Which of an armored transport company's many services (ATM cash replenishment, ATM repairs, vault storage, coin wrapping) are taxable in Texas?

Plain-English summary

An armored transport company providing ground transport, ATM services (cash replenishment, deposit pickup, machine maintenance/repair), cash vault services, and coin wrapping to banks asked the Comptroller for a taxability ruling covering each service line.

Taxable:

• Armored ground transport of currency and valuables.
• ATM cash replenishment and deposit pickup — taxable as a security service under Sec. 151.0075 (since it requires a license under the Private Investigators and Private Security Agencies Act).
• Servicing ATMs bolted to floors — taxable as labor to repair, restore, or maintain tangible personal property.
• Repairing/restoring ATMs that are set into walls (real property improvements) — including clearing jammed bills/cards and installing repair parts.
• Receipt paper sale/replacement — taxable in total.
• Deposit processing/consolidation and change order preparation — taxable security services.
• Food stamp pickup/delivery.
• Pickup and delivery of coins for wrapping (the transport leg, distinct from the wrapping itself).

Not taxable:

• True maintenance (as opposed to repair) of ATMs that are real-property improvements — Rule 3.357 defines maintenance as scheduled, periodic work to sustain safe, continuous operation or prevent deterioration, distinct from a repair.
• Coin wrapping itself — a nontaxable service, as long as it's separately stated from the taxable pickup/delivery charges (though the company owes tax on its own wrapping supplies).
• Vault storage — not taxable, unless the provider is required to be licensed under the Private Investigators and Private Security Agencies Act for that specific function, or the storage is tied to a service that requires such a license. The Comptroller noted this specific point remained unresolved on the facts presented and recommended the company get a written opinion from the state licensing board.

What this means for you

Armored transport and ATM service companies

Whether a given charge is taxable often hinges on a fine distinction: repair vs. maintenance of a wall-mounted ATM, or whether a licensable security function (like deposit processing) is involved. Separately stating nontaxable services (coin wrapping, true maintenance) from taxable ones (transport, repair, security services) on your invoices is important to avoid over-collecting or under-collecting tax.

Banks and financial institutions purchasing these services

Expect tax on most ATM cash-handling and repair services, but not on genuine scheduled maintenance of wall-mounted machines or on the coin-wrapping service itself (if billed separately from transport).

Common questions

Q: Is servicing a bank's ATM machine always taxable?
A: Mostly, per this letter — cash replenishment/pickup and repairs are taxable, but true scheduled maintenance (not repair) of a wall-mounted ATM is not taxable under Rule 3.357.

Q: Is coin wrapping taxable?
A: No, per this letter, as long as the charge is separately stated from taxable transport/pickup charges — though the company owes tax on supplies used to wrap the coins.

Q: Is vault storage of currency taxable?
A: Generally not, per this letter, unless the provider must be licensed as a security service for that specific function — a point this letter left unresolved on the facts given.

Citations and references

Statutes and rules:

• Tex. Tax Code § 151.0075 (definition of "security service")
• 34 Tex. Admin. Code Rule 3.357 (maintenance vs. repair of real property improvements)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9805553L

Original ruling text

May 26, 1998

Dear Mr. **:

Thank you for your recent letter which is restated in part with response below.

This letter is to request a written legal opinion or an official ruling
regarding the taxability of the services that **provides to its
customers.

**. is an armored transport company that provides armored ground
transport services, automated teller machine ("ATM") services, cash vault and
related services, and coin wrapping services to financial institutions and
other commercial customers. **. is strictly a service company, is
service taxable where the service was rendered?

The traditional armored ground transportation represents the core service
provided by **. Armored vehicles transport currency and other valuables
between commercial enterprises and banks, between banks, and from the Federal
Reserve Banks to commercial banks.

