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Investigating the Taxability of New Jersey Detective Services

  • Apr 28, 2015 | Gail Cole

 Should this guy's services be taxed?

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?”

The source

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.”

Taxable services

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

Nontaxable 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.

Know the sales tax you’re required to collect and remit so you don’t find yourself at the wrong end of an investigation. Learn how an automated solution works.

photo credit: detective via photopin (license)

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.