Can a private investigator selling surveillance work to a television station use a resale certificate instead of charging sales tax, on the theory that the TV station resells the information to the public as part of its programming?

Plain-English summary

A private investigator did work for a television program -- some of it (like surveillance tapes) sold as-is, some incorporated into the shows -- and the TV company wanted to use a resale certificate instead of paying sales tax, reasoning that it was reselling the investigator's information to the public as part of its programming.

The Comptroller rejected this on two independent grounds:

1. Wrong category entirely. The investigator isn't providing an "information service" -- they're performing a security service under Tax Code Section 151.0075, defined as a service requiring a license under the Private Investigators and Private Security Agencies Act. There IS a real exclusion in Texas law -- Section 151.0038(a)(1)(A) excludes sales of information services to a newspaper or FCC-licensed radio/TV station -- but it simply doesn't apply here, because the investigator's work is a security service, not an information service, no matter who the customer is or what they do with the output.

2. No valid resale even if it were an information service. The Comptroller went further and explained why a resale certificate wouldn't work anyway: under Section 151.006(1), a taxable service can be bought "for resale" only if it becomes an integral, essential part of a taxable service the buyer then sells. A service is "integral" only if it's essential to performing the buyer's taxable service and the buyer's taxable service couldn't be rendered without it. Broadcasting a television program is not itself a taxable service -- so there's no taxable service for the investigator's work to become an integral part of, and the purchase can't qualify as a sale for resale, even for a cable TV service.

What this means for you

Private investigators and security service providers selling to media companies

Your services stay taxable regardless of whether your customer is a media company that broadcasts or "resells" the information you gather to the public -- the media exclusion in Section 151.0038(a)(1)(A) is narrowly limited to actual information services, and security services never qualify for it.

Television and media companies trying to use resale certificates for content inputs

Even genuine information-service purchases can't automatically be resold tax-free just because they end up in a broadcast -- you'd need the underlying purchase to be an integral part of a taxable service you sell, and broadcasting itself isn't a taxable service in Texas.

Accountants and tax professionals

A two-layer analysis worth keeping as a template: first confirm the service category (security vs. information) before even reaching the media-industry exclusion, then separately test whether a resale theory could work at all under the integral-part-of-a-taxable-service standard -- don't let a client's "but we resell it" argument skip either step.

Common questions

Q: Does selling investigative/surveillance work to a TV station make it tax-exempt as an information service?
A: No. Private investigator work is a security service under Section 151.0075, not an information service, so the media-industry information-services exclusion doesn't apply.

Q: Can a TV station buy a private investigator's services tax-free with a resale certificate?
A: No, because broadcasting a television program is not itself a taxable service, so the investigator's work can't be an "integral part" of a taxable service being resold.

Q: Would the answer differ for cable television?
A: No, the letter specifically notes the same result applies even if sold to a cable television service.

Q: Can I rely on this letter for my own business?
A: No. It is based on the specific facts presented and can only be relied on by the taxpayer to whom it was issued.

Citations and references

Statutes and rules:

• Texas Tax Code Section 151.0075 (definition of security service)
• Texas Tax Code Section 151.0038(a)(1)(A) (information services exclusion for news/broadcast media)
• Texas Tax Code Section 151.006(1) (sale for resale)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9905407L

Original ruling text

May 4, 1999

Dear **:

Thank you for your recent letter which is restated in part with response below.

"One of my clients is a private investigator who does work for a television
program. It is my understanding that my client is liable for
collection/payment of sales tax on his services.

However, his client is under the impression that since he used the information
provided and resells it to the public, he is not subject to the sales tax. He
wants to use his resale certificate in lieu of sales tax.

Some of the information provided by my client to the television company is used
as part of the shows, and part of it is sold as is (ex: surveillance tapes).
Please explain to me what the state requires in regard to collection of the
sales tax."

Response: The client is performing a security service as defined in Tax Code
Section 151.0075. "Security service" means service for which a license is
required under Section 13, Private Investigators and Private Security Agencies
Act (Article 4413(29bb), Vernon's Texas Civil Statutes).

The fact that the client is selling their services to a television company does
not exempt their charges from sales tax. Tax Code Section 151.0038 (a) (1) (A)
excludes sales of information services to a newspaper or to a radio or
television station licensed by the Federal Communications Commission. However,
this is not applicable to your client since the client is selling security
services and not information services.

Under Tax Code Section 151.006(1), "Sale for resale" means a sale of tangible
personal property or a taxable service to a purchaser who acquires the property
or service for the purpose of reselling it in the United States of America or a
possession or territory of the United States of America or in the United
Mexican States in the normal course of business in the form or condition in
which it is acquired or as an attachment to or integral part of other tangible
personal property or taxable service.

To buy the client's work product for resale, the television company itself
would have to be selling a taxable service and the security service itself
would have to become an integral part of the taxable service sold by the
television company. A service is considered an integral part of a taxable
service if the service purchased is essential to the performance of the taxable
service and without which the taxable service could not be rendered.
Accordingly, the purchase of the security service would not be exempt even if
sold to a cable television service.

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

You may call me toll free at 1-800-531-5441, ext. 3-4680. The direct line is
512/463-4680. You may also write to Tax Policy, Comptroller of Public
Accounts. The email address is .

Sincerely,

Al Van Allen
Tax Policy Division