How does NY sales tax apply to a security company's monitoring services, alarm/CCTV equipment, installation, repairs, and its own purchases?

Plain-English summary

The petitioner is a major security company -- electronic security, fire and burglar alarms, video surveillance (CCTV), access control, central-station monitoring, and guard services -- that sells, leases, installs, and repairs equipment for residential and commercial customers in New York. It asked eight questions about when it must collect sales tax on its charges and when it owes tax on its own purchases. The unifying rules:

• Monitoring is always taxable. Monitoring and other alarm services are "protective and detective services" taxable under Tax Law 1105(c)(8) -- whether or not equipment is transferred with them.
• Selling/installing equipment alone: taxable as tangible personal property (and its installation under 1105(c)(3)) unless the installation is a capital improvement to real property. Whether an install is a capital improvement is a fact-intensive, three-part test (1101(b)(9)): it must add value, be permanently affixed so removal would cause material damage, and be intended to be permanent.
• CCTV systems: the in-wall wiring, circuit panels, and cabling installed like a building's electrical system generally qualify as a capital improvement; but cameras and monitors that are merely bolted to a wall or sit on a desk and can be removed and reused are not part of a capital improvement. Leased equipment never qualifies, because a lease isn't a permanent installation. (For tenant installations, the lease must show title vests in the landlord and the improvement stays with the premises.)
• Equipment furnished as part of a protective service: the equipment charge is taxed under 1105(c)(8) (not as a separate TPP sale) when (1) it's furnished with a protective service, (2) the provider keeps ownership or the right to remove it, and (3) it isn't otherwise usable as a local alarm or with other providers' protective services (TSB-A-06(31)S). If the equipment is sold outright or works independently, it's a regular TPP sale.
• Repairs, maintenance, service agreements: taxable, and their treatment parallels the equipment rules above -- under 1105(c)(8) when tied to the company's protective service/equipment it owns, otherwise under 1105(c)(3) or (c)(5).
• The company's own purchases: When it buys property or subcontracted installation that it uses to provide a protective service, it's the user/consumer and owes tax on that purchase (Baker Protective; TSB-A-06(31)S). When the purchase is genuinely resold (e.g., installation resold as a taxable installation service, or monitoring resold), the resale exclusion applies.

What this means for you

Alarm, CCTV, and security companies

Treat monitoring as always taxable. For equipment and installation, the key question is capital improvement or not -- get a properly completed capital improvement certificate where the job qualifies, and remember that leased equipment and readily removable cameras/monitors don't qualify. Watch the difference between selling equipment and furnishing it as part of your protective service: when you keep ownership/the right to remove it and it only works with your service, the equipment charge rides along with the taxable protective service. On your own side, you generally owe tax on property and subcontracted installation you consume in providing a protective service, but can buy for resale what you genuinely resell.

Customers

A bundled "monitoring + equipment" bill will usually be taxable. A pure equipment install that's a capital improvement (and certified as such) shouldn't carry sales tax.

Common questions

Q: Is alarm/CCTV monitoring taxable?
A: Yes, always -- it's a protective and detective service under 1105(c)(8).

Q: Is installing a CCTV system taxable?
A: The in-wall wiring usually qualifies as a nontaxable capital improvement, but bolted-on cameras and desk monitors don't, and leased equipment never does.

Q: Do we owe tax on equipment and subcontracted installation we use to provide monitoring?
A: Generally yes -- you're the user/consumer of property and installation you consume in providing your protective service, unless the purchase qualifies for resale.

Citations and references

• Tax Law section 1105(a) (sales tax on tangible personal property)
• Tax Law section 1105(c)(3) (installing tangible personal property)
• Tax Law section 1105(c)(5) (maintaining/servicing real property)
• Tax Law section 1105(c)(8) (protective and detective services)
• Tax Law section 1101(b)(9) (capital improvement)
• Tax Law section 1101(b)(4)(i) (purchases for resale)
• 20 NYCRR section 541.5 (contractors and capital improvements)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2011.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a11_26s.pdf

Original ruling text

New York State Department of Taxation and Finance
TSB-A-11(26)S
Sales Tax
October 12, 2011

