How did Texas tax licensed security services and items used or transferred in providing them, and what later-law alert applies?

Plain-English summary

The 1987 letter defined security services by the license requirement and listed investigation, guard, alarm, armored-car, courier, guard-dog, detective, and private-investigator services. Providers had to collect tax on the total charge or accept a proper resale or exemption certificate.

Providers owed tax on items used but not transferred into the customer's care and custody. They could buy transferred items under a resale certificate.

STAR now warns that, effective September 1, 2019, private security consultants and guard dog companies were removed from the cited license requirements and are no longer considered taxable security services on that basis.

What this means for you

Do not apply the 1987 provider list without the 2019 alert. For services still within the rule, the letter distinguishes consumed supplies from items directly transferred to the customer.

Common questions

What amount was taxed in 1987? The total security-service charge.

Did the provider owe tax on supplies it consumed? Yes.

Could transferred items be bought for resale? Yes.

What changed in 2019? The STAR alert removes private security consultants and guard dog companies from this license-based taxable category.

Citations and references

• Vernon's Texas Civil Statutes art. 4413 (29bb), § 13 — 1987 license-based definition.
• 34 Tex. Admin. Code Rules 3.285 and 3.287 — resale and exemption certificates.
• SB 616 § 5.028; Texas Occupations Code § 1702.102 — cited in STAR's 2019 alert.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8709L0832C09

Original ruling text

ALERT – Services provided by private security consultants and guard dog companies are no longer considered a taxable security service. SB 616 (section 5.028) amended the Occupation Code 1702.102 to remove these entities from the license requirements. Comptroller Rule 3.333 is based upon this Occupation Code. 86th Legislative Session, effective 09/01/2019.

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

September 18, 1987

Dear ***:

Thank you for your letter concerning the taxability of your business.

Security services means any 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, and includes any service
provided as an investigations company, guard company, alarm systems
company, armored car company, courier company, guard dog company,
security service contractor, private security officer, detective service,
or private investigator.

All providers of security services must obtain a Texas sales and use tax
permit and collect tax on the total amount charged for security services,
or accept a properly completed resale or exemption certificate in lieu of
collecting tax. See Sec. 3.285 of this title (relating to Resale
Certificate; Sales for Resale) and Sec. 3.287 of this title (relating to Exemption
Certificates).

A provider of security services must pay sales or use tax on all items
used to provide the service which are not directly transferred to the care and
custody of the customer. If the item is transferred, the security service
provider may give his supplier a resale certificate in lieu of tax at the
time of purchase.

Enclosed is Rule 3.285 Sales for Resale, Rule 3.287 Exemption Certificates
and a sales tax application that needs to be completed and returned. If
you need help with the application or in determining the correct tax rate you
can call the comptroller's office nearest you at 713/879-883S.

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 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,
Curt Swenson
Tax Policy Division