Is installing, monitoring, servicing, or repairing a burglar alarm/security system taxable as a security service, even if the system becomes part of a new-construction improvement to real property?

Plain-English summary

A security system business asked the Comptroller about the sales tax treatment of installing, monitoring, maintaining, and repairing burglar alarm/security systems. The Comptroller confirmed this is a taxable "security service" and walked through the licensing-based legal chain that gets it there.

Under the Private Investigators and Private Security Agencies Act (Article 4413(29bb)), an "alarm systems company" is any person that sells, installs, services, monitors, or responds to burglar alarms, signal devices, cameras, or similar electrical/mechanical/electronic devices used to prevent/detect burglary, theft, or intrusion, or primarily to detect and summon aid for emergencies — and an "alarm systems installer" is similarly defined. Both are required to be licensed under Section 13 of the Act. Because Tax Code Sec. 151.0075 defines a "security service" as one requiring this kind of license, and Sec. 151.0101(a)(14) makes security services taxable, installing/servicing/monitoring a licensed security system triggers sales tax under Rule 3.333.

Critically, the entire charge for security services is taxable regardless of whether the security system becomes an improvement to real property — even as part of new construction, where labor is normally untaxed. So a business that installs a security system as part of building a new house can't treat the security-installation labor as untaxed new-construction labor just because it's part of the same construction job. The letter advises separating taxable security-service charges from nontaxable new-construction labor on invoices — otherwise the ENTIRE charge becomes taxable. Materials are taxable in either scenario regardless.

What this means for you

Alarm systems companies and installers

If you're licensed under the Private Investigators and Private Security Agencies Act (as most alarm installers and monitors are), your installation, service, and monitoring charges are taxable security services — full stop, even when the system is part of a new-construction project where other labor would normally be untaxed.

General contractors bundling security systems into new construction

Keep security-service charges (installation, monitoring, maintenance, repair by a licensed alarm company) SEPARATE from other new-construction labor on your invoices. If you don't separate them, the whole combined charge becomes taxable, not just the security portion.

Accountants and tax professionals

This letter is a clean statutory chain worth keeping as a reference: the licensing requirement under the Private Investigators Act (a non-tax statute) determines whether Tax Code Sec. 151.0075's "security service" definition applies, which in turn triggers Sec. 151.0101(a)(14) taxability — a good example of how a separate regulatory licensing scheme can directly determine sales tax treatment.

Common questions

Q: Is installing a home security system taxable in Texas?
A: Yes, if the installer is required to be licensed under the Private Investigators and Private Security Agencies Act — which is typically the case for alarm systems companies and installers.

Q: Does it matter if the security system becomes part of a new house being built?
A: No — the entire charge for security services is taxable regardless of whether the system becomes an improvement to realty, including as part of new construction.

Q: How do I avoid taxing my whole new-construction invoice because of a bundled security system?
A: Separately state the taxable security-service charges from the nontaxable new-construction labor. If you don't separate them, the entire combined charge becomes taxable.

Q: Are materials always taxable regardless of how the labor is characterized?
A: Yes — the letter states materials are taxable in either scenario (security service or new construction).

Citations and references

• Tex. Tax Code Sec. 151.0075 (defines "security service" as a service requiring a license under Section 13 of the Private Investigators and Private Security Agencies Act)
• Tex. Tax Code Sec. 151.0101(a)(14) (imposes sales tax on security services)
• 34 Tex. Admin. Code Rule 3.333 (security services)
• Article 4413(29bb), Private Investigators and Private Security Agencies Act, Sec. 13 (licensing requirement for alarm systems companies/installers) and Secs. (2), (27) (definitions of "alarm systems company" and "alarm systems installer")

Subject

Burglar Alarm/Security System (Installation, Monitoring, Maintenance, Repairs)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9711330L

Original ruling text

November 4, 1997

Dear **:

Thank you for your letter dated October 28, 1997, concerning Texas sales tax.

Please be aware that the installation of a security system is a taxable service
if the installer is required to be licensed to install the system under Article
4413(29bb), Private Investigators and Private Security Agencies Act, sec. 13.
The total charge for security services is taxable regardless of whether the
security system becomes an improvement to realty (including as part of the new
construction of real property). See enclosed Rule 3.333 regarding security
services.

Response: I took the liberty of faxing a copy of your letter to the Texas Board
of Private Investigators. The function of installing and monitoring the devices
requires a license under Texas Civil Statutes, Article 4413(29bb), Private
Investigators and Private Security Agencies Act, sec. 13. That has the effect
of rendering those charges subject to sales tax as Security Services under Tax
Code Section 151.0101(a)(14) and as defined in Section 151.0075.

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 based on the facts you submitted and current law. Other facts
though similar, may result in different answers.

If you have any questions or need more information, you may call me toll free
at 1-800-531-5441, extension 5-0330. The direct line is 512/475-0330. You may
also write to Tax Policy Division, Comptroller of Public Accounts.

Sincerely,

Bettie Peterson
Tax Policy Division