Was the monthly monitoring fee for an in-home emergency-alert unit taxable along with the equipment rent?

Plain-English summary

An unidentified local service administrator marketed a nationwide provider's emergency-response program. It bought or leased units from the out-of-state monitoring company, found customers, installed units at their homes and charged one-time installation plus separately described monthly equipment rental/monitoring.

Customers paid the local provider directly; it in turn paid upstream for buying/leasing equipment and monitoring all active units. The provider acknowledged customer equipment rent was taxable. Counsel was asked only about monitoring, not installation or upstream treatment.

Pressing an in-home portable transmitter sent radio to receiver, which dialed an out-of-state central center. It notified one of three contacts the customer designated at installation. Monthly monitoring did not vary with number of activations.

On these unique specific facts, counsel treated monitoring as nontaxable service, making customer contract mixed tangible-property rental and service. No agreements, equipment/acquisition tax, installation evidence, prices/bills, response logs, upstream payments, returns or outcome is supplied. The live annotation publishes the operational facts/result but not the installation nondecision/source limits.

Common questions

Was all of the monthly bill taxable?

No. Only the equipment-rental portion was identified as taxable.

Did counsel independently determine rent taxability?

The provider acknowledged it; the sole submitted question was monitoring tax.

Why was monitoring treated as a service?

The charge paid for the center to receive signals and notify designated emergency contacts.

Did activation count change the fee?

No. The stated monitoring charge did not vary by customer use.

Did the source decide the installation fee?

No. The question presented and answered concerned the monthly monitoring fee.

Did counsel state a broad rule for all alert services?

No. The memorandum expressly tied its result to this unique situation and the provider's specific facts.

Are the contracts and actual bills supplied?

No. The source quotes descriptions but includes no underlying document or outcome.

Citations and references

• Sections 6051/6006(a)/6007; Civil Code section 1656.1 — retail-sale/reimbursement framework
• Sections 6201/6401 — use-tax framework
• Regulation 1501 — services not constituting tangible-property sales
• April 25/April 12/March 13 writings and contract/equipment/installation/billing/tax records — absent
• July 15, 1996 Chung memorandum — monitoring-only unique-facts result
• Official Annotation 330.2333 — detailed mixed-contract excerpt without nondecision/source limits

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: Annotation 330.2333
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/330-2333.pdf

Original ruling text

State of California

Board of Equalization

Memorandum

To:

Ms. L. P. Salcedo
Business Tax Representative

From:

Sophia H. Chung
Tax Counsel

330.2333

Date:

July 15, 1996

Subject:

This is in response to your memorandum dated April 25, 1996, asking how tax applies to charges for monitoring services provided by --- --- ---. By way of a letter dated April 12, 1996, addressed to you, --- --- --- has provided the following factual background:
--- --- --- is the local service administrators of --- --- --- which provides complete and expansion programs of --- --- --- across the United States. Our service consists of an easy to use electronic device designed to signal a friend, relative, emergency service whenever help is needed. "We buy or lease these units from --- --- --- and market the service in --- city. We find clients, install our units at client's homes and charge a one time installation fee and a monthly fee for the rental of the equipment (which is taxable) and a monthly fee for the monitoring service.... The monitoring is done through --- --- -- --- in ---. We bill our clients for rental and monitoring of the equipment and they pay us directly and --- --- --- in turn pays--- --- --- for the purchase or lease of the equipment and the monitoring of all units in service." DISCUSSION Retail sales of tangible personal property in California are subject to sales tax, measured by the gross receipts, unless the sale is specifically exempt from taxation by statute. (Rev. & Tax. Code § 6051.) The term "sale" means any transfer of title or possession of tangible personal property for consideration. (Rev. & Tax. Code § 6006(a).) A sale at retail means a sale for any purpose other than resale in the regular course of business. (Rev. & Tax. Code § 6007.) Although the retailer owes the sales tax, the retailer may collect sales tax reimbursement from the purchaser if the contract of sale so provides. (Civ. Code § 1656.1.) When sales tax does not apply, use tax, measured by the sales price, applies to the use of tangible personal property purchased from a retailer for the storage, use, or other consumption in California, unless the use

is exempt from taxation by statute. (Rev. & Tax. Code §§ 6201, 6401.) Neither the sales tax nor the use tax applies to charges for services not constituting sales of tangible personal property. (Reg. 1501.)
--- acknowledges that the monthly fee charged to its customers for equipment rental is subject to tax. The only question presented is whether the monthly fee for monitoring the equipment is subject to tax. In a letter dated March 13, 1996, to Mr. B. H. Watson, Supervisor of Return Analysis Section, --- explains the operation of the monitoring equipment and services. When the customer presses the button on the portable transmitter installed in the customer's home, it sends a radio signal to the receiver, which then dials the central monitoring service located in ---. The center then notifies one of three emergency contacts designated by the customer at the time of the installation of the unit. There is no charge for the number of times the system is used by the customer. Based on the unique situation presented by the specific facts provided by ---, we regard the monthly fee for monitoring the unit as a nontaxable charge for services. Thus, we conclude that the contract between --- and its customers is for both the sale of tangible personal property and the provision of services. In other words, the monthly fee for the rental of the monitoring equipment is subject to tax, however, the monthly fee for monitoring the equipment is not subject to tax. SHC:rz