurance services. The Comptroller searched both the Texas Insurance Code and the Texas Tax Code and found no provision exempting the Fund.

More than that, the Insurance Code affirmatively requires the opposite: Section 12(c) states that the Fund "shall pay all other taxes and fees or any payments due in lieu of taxes in the same manner as an insurance carrier authorized and admitted by the Texas Department of Insurance to do insurance business in this state under a certificate of authority that includes authorization to write workers' compensation insurance." In other words, the legislature specifically leveled the playing field — the Fund doesn't get special tax treatment just because it's a state-created entity serving a public function; it's taxed the same as any private workers' compensation insurer.

What this means for you

State-created insurance funds, facilities, or similar quasi-governmental entities

Being created by statute to serve a public insurance function (like providing a market of last resort for workers' compensation coverage) doesn't create an automatic sales tax exemption. Check for an explicit exemption provision — if none exists, and especially if the enabling statute has a parity clause like Insurance Code § 12(c), expect the same tax treatment as private-sector competitors.

Businesses and insurers dealing with the Fund

Don't assume transactions involving the Fund get different sales tax treatment than the same transactions with a private insurance carrier — the Fund is taxed on the same basis.

Accountants and tax professionals

This letter is a clean example of statutory parity language (a "pay taxes the same as any other licensed carrier" clause) foreclosing an exemption argument, even in the absence of any specific taxing provision naming the entity.

Common questions

Q: Is the Texas Workers' Compensation Insurance Fund exempt from sales tax as a state entity?
A: No. Neither the Insurance Code nor the Tax Code exempts it, and Insurance Code § 12(c) requires it to pay taxes the same way any other licensed workers' compensation insurance carrier does.

Q: Does this ruling apply to other state-created insurance funds or facilities?
A: Not automatically — this letter addresses this specific Fund and its enabling statute's parity clause; other entities would need their own governing statute checked for an exemption or parity provision.

Q: Can I rely on this letter for a different entity's tax status?
A: No. This opinion is based on the facts presented, and additional or different facts may change the result; it binds the Comptroller only as to the taxpayer it was issued to.

Citations and references

• Tex. Insurance Code § 12(c) (Fund pays all taxes and fees the same as a licensed insurance carrier)

Subject

Texas Workers' Compensation Insurance Fund — Not Exempt From Tax On 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/9801087L

Original ruling text

January 22, 1998

Dear *****:

This is a follow-up to our recent telephone conversation regarding the tax
status of the Workers' Compensation Insurance Fund (the Fund), the successor to
the Workers' Compensation Facility (the Facility).

We can find no provision in the Texas Insurance Code or Texas Tax Code that
exempts the Fund for sales tax purposes. We do find that the Texas Insurance
Code requires the Fund to pay all taxes in the same manner as any other
licensed insurance carrier: Texas Insurance Code Sec. 12(c) states:

The Fund shall pay all other taxes and fees or any payments due in lieu of
taxes in the same manner as an insurance carrier authorized and admitted by the
Texas Department of Insurance to do insurance business in this state under a
certificate of authority that includes authorization to write workers'
compensation insurance.

I am enclosing a letter to you dated June 23, 1994, for reference.

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. The direct line is
512/463-4683. You may also write to Tax Policy Division, Comptroller of Public
Accounts.

Sincerely,

Eddie C. Washington
Tax Policy Division