Is a computerized communications monitoring service for elderly, shut-in people taxable as a 'security service' in Texas if the provider must be licensed as an Alarm Systems Company under the Private Security Act?

Plain-English summary

A taxpayer doing business as "Company A" was awarded marketing and management rights to provide a computerized communication service for shut-in elderly people (the letter refers to this in one internal memo as "Call — A — Day"). The taxpayer wrote to the Comptroller (originally to Comptroller John Sharp, on July 18, 1995) asking whether the service would be taxable, noting that it would initially be provided from a centralized site in Texas (eventually networked nationwide) and that all payments would be made by credit card.

Before answering, the Tax Administration Office checked with the State Board of Private Investigators (the agency that licenses private security businesses under the Private Security Act). The Board's Investigation Division reviewed the taxpayer's brochure and concluded that the service, as described, would require the taxpayer to obtain an Alarm Systems Company license. The letter quotes the statutory definition of "alarm systems company" — a person that sells, installs, services, monitors, or responds to burglar alarm devices or other electrical/mechanical/electronic devices used to prevent or detect burglary, theft, or other losses; to prevent or detect intrusion; or primarily to detect or summon aid for other emergencies — and notes that an updated version of this definition (adding "detection device" and expanding the alarm/monitor definitions) took effect September 1, 1995.

Because the service required this licensure, the Comptroller's Tax Administration Office held that the taxpayer's service is a "security service" as defined under Texas tax law, and:

• Charges for the service billed to Texas customers are subject to sales tax.
• Charges for the same service billed to out-of-state residents are not taxable.

What this means for you

Businesses offering monitoring, alerting, or "check-in" services for elderly or at-risk customers

If your service is the kind that would require you to be licensed as an Alarm Systems Company under the Private Security Act — because it's designed to detect emergencies, intrusions, or similar events and summon aid — the Comptroller treats it as a taxable "security service," even if you market it primarily as a communications or check-in service for elderly customers rather than as a burglar alarm. The licensing requirement, not your marketing description, is what drives the tax classification here.

Businesses billing both Texas and out-of-state customers

Only charges billed to Texas customers are subject to Texas sales tax under this ruling; charges to out-of-state residents for the same service are not taxable.

Accountants and tax professionals advising clients in adjacent industries (alarm monitoring, medical alert, PERS/emergency response services)

This letter is a useful illustration of the Comptroller's approach: it looked to the licensing requirements administered by another state agency (the State Board of Private Investigators) to decide whether a service fits the "security service" tax category, rather than evaluating the service's function in isolation.

Common questions

Q: Why was a communications service for elderly people treated as a "security service"?
A: The Comptroller checked with the State Board of Private Investigators, which determined the service required an Alarm Systems Company license under the Private Security Act. Because that license was required, the service met the definition of a taxable "security service" under Texas law.

Q: Is the whole business taxable, or just certain charges?
A: The letter addresses charges for the service itself. It specifically states charges to Texans are taxable and charges to out-of-state residents are not taxable.

Q: What is an "Alarm Systems Company" under the law quoted in this letter?
A: As defined at the time, any person that sells, installs, services, monitors, or responds to burglar alarm devices or other electrical, mechanical, or electronic devices used to prevent/detect burglary, theft, or similar losses; to prevent or detect intrusion; or primarily to detect or summon aid for other emergencies. An expanded version of this definition (adding "detection device" and other terms) took effect September 1, 1995.

Q: Does this ruling explain what tax rate applies or cite a specific statute number?
A: No — the letter describes the "security service" classification and the licensing basis for it, but does not cite a specific Tax Code section or state a tax rate; those details are not part of the text of this letter.

Citations and references

No statutes, regulations, or case law are cited by name in this letter (it references the Private Security Act's licensing definitions generally, quoted from the Board's own materials, without a citation).

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9507L1357D06

Original ruling text

July 28, 1995

Dear ** :

Thank you for taking the time to write us regarding the tax treatment of
the service you provide.

