Investigating the Taxability of New Jersey Detective Services
- Apr 28, 2015 | Gail Cole
Eddie Mars: Convenient, the door being open when you didn't have a key, eh?
Philip Marlowe: Yeah, wasn't it. By the way, how'd you happen to have one?
Eddie Mars: Is that any of your business?
Philip Marlowe: I could make it my business.
Eddie Mars: I could make your business mine.
Philip Marlowe: Oh, you wouldn't like it. The pay's too small. -The Big Sleep
Philip Marlowe didn't work in New Jersey. Had he, would his services have been subject to sales tax?
Yes. Investigation and security services that are sourced to New Jersey are subject to New Jersey sales tax. This raises the question, “What are ‘investigation and security services,’ and what does ‘sourced to New Jersey’ mean?”
Wherever a customer “makes first use of the service” is where the service is sourced, and first use is defined as “where the investigative report is delivered.”
New Jersey sales tax applies to many detective and investigation services, including the following:
- Armored car series
- Background checks
- Fingerprint, polygraph (lie detecting) and skip tracing services
- Insurance claim investigation services
- Online or real-life research services to track down unclaimed assets or persons
- Online or real-life research to track down birth parents and other long-lost people or pets
- Security guard and patrol services
- Security systems services
New Jersey sales tax does not apply to the following services:
- Charges by a business hired by an attorney to serve subpoenas and court summonses
- Insurance claim adjustment services
- Skycap services performed at an airport
- Ticket and baggage checks to verify a passenger’s identity
The taxable amount
If the movies are true, detective services always include a bit of surveillance. The detective purchases a newspaper or a drink to fit into the background, or pursues the subject for miles. In real life in New Jersey, any charges incurred while on the case, such as meals, tolls, or mileage, are included in the taxable service and are subject to tax, “regardless of how they are billed.” As explained by the Division of Taxation:
“The amount of the receipt subject to sales tax includes the fee charged for the investigation and security service, as well as the cost of materials used, labor or service, interest losses, all costs of transportation to the seller, all taxes imposed on the seller, any other expense of the seller, and charges by the seller for any services necessary to complete the sale.”
In the event that the service provider makes a purchase that will be transferred to the client, a resale certificate should be provided to the seller and sales tax should not be paid. Examples could include photographs or printing and copy charges. Please see the New Jersey publication ANJ-28 for additional details.
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