Are charges for installing, servicing, and monitoring a burglar alarm/security system taxable in Texas, including when the system is installed during new construction of a building or house?

Plain-English summary

The Texas Comptroller's Tax Policy Division wrote to a taxpayer (following up on an earlier July 21 letter) to confirm that the Tax Code imposes sales tax on charges for "security services." Tax Code Section 151.0075 defines a "Security Service" as a service for which a license is required under Section 13 of the Private Investigators and Private Security Agencies Act.

The letter explains that the Comptroller's policy on security services follows the licensing categories set by the State Board of Private Investigators and Private Security Agencies. Under the Act, an "Alarm systems company" (a business that sells, installs, services, monitors, or responds to burglar alarms, signal devices, cameras, or similar devices used to prevent/detect burglary, theft, or intrusion, or to summon aid in emergencies) must be licensed. Likewise, an "Alarm systems installer" (a person who installs or services those same kinds of devices) must be licensed under Section 13 of the Act.

Because those activities require licensing under the Act, charges for installing, servicing, and monitoring burglar alarm/security systems are taxed as security services — and this holds true even when the alarm/security system is installed at the initial or new construction of a building or house. The letter tells the taxpayer to separately state charges for these taxable services from charges for nontaxable services, or else the entire charge becomes subject to sales tax. Other new-construction labor, apart from the taxable security service itself, is not subject to sales tax — but charges for materials are taxable regardless of whether the labor is taxable or not.

What this means for you

Alarm/security system installers and monitoring companies

If you sell, install, service, or monitor burglar alarms, signal devices, or similar security equipment, your charges for those activities are taxable "security services" under Tax Code Section 151.0075 — including when you're installing the system as part of a new home or building's construction. This is true even though most other new-construction labor is not taxed.

Contractors and builders installing security systems during new construction

Don't assume that because a security system is going into a brand-new building, the installation charge escapes tax the way other new-construction labor does. The Comptroller treated alarm/security system installation as a taxable security service regardless of whether it happens during initial construction or afterward.

Anyone billing for both taxable and nontaxable work on the same job

Separately state your charges for taxable security services (installation, service, monitoring) from your charges for nontaxable labor. If you lump them together, the Comptroller will tax the entire combined charge. Charges for materials are taxable either way.

Common questions

Q: Is installing a burglar alarm/security system during new construction of a house or building taxable?
A: Yes. The letter confirms that charges for installation, service, and monitoring are taxed as security services under Tax Code Section 151.0075, regardless of whether the system goes in during initial/new construction.

Q: What makes a business or person subject to this tax treatment?
A: Licensing status under the Private Investigators and Private Security Agencies Act. Businesses that sell, install, service, monitor, or respond to alarm systems ("Alarm systems company") and individuals who install or service them ("Alarm systems installer") must be licensed under Section 13 of the Act, and the Comptroller ties its security-services tax policy to those licensing categories.

Q: If I do both taxable security work and other nontaxable construction labor on the same project, how is it taxed?
A: You should separate the charges. If you don't separately state the taxable security service charges from the nontaxable labor charges, the total combined charge becomes subject to sales tax.

Q: Are charges for materials used in the installation taxable?
A: Yes. The letter states charges for materials are taxable in either case (whether or not the associated labor is taxable).

Q: Can another taxpayer rely on this letter?
A: No. The letter states the opinion is rendered based on the facts submitted, and other facts, though similar, may yield different results.

Citations and references

Statutes and rules:

• Tax Code Section 151.0075 (definition of "Security Service")
• Private Investigators and Private Security Agencies Act, Article 4413(29bb), Vernon's Texas Civil Statutes, Section 13 (licensing of alarm systems companies and installers)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9508L1366D10

Original ruling text

August 24, 1995

Dear ****:

As I mentioned in my letter of July 21, the Tax Code imposes sales tax on
charges for security services.

Tax Code Section 151.0075 defines "Security Service" as a service for which a
license is required under Section 13, Private Investigators and Private
Security Agencies Act "The Act".

Accordingly, our policy on security services is linked to decisions of the
State Board of Private Investigators and Private Security Agencies.

Alarm Systems Companies as defined in Section (2) of the Act are required to be
licensed under the Act. That definition reads as follows:

"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 and summon aid for other emergencies.

Alarm Systems Installers as defined in Section (27) of the Act are required to
be licensed under Section 13 of the Act. That definition reads as follows:

"Alarm systems installer" means a person who installs or services 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 and summon aid for other emergencies.

Accordingly, charges for installation, service, and monitoring are taxed as
security services. You should separate your charges for providing taxable
services from your charges for non taxable services or the total charge will be
subject to sales tax.

Excluding taxable services, other new construction labor is not subject to
sales tax. Charges for materials are taxable in either case.

This opinion is rendered based on the facts you submitted. Other facts, though
similar, may yield different results.

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 Division, Comptroller of Public
Accounts.

Sincerely,

Al Van Allen
Tax Policy Division

NOTE: Previous Accession Number 9508422L