Could a Texas security-service provider offset its service tax with tax paid to another state on equipment or repairs, or buy those items for resale?

Plain-English summary

Texas sales tax applied to the total charge for security services performed for Texas customers. Tax paid to another state on the equipment or out-of-state repairs used to provide that service did not reduce the Texas tax due on the service.

The provider could issue a resale certificate for equipment or repairs only if care, custody, and control of the tangible personal property transferred to the customer as part of the taxable security service. New and recycled equipment produced the same service-tax result.

STAR now displays an alert directing readers to Rule 3.285 as amended November 1, 2017 for current care, custody, and control guidance.

Common questions

Could out-of-state tax offset Texas service tax? No.

When could equipment or repairs be bought for resale? When care, custody, and control transferred to the customer as part of the taxable service.

Did recycled equipment change the answer? No.

Citations and references

• 34 Tex. Admin. Code Rules 3.333, 3.338, 3.340, and 3.285

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9001L0974B12

Original ruling text

ALERT: For specific guidance relating to the care, custody and control of TPP when providing a taxable service, please see Rule 3.285, Resale Certificates; Sales for Resale amended 11/01/2017.

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

January 8, 1990

Dear ***:

Thank you for your recent letter regarding Texas sales and/or use
taxes that relate to security services performed in Texas.

You stated that your subsidiary, "*", currently is doing
business in Texas and that sales tax is paid to an out-of-state
supplier on the equipment which is installed in Texas in order to
provide the security service. You also stated that any repairs to
the units were performed by an out-of-state repair service.

You asked about the proper application of the sales and use tax on
the repaired units which are installed in Texas.

Texas sales tax is due on the total amount charged for the
security services performed for your customers in Texas. "*"
cannot reduce the sales tax due from the sale of security service
in Texas, by an amount of sales tax paid to another state, on the
equipment or repairs, used to perform that service. Providers of
security services may issue a resale certificate in lieu of Texas
tax (for equipment or repairs) to suppliers of tangible personal
property if care, custody and control of the tangible personal
property is transferred to the customer as part of the taxable
service. For your information I am enclosing Rules 3.333, 3.338,
3.340, and 3.285.

The taxability of the security services you provide will remain
the same whether you use new or "recycled" equipment.

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

If you have any questions or need additional information, you may
call me toll-free at 1-800-252-5555, extension 5-0330, or write to
me at Tax Correspondence, Comptroller of Public Accounts.

Sincerely,
Bettie U. Peterson
Tax Correspondence Division