Office of Counsel
Advisory Opinion Unit
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S100922A

The Department of Taxation and Finance received a Petition for Advisory Opinion from name
redacted, on behalf of name redacted (Petitioner). Petitioner asks whether it is required to collect sales
tax on the receipts from the sale, lease, installation or repair of fire and burglar alarms, closed circuit
television systems, and from the sale of monitoring services. It also asks when the Petitioner must pay
sales or use taxes on its purchases.
We conclude that Petitioner’s monitoring services are subject to sales tax under Tax Law
section 1105(c)(8) as protective services and Petitioner’s charges for the installation or repair of alarm
or monitoring equipment will be subject to sales tax under the conditions outlined below. The
taxability of Petitioner’s purchases will depend on how they are used or consumed.
Facts
Petitioner is a leading supplier of electronic security, fire alarm, burglar alarm, video
surveillance, access control equipment services, personal emergency response services, central station
monitoring, and uniformed guard services. Petitioner provides its services to both residential and
commercial customers throughout the United States. Petitioner sells, leases, repairs, and installs closed
circuit televisions (CCTV) systems, as well as burglar and fire alarms for customers in New York. At
least in some cases, Petitioner’s installation work will entail the installation of electric wires, circuit
breaker panels, main power boxes and cables within the walls and ceilings of buildings. Petitioner also
installs cameras, door and window sensors, sirens, alarm bells, pull stations, keypads, smoke detectors
and panic buttons.
CCTV systems consist of electrical wiring, cameras and television monitors. In a CCTV
installation, 99% of the labor is dedicated to the wiring of the system to the customer’s real property.
The CCTV wiring is similar to the electrical wiring of a building.
Analysis
Petitioner presents eight specific questions as to the taxability of its receipts and purchases.
Question 1
Are Petitioner’s receipts from the sale or lease of equipment that it installs or hires a
subcontractor to install subject sales tax?
Answer
Assuming that Petitioner does not provide protective service in conjunction with the sale and
installation of the tangible personal property, Petitioner’s receipts for the sale or lease of the equipment

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will be subject to sales tax unless the installation of the equipment that it sells to its customer results in
a capital improvement.
The retail sale of tangible personal property is subject to sales tax under Tax Law section
1105(a). When Petitioner sells tangible personal property that it installs and that remains tangible
personal property after installation, Petitioner is selling tangible personal property at retail.
All charges by a contractor (including charges for labor and material) to a customer for adding
to or improving real property by a capital improvement are not subject to tax. See 20 NYCRR
§541.5(b)(2). The charges to the customer for tangible personal property that becomes part of a capital
improvement are not subject to sales tax because the contractor is the retail purchaser of such property.
See 20 NYCRR §541.5(b)(1). When Petitioner acts as a contractor in installing tangible personal
property that becomes part of a capital improvement, its receipts for such tangible personal property
will not be subject to sales tax because Petitioner would not be selling tangible personal property at
retail. In those situations, Petitioner must pay sales or use tax on its purchases of tangible personal
property to be installed as part of a capital improvement.
The answer to this question is premised on Petitioner not providing any protective services in
conjunction with the installation of the tangible personal property. As explained below, the sales tax
status of the sale and installation of tangible personal property done in conjunction with the provision
of a protective service subject to sales tax under Tax Law section 1105(c)(8) can be different from the
sales tax status of the sale and installation only of tangible personal property.
The application for Advisory Opinion presents insufficient information to determine whether
the installation of equipment defined generally constitutes a capital improvement. However, if
Petitioner accepts in good faith a properly completed capital improvement certificate from a customer
for whom it installs tangible personal property, Petitioner may deem the transaction a capital
improvement job and pay sales and use tax accordingly. See 20 NYCRR §541.5(b)(4).
Question 2
Are Petitioner’s receipts from the sale of monitoring service and sale or lease of equipment
subject to sales tax?
Answer
The sale or lease of equipment in conjunction with the sale of a monitoring service is subject to
sales tax. While monitoring service is always subject to sales tax under Tax Law section 1105(c)(8),
the receipts for the transfer of the tangible personal property can be subject to sales tax under Tax Law
section 1105(a) as the sale or lease of tangible personal property or subject to sales tax under Tax Law
section 1105(c)(8) as part of the provision of a protective service depending on the type of tangible
personal property furnished and the contract terms for the provision of the tangible personal property
and service.
Protective and detective services include, but are not limited to, all services provided by or
through alarm or protective systems of every nature, including, but are not limited to, protection
against burglary, theft, fire, water damage or any malfunction of industrial processes or any other
malfunction of or damage to property or injury to persons, detective agencies, armored car services and

