Texas Sales Tax on Security Services
Whenever we think about a service, the normal reaction or understanding is that it should not be taxed. Just remember, the state of Texas does not have income tax, so if any state will tax a service, it will likely be Texas.
If your company is being audited for sales tax, first, think to yourself what kind of service you are offering. If you have to get a security license, then it is a taxable security service. Most of our clients fall into category 8 and 9 below.
Then, remember that during a sales and use tax audit, all of your assets and consumables will also be examined to see whether or not sales tax was paid.
Consider the following questions:
- Did you have any deliveries?
- Did you sell a camera along with your service?
- Did you use a camera system and are you the end user of that camera?
It is not only the taxability of the service itself, rather the entire service as a whole.
Taxable Security Services in Texas
Let’s talk about what kind of security services in Texas are taxable:
- Investigations
- Providing security guards or guard dogs
- Monitoring certain medical alert systems
- Installing or monitoring burglar alarm systems
- Providing armored cars or armed couriers
- Vehicle location and tracking (also known as Tele-Matics)
- Unclaimed property services and computer forensic services (e.g., locating and retrieving deleted or hidden computer files)
- Private Security service
- Locksmith services
Non-Taxable Security Services in Texas
What about security services that are not taxable:
- Medical alert services and the services of full-time peace officers privately employed as guards or watchmen are not taxable security services.
- Vehicle location and tracking service providers can be exempted from the licensing requirement by the Private Security Bureau if they pay an annual fee and meet certain operating standards.
Facing a Sales Tax Audit in Texas?
Contact our attorney for a consultation.
If you are facing a sales tax audit in Texas, professional legal guidance can help ensure compliance and minimize risk.
Frequently Asked Questions
Is sales tax applied to all security services in Texas?
No, not all security services are taxable in Texas. The state distinguishes between taxable and non-taxable services. Services like installing burglar alarms or providing guard dogs are taxable, while medical alert services and peace officers employed as guards are not.
How can I determine if my service is considered a taxable security service?
If your service requires a security license from the Texas Private Security Bureau, it’s likely taxable. This includes services such as investigations, monitoring alarms, or providing armed couriers.
Are equipment sales bundled