We checked with the State Board of Private Investigators and discovered
that the service described in your brochure requires that you be licensed by
them. Because of your need to be licensed, COMPANY A service is a "security
service" as defined in the law and your charges for services provided to
Texans are subject to sales tax. Services provided to out-of-state residents
are not taxable.

I am enclosing two publications regarding security services for your
information. If you have additional questions, please call Al Van Allen. Al's
toll-free telephone number is 1-800-531-5441, extension 3-4680.

Please let me know if I can be of further service to you.

Sincerely,

Joe A. Galvan, Jr., Manager
Tax Administration

JULY 25, 1995

Comptroller of Public Accounts
Tax Administration Office
Mr. Al Van Allen

Re: COMPANY A licensure requirements as an Alarm Systems Company.

Dear Mr. Van Allen:

I have reviewed the information brochure from **, d/b/a/
COMPANY A and have found that the services **** is purporting to offer
would require him to obtain an Alarm Systems Company license from this agency.
For your convenience I have quoted the definition of an Alarm Systems Company
and have highlighted those areas that would be particular to the above
referenced.

"Alarm systems company" means 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:

(a) to prevent or detect burglary, theft, shoplifting, pilferage, or other
losses of that type;

(b) to prevent or detect intrusion; or

(c) primarily to detect or summon aid for other emergencies.

(31) "Alarm systems monitor" means an individual who monitors burglar alarm
signal devices, burglar alarms, television cameras, still cameras, or any
other electricalmechanical, or electronic device used to prevent or detect
burglary, theft, shopliftingpilferage, or similar losses, used to prevent or
detect intrusion, or used primarily to summon aid for other emergencies.
The term does not include a person employed exclusively and regularly by an
employer other than a licensee in connection with the affairs of that
employer, and with whom the person has an employee-employer relationship.

Effective September 1, 1995 the definition of an alarm company and the
definition of an alarm systems monitor will be changed to the following:

"Alarm systems company" means any person that sells, installs, services,
monitors, or responds to burglar alarm signal devices, detection devices,
burglar alarms, robbery alarms, television cameras, still cameras, or any
other electrical, mechanical, or electronic device used:

(A) to prevent or detect burglary, theft, robbery, shoplifting, pilferage,
shrinkage, or other losses of that type;

(B) to prevent or detect intrusion; or

(C) primarily to detect or summon aid for other emergencies

(31) "Alarm systems monitor" means an individual who monitors burglar alarm
signal devices, detection devices, burglar alarms, robbery alarms,
television cameras, still cameras, or any other electrical, mechanical,
or electronic device used to prevent or detect burglary, theft, shoplifting,
pilferage, shrinkage, or similar losses, used to prevent or detect
intrusion, or used primarily to summon aid for other emergencies. The term
does not include a person employed exclusively and regularly by an employer
other than a licensee in connection with the affairs of that employer, and
with whom the person has an employee-employer relationship.

Effective September 1, l995 the Act will also include the definition of
"detection device" which I have listed for you.

(33) "Detection device" means an electronic device used as a part of a burglar
or hold-up alarm including any control, communications, motion detector, door
or window switch, sound detector, vibration detector, light beam, pressure mat,
wiring or similar device; or any electronic device used to limit access by
persons into building structures or gate compounds, including any control,
communications, motion detector, door or window switch, card or proximity
readers, push-button key pad entry, gate entry device, door exit buttons, or
similar device.

I hope this letter address your concerns. If you have any questions, please
call me at 512/463-5545

Sincerely,
** , Chief
Investigation Division

July 18, 1995

Mr. John Sharp
Texas Comptroller
Austin, Texas 78763

Re: Sales Tax

Dear Mr. Sharp:

I have recently been awarded the marketing and managing
rights to provide a computerized communication service for
shut-in elderly people. Please see the attached brochure to
become better acquainted with the service.

I am writing to find out if this will be a taxable
service. Some other facts concerning this product are:

1. The service will initially be provided in Texas
   and eventually networked nationwide.

2. The service will be provided from (one) centralized
   site in Texas, possibly outside the city limits.

3. All payments will be made by credit card only.

I would appreciate a written response from your offices
concerning this inquiry.

Sincerely,

NOTE: Previous Accession Number 9507294L