News & Insights

Insurance Monitoring Service Is Not Subject to Texas Sales Tax

Tax Development Mar 15, 2017

In a recently issued letter ruling (STARS Number 201701013L), the Texas Comptroller of Public Accounts (“Comptroller”) determined that an insurance monitoring service was not subject to sales tax. Texas imposes sales tax on several services, including data processing and insurance services. Taxable data processing services include data entry, retrieval, and search and information compilation, storage, or manipulation. Data processing does not include the use of a computer to facilitate the performance of another service. Taxable insurance services include insurance inspection service (any activity to evaluate risks or to value property in connection with insurance coverage), insurance investigation (any activity to evaluate eligibility for insurance coverage or for the payment of benefits), and insurance loss prevention service (any activity to identify, analyze, evaluate, control, anticipate, or eliminate the occurrence losses or damages).

The service provider worked for lenders and ensured that borrowers maintained sufficient insurance coverage on properties subject to loans. The service included reviewing loan documents and insurance policies, maintaining the information, providing borrowers online access to review and submit documents, sending periodic reports to lenders, and providing online access to lenders to obtain customized reports.

The Comptroller determined that service provider’s data processing activities were ancillary and incidental to the professional service provided. In addition, although the service provider reviewed insurance policies to ensure sufficient insurance coverage, the Comptroller determined that this service was not a taxable insurance service.  

TECHNICAL INFORMATION CONTACT:

Adina Christian
Director
Ryan
512.476.0022
adina.christian@ryan.com