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guard, patrol and watchman services of every nature, whether or not tangible personal property is
transferred in conjunction therewith. Monitoring services qualify as protective services; therefore,
Petitioner’s receipts for monitoring service are subject to sales tax under Tax Law section 1105(c)(8).
A charge for equipment will be subject to sales tax under Tax Law section 1105(c)(8) when (1)
the equipment is furnished in conjunction with a protective service, (2) the provider of service retains
ownership or the right to remove the equipment, and (3) the equipment is not otherwise functional as a
local monitoring service or in conjunction with other protective services offered by other providers.
See TSB-A-06(31)S. Petitioner would be selling tangible personal property for purposes of sales tax in
conjunction with a protective service if the tangible personal property is sold outright or the equipment
is functional as part of a local monitoring service or other protective service offered by other providers.
Id.
The answer to this question is premised on the Petitioner not installing the equipment. As
explained below, the tax status of the sale and installation of tangible personal property can have
different results depending on the nature of the installation work. The answer is also premised on the
sale or lease of the equipment being optional, i.e., the equipment can be purchased without protective
service. If the equipment must be purchased in conjunction with the purchase of a protective service,
the charge for the equipment will be a receipt subject to sales tax under Tax Law section 1105(c)(8).
Question 3
Is the sale or lease of equipment, the service of installing equipment and the service of
protective monitoring subject to sales tax?
Answer
As stated above, monitoring service is always subject to sales tax under Tax Law section
1105(c)(8). Unless the installation of the tangible personal property results in a capital improvement,
the receipts for the sale or lease of tangible personal property and the installation of the tangible
personal property other than in conjunction with the sale of protective or monitoring service as
discussed in Answer 2 above will be subject to sales tax either under Tax Law section 1105(a) or
section 1105(c)(3). If the installation of the tangible personal property qualifies as a capital
improvement, neither a charge for the tangible personal property installed nor a charge for the
installation will be subject to sales tax. Installation of tangible personal property in conjunction with
the provision of protective or monitoring service will be taxable under Tax Law section 1105(c)(8).
Section 1101(b)(9) of the Tax Law defines “capital improvement” as follows:
(i) An addition or alteration to real property which:
(A) Substantially adds to the value of the real property, or appreciably prolongs
the useful life of the real property; and
(B) Becomes part of the real property or is permanently affixed to the real
property so that removal would cause material damage to the property or article itself;
and

