When a city secures vacant buildings from unauthorized entry or demolishes them under its police powers (as opposed to hiring an outside security company), does it owe sales tax on those charges?

Plain-English summary

A city asked the Comptroller about the tax treatment of two activities it performs under its police powers: securing vacant buildings from unauthorized entry, and demolishing buildings. The Comptroller confirmed both are nontaxable, extending a prior Comptroller hearing decision (Hearing No. 27,367) that had already established that a city's charge for mowing a vacant lot in violation of a city ordinance — an activity performed under the city's police powers — is not taxable. The reasoning was the same for building security: "a charge for the securing of vacant buildings by a city under its police powers to prevent unauthorized entry is not taxable." The charge for demolishing a building was likewise found not taxable.

What this means for you

Cities and municipalities

Charges you make for exercising police powers — securing vacant/unsafe buildings, demolishing hazardous structures, or code-enforcement mowing of violating properties — are not taxable as security, demolition, or real property services. This is distinct from a private security company or demolition contractor performing the same physical work under an ordinary commercial contract, where normal taxability rules for those services would apply.

Private security and demolition companies

This ruling addresses a municipality acting under its police powers, not a private contractor hired by a private party. Don't assume this exemption extends to your commercial security or demolition services performed for non-governmental customers — check the specific rules governing security services and real property/demolition work in that context.

Accountants and tax professionals

The through-line across this letter and the referenced Hearing No. 27,367 is that a city's exercise of police power (code enforcement mowing, securing unsafe buildings, demolition) is treated as a governmental function rather than a taxable commercial service, distinguishing it from the same physical activity performed commercially.

Common questions

Q: Does a city owe sales tax when it secures a vacant, unsafe building to prevent trespassing?
A: No, when the city is acting under its police powers — this letter confirms that charge is not a taxable security service.

Q: Is demolition of a building taxable?
A: In this ruling, addressing a city's demolition activity, the charge for demolishing a building is not taxable.

Q: Does this exemption extend to a private security company doing similar work?
A: This letter addresses a city acting under its police powers, not a private commercial security or demolition company; it should not be assumed to extend to purely private commercial transactions.

Q: Can I rely on this letter for my own situation?
A: No. This opinion is based on the facts presented; additional or different facts may change the opinion.

Citations and references

No Texas Tax Code section or administrative rule is cited by number in the letter. The letter relies on Comptroller Hearing No. 27,367 (establishing that a city's police-power mowing of a violating vacant lot is nontaxable) and extends that reasoning to building-securing and demolition charges.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/200005303L

Original ruling text

May 12, 2000

Subject: Sales Tax

Dear **:

Thank you for your recent email concerning the taxability of certain activities
performed by the City of CITY.

The city began charging sales tax for mowing properties that were in violation
of city ordinance based on information I gave personnel in the city's finance
department. The city also contracts to have buildings secured from unauthorized
entry or demolished.

You correctly conclude that Hearing No. 27,367 renders the charge for mowing of
vacant lot by a city under its police powers to be nontaxable. Similarly, a
charge for the securing of vacant buildings by a city under its police powers
to prevent unauthorized entry is not taxable.

The charge for demolishing a building is not taxable.

This opinion is based on the facts presented. If there are additional or
different facts, the opinion may change.

You may call me toll free 1-800-531-5441, extension 3-4683, if you have any
questions or need more information. You may write to Tax Policy Division,
Comptroller of Public Accounts, P.O. Box 13528, Austin, Texas 78711-3825. My
e-mail address is .

Sincerely,

Eddie C. Washington
Tax Policy Division