How did Texas tax repair and maintenance contracts for bank vaults, safes, drive-in equipment, cameras, and alarms?

Plain-English summary

Repair labor for tangible personal property and nonresidential real property was taxable, so the full charge to repair vault doors, safes, or remote drive-in equipment was taxable.

If those items were real property, qualifying maintenance labor could be nontaxable under Rule 3.357(a)(3). The provider still owed tax on materials and had to substantiate maintenance through schedules or work orders.

Camera and burglar-alarm repair and maintenance was taxable security service under Rule 3.333(a). If particular alarm work was not a security service—for example, fire-alarm repair—it remained taxable as tangible-personal-property or nonresidential-real-property repair.

The letter also described collection of state, city, MTA, county, and transit taxes based on the service location, subject to a two-percent local-tax cap.

What this means for you

Classifying the asset as personal property or realty mattered most for maintenance labor, not repairs. Security-system work had its own taxable-service rule.

Common questions

Were vault and drive-in-equipment repairs taxable? Yes, in full.

Could real-property maintenance labor be nontaxable? Yes, with supporting schedules or work orders.

Were cameras and burglar alarms taxable security services? Yes.

Was fire-alarm repair nontaxable? No; it remained taxable repair even though it was not security service.

Citations and references

• Comptroller Rule 3.292 — tangible-personal-property repair
• Comptroller Rule 3.357(a)(3) and (c)(2) — real-property maintenance and materials
• Comptroller Rule 3.333(a) — 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/9009L1043E10

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, TEXAS 78774

September 6, 1990

Dear **:

We received your letter questioning the taxability of your service
contracts on vault doors (and safes), remote drive-in equipment
(pneumatic tube systems), cameras, and alarms.

Labor to repair tangible personal property is taxable. Labor to
repair non-residential real property is also taxable. Therefore,
if you are repairing tangible personal property or non-residential
real property, then your entire charge for the repair is taxable.
See the enclosed Rules 3.292 relating to repairs to tangible per-
sonal property and 3.357 relating to repairs to real property.

The entire charge to repair bank vault doors, safes or remote
drive-in equipment is taxable.

Labor to maintain real property is not taxable. If the bank vault
doors, safes or remote drive-in equipment are realty as opposed to
tangible personal property, then no tax is due on labor which meets
the definition of maintenance in section (a)(3) of Rule 3.357. How-
ever, persons providing maintenance on real property are liable for
tax on all materials used. You must be able to show by maintenance
schedules or work orders that the services meet the definition in
section (a)(3) of Rule 3.357. See section (c)(2) of Rule 3.357.

The repair and maintenance of security systems including the cameras
and alarms is taxable as a security service. The enclosed Rule 3.333
(a) defines a security service as "any service for which a license
is required under the Private Investigators and P rivate Security
Agencies Act, Sec. 13, Texas Civil Statutes, Article 4413 (29bb) and
includes any services provided in the scope of the required license...
as [an] alarm systems company.....". An alarm systems company is de-
fined under that act as "any person that sells, installs, services,
monitors, or responds to burglar alarm signal devices, burglar alarms,
television cameras, still cameras, or any other electrical, mechanical,
or electronic device used to prevent or detect burglary, theft, shop-
lifting, pilferage, and other losses."

If the repair and maintenance of the cameras and alarms is not a taxa-ble
security service, then it is taxable as the repair of tangible
personal property or the repair of non- residential real property as
discussed above. For example, the repair of fire alarms is not a tax-
able security service.

If ** has one place of business located inside the city
limits of *, then you should collect 6.25% state tax and 1%
* city tax on all your taxable items. If you perform ser-
vice contracts within the * MTA area, then you should also
collect the 1% * MTA tax. When you go outside the *
MTA area to perform service contracts, then you should not collect
the * MTA tax; however, you will be required to collect that
areas county tax or transit tax provided you don't collect more than
the 2% cap on local taxes. See the enclosed "Texas Tax Bulletin".

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

If you have any questions you may call or write Tax Correspondence.
You may call toll free 1- 800- 252- 5555, or our regular number is
512/463-4600. My extension is 3-4658.

Sincerely,
Sherry Buckley
Tax Correspondence