ATM services represent the most dynamic sector of our business. ATM services
consist of cash replenishment, deposit pick-up and first-line and second-line
maintenance services. Cash replenishment and deposit pick-up at ATM locations
is substantially similar to normal ground transportation services with respect
to the transport of cash. However, the servicing of ATM locations involves a
greater degree of mechanical proficiency in that guards are required to disarm
and reset alarms, change bill cassettes (replenishing of cash in the ATMs) and
perform various other administrative and mechanical tasks. First - line
maintenance services involve correction of simple non- technical problems such
as dislodging jammed bills and cards and refilling receipt paper and are
frequently provided by armored transport carriers. Second-line maintenance
services consist of more complex technical ATM repairs and often require
specialized training, diagnostic equipment and an inventory of parts.

Cash vault and related service cover a wide array of activities from passive,
secured storage of valuables such as currency, securities and computer chips to
active services such as deposit processing and consolidation, change order
preparation and food stamp processing.

Coin wrapping is essentially part of the cash vault service. **.
picks-up loose coins from its customers or coin machines and transports it back
to **. place of business where the loose coins are wrapped in each
respective rolls (quarters, dimes, nickels and pennies). The wrapped coins are
then given back to the customer or deposited.

Please provide us a written legal opinion or an official ruling regarding the
taxability of each of the services mentioned above that **.
provides. If you require additional information or explanation of our business,
please feel free to contact us. Your assistance in this matter is greatly
appreciated. Thank you.

Response: Tax Code Section 151.0075 defines Security Service as service for
which a license is required under Section 13, Private Investigators and Private
Security Agencies Act (Article 4413(29bb), Vernon's Texas Civil Statutes) "The
Act". I have reviewed Article 4413 (29bb) and discussed the facts in your
letter with staff from the Texas Board of Private Investigators.

Charges for armored ground transport services are subject to sales tax.

Charges for ATM services related to transport of money to and from the ATM
machines is subject to sales tax as a security service. This includes cash
replenishment and deposit pick up. Charges to service ATMs that are bolted to
floors are taxable as labor to repair, restore, or maintain tangible property.

As we discussed in our telephone conversation of May 13, 1998, charges to
repair or restore ATMs that are improvements to real property (set in walls)
are also subject to sales tax. This would include charges for removing money
and cards that are stuck in machines as well as for any repair parts installed.
Charges to maintain improvements to realty are not subject to sales tax. Rule
3.357 defines maintenance on real property as follows:

"For operational and functioning improvements to realty, maintenance means
scheduled, periodic work necessary to sustain or support safe, efficient,
continuous operations, or to prevent the decline, failure, lapse, or
deterioration of the improvement."

Charges for sale and replacement of receipt paper are taxable in total.

Vault storage services are not taxable unless you are required to hold a
license for the service under The Act or unless the storage is related to the
performance of a service that requires a license under The Act. I discussed
your facts with staff from the Texas Board of Private Investigators and have
reviewed the additional material you provided. However, it is still not clear
to me if these functions require your firm to be licensed under "The Act" and I
recommend that you contact them in writing for an opinion based on specific
fact situations. If you will then provide me with a copy of their written
response and the specific facts on which it was based, I will be happy to
respond.

In our telephone conversation of May 13, 1998, you stated that deposit
processing and consolidation means picking up money from a customer, counting
and bundling the money and depositing the money in the customer's bank. This
function requires a license under The Act and as such is a taxable security
service. Change order preparation involves picking up and delivering coins in
denominations requested by the customer and is a security service the charges
for which are subject to sales tax. You stated that you were not sure if
**does food stamp processing in Texas, however, charges for pick up
and delivery of food stamps are subject to sales tax.

Coin wrapping is a nontaxable service, and no tax is due if the charge for coin
wrapping is separately stated from taxable services. **. must pay
tax on all supplies used in performing the wrapping service. Charges for pick
up and delivery of the coins are subject to sales tax.

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

You may call me toll free at 1-800-531-5441, ext. 3-4680. The direct line is
512/463-4680. You may also write to Tax Policy, Comptroller of Public
Accounts. The email address is .

Sincerely,

Al Van Allen
Tax Policy Division