How did Texas tax alarm-system sales, leases, installation, maintenance, and monitoring, and was fire-alarm monitoring treated as a security service?

Plain-English summary

Alarm systems were tangible personal property, so their sale or lease and the related installation and maintenance charges were taxable.

Monitoring Texas locations was generally taxable, but monitoring a fire-alarm system was not taxable under Rule 3.333. The letter explained that fire-alarm systems were not covered by the Private Investigators and Private Security Agencies Act.

The letter also corrected an enclosed question-and-answer item: tax was collected based on the service provider's place of business, and no Metropolitan Transit Authority tax was due if the service was provided outside an MTA.

What this means for you

The historical letter separated the taxable alarm equipment and physical services from the monitoring classification. The fire-alarm exception applied to monitoring under the security-services rule, not to the sale, lease, installation, or maintenance of alarm equipment.

Common questions

Were alarm-system sales and leases taxable? Yes.

Were installation and maintenance taxable? Yes.

Was fire-alarm monitoring taxable as security service? No, under the cited rule and Act.

How did the letter source the monitoring tax? By the service provider's place of business; it said no MTA tax was due when service was provided outside an MTA.

Citations and references

• Private Investigators and Private Security Agencies Act
• 34 Tex. Admin. Code Rule 3.333 (security services)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8711L0848A05

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller November 25, 1987

Dear ***:

Thank you for your recent letter regarding the taxability of the sales
and
services provided by your company.

In your letter, you stated that your company installs alarm systems and
has
income from the installation, service, monitoring and leasing of those
systems.

Alarm systems are considered to be tangible personal property.
Therefore,
the sale (or lease), installation and maintenance charges are subject to
tax.

Monitoring charges of locations in Texas are taxable, except for
monitoring
fire alarm systems. Fire alarm systems are not covered by the Private
Investigators and Private Security Agencies Act and, therefore, not
taxable
under Rule 3.333, "Security Services."

Enclosed is a series of questions and answers relating to the taxability
of
securities services. The answer to question #37 is incorrect. the
answer is
currently being revised. The tax should be collected based upon the
service
provider's place of business. If the service is provided outside of an
MTA,
no MTA tax is due.

Also enclosed, for you information, is Rule 3.333.

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

If you have any questions or need more information, please call me at
1-800-252-5555 toll free from anywhere in Texas. The regular number is
512/463-4600. You may write me at the Tax Policy Division.

Sincerely,
Julie Pesl
Tax Policy Division