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(C) Is intended to become a permanent installation.
The installation of leased tangible personal property is by definition not intended to be
permanent; therefore, only the installation of tangible personal property that is sold outright can qualify
as a capital improvement. See TSB-A-04(05)S; TSB-A-98(635)S.
Subject to the qualification about leased tangible personal property, the question of whether the
sale and installation of tangible personal property qualifies as a capital improvement is a factually
intensive. Generic descriptions of tangible personal property being installed and generalized
descriptions of methods of installation lack the requisite detail to determine if the installation results in
a capital improvement. Cf. Matter of Building Contractors Association v. Tully, 87 AD2d 909, 449
NYS2d 547 (1982). Petitioner’s application for Advisory Opinion provides insufficient information
about its installation of burglary and fire alarm systems to reach a conclusion about whether these
installations qualify as capital improvements.
The description in Petitioner’s Advisory Opinion petition of the installation of its CCTV
systems is sufficient to conclude that the installations result in capital improvements subject to two
qualifications outlined below.
The first condition for a capital improvement set forth in section 1101(b)(9)(i)(A) of the Tax
Law requires that an installation must “substantially add to the value of the real property, or
appreciably prolong the useful life of the real property.” TSB-A-09(10)S. Though a CCTV system
cannot be said to appreciably prolong the useful life of the real property, it is reasonable to conclude
that it may substantially add to the value of the real property. Id.
The second condition for a capital improvement set forth in section 1101(b)(9)(i)(B) of the Tax
Law is that the CCTV system be installed in such a manner as to become part of the real property or be
permanently affixed to the real property so that removal would cause material damage to the real
property or to the CCTV system itself. Installations of circuit breaker panels, in-wall wiring,
additional circuits to electrical systems, main power boxes, and light fixtures as part of the realty
would meet this second condition. See Publication 862, Sales and Use Tax Classifications of Capital
Improvements and Repairs to Real Property (April 2001), p 13. Where the cables, wires and other
equipment in a CCTV system are installed in a manner similar to the building's electrical system,
circuit breaker panels and other items listed above so that they become a part of the real property, their
installation would meet the second requirement of section 1101(b)(9)(i) of the Tax Law. Id. However,
components of the system such as the video surveillance cameras and television monitors that are
installed on brackets bolted to a wall, and the monitors, system controllers, and recording devices that
sit on desks, and that can be readily removed from the premises and reused, are not considered
permanently affixed to the real property. Therefore, these items will not be considered a part of a
capital improvement to real property. See Matter of Gem Stores, Inc., Tax Appeals Tribunal, October
14, 1988, TSB-D-88(30)S.
The third condition for a capital improvement set forth in section 1101(b)(9)(i)(C) of the Tax
Law is that the CCTV system be intended to become a permanent installation. In order to meet this
condition, the system must become the property of the owner of the realty upon its installation. Thus,
with respect to an installation performed for the owner of real property, the CCTV system's cables,

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wires, camera housings or other equipment installed into the ceiling and walls in a manner similar to
the building's electrical system, circuit breaker panels, and other items listed above are considered to
be permanently affixed to the real property and intended to become a permanent installation.
When installations of property are made for an occupant or tenant, it is presumed that the
installation of that property is not intended to be permanent unless the lease indicates that title to the
improvements is to vest in the landlord and that the improvements are to become a part of the premises
and remain in the premises. See TSB-A-82(32)S. Where the conditions in section 1101(b)(9)(i) of the
Tax Law discussed above are met for installations performed for commercial and industrial tenants of
real property, and a specific lease provision states that title to the improvement immediately vests in
the lessor upon installation, and the improvement becomes part of the premises and remain in the
premises after termination of the lease or rental agreement, such installations may also qualify as
capital improvements to the real property. See Matter of Flah's of Syracuse, Inc. v. James H. Tully, Jr.
et al, 89 AD 2d 729 (3rd Dep’t 1982).
In summary, CCTV system components that add value to the property, are installed so as to be
considered permanently affixed to the real property in the same manner as the building's electrical
system, and become the property of the owner of the realty upon installation, are considered to meet
the conditions set forth in section 1101(b)(9)(i) of the Tax Law to qualify as a capital improvement to
real property. See TSB-A-04(5)S.
Question 4
Are the receipts from the sale or lease of equipment, installation of the equipment, and
monitoring service by Petitioner’s subcontractors subject to sales and use tax.
Answer
The taxability of Petitioner’s payment to a subcontractor for installation service depends on the
taxability of the product sold by Petitioner to which the payment relates, and in the case of Petitioner’s
purchase of tangible personal property, the taxability of the purchase also depends on what rights the
Petitioner’s customer has over the property.
If Petitioner uses a monitoring service purchased from a subcontractor to provide a taxable
protective service, Petitioner’s purchase of the service will not be subject to sales tax because the
subcontractor’s service would be resold by Petitioner.
If Petitioner uses installation services purchased from a subcontractor to provide a taxable
protective service, Petitioner’s purchase of the service will be subject to sales tax under Tax Law
section 1105(c)(3) or 1105(c)(5). TSB-A-06(31)S. In such case, Petitioner is considered to be the user
and consumer of the installation service in the performance of Petitioner’s protective service. See
Matter of Baker Protective Services, Inc. d/b/a Wells Fargo Alarm Services, Inc., Dec Tax App Trib,
November 1, 2001; TSB-A-04(5)S.
If Petitioner uses installation services purchased from a subcontractor to provide an installation
service subject to sales tax under Tax Law section 1105(c)(3) or 1105(c)(5), Petitioner’s purchase of
the service would not be subject to sales tax because it would qualify for the resale exclusion.

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If tangible personal property purchased by Petitioner from a subcontractor is not sold by
Petitioner as tangible personal property, Petitioner is the retail purchaser of the property and would
owe sales or use tax on the purchase. As explained in the answer to question 2, for purposes of sales
tax, Petitioner is not selling tangible personal property that is used in conjunction with the provision of
a protective service when Petitioner retains ownership over the property or the right to remove the
property, and the tangible personal property is not otherwise functional in conjunction with protective
services offered by other providers. Because the tangible personal property is deemed to be used by
Petitioner in the performance of its service, Petitioner’s purchase of the property fails to qualify as a
purchase for resale as such or as property actually transferred to the customer in performance of the
service for the purposes of section 1101(b)(4)(i) of the Tax Law.
Question 5
Is installation labor subject to sales tax?
Answer
A labor charge for installing tangible personal property is subject to sales tax unless the
installation results in a capital improvement.
A labor charge for installing tangible personal property is a receipt for a service, which may be
taxable under Tax Law section 1105(c)(3) or 1105(c)(5). As explained above in the answers to
question 3, the taxability of an installation service depends on the end of result of the installation: an
installation service is subject to sales tax unless the installation service results in a capital
improvement.
Question 6
Are receipts for repair and maintenance calls performed directly by Petitioner or a
subcontractor on Petitioner’s behalf subject to sales tax?
Answer
The receipts for repair and maintenance calls are subject to sales tax under Tax Law section
1105(c)(3), 1105(c)(5) or 1105(c)(8). Repair and maintenance receipts are subject to sales tax under
Tax Law section 1105(c)(8) if (1) the tangible personal property being serviced was provided by
Petitioner in conjunction with one of Petitioner protective or monitoring services, (2) Petitioner retains
ownership or the right to remove the tangible personal property, and (3) the tangible personal property
is not otherwise functional as a local alarm or other monitoring service offered by other protective
service providers. In all other cases, the receipts for repair and maintenance work would be subject to
sales tax under Tax Law section 1105(c)(3) or 1105(c)(5). In sum, the taxability of repair and
maintenance receipts will parallel the taxability of receipts for the installation of protective equipment.
Question 7
Are repair and maintenance service calls (labor and equipment) provided by Petitioner’s
employees and Petitioner’s subcontractors subject to sales tax?
Answer
If Petitioner bills for repair and maintenance service calls, the taxability of the receipts will be
same as the receipts addressed in the answer to question 6. If Petitioner does not bill a separate charge

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for repair and maintenance service calls, the taxability of the receipt for the transaction will on depend
on the primary function of the transaction of which the service calls are a part. Matter of SSOV '81
Ltd., Tax Appeals Tribunal, January 19, 1995. For example, if service calls are performed in
conjunction with a protective service provided by Petitioner, the service calls are a component of the
protective service.
Question 8
Are service agreements for a monthly fixed payment for limited or unlimited service calls
provided by Petitioner or a subcontractor subject to sales tax?
Answer
Service agreements related to the repair or maintenance of protective equipment are subject to
sales tax under Tax Law section 1105(c)(3), 1105(c)(5) or 1105(c)(8). Because service agreements are
contracts for repair and maintenance, the precise sales tax status of the contract receipts would depend
on the factors addressed in the answer to question 6.

DATED: October 12, 2011

NOTE:

/S/
DEBORAH R. LIEBMAN
Deputy Counsel

An Advisory Opinion is issued at the request of a person or entity. It is limited to the facts
set forth therein and is binding on the Department only with respect to the person or entity
to whom it is issued and only if the person or entity fully and accurately describes all
relevant facts. An Advisory Opinion is based on the law, regulations, and Department
policies in effect as of the date the Opinion is issued or for the specific time period at issue
in the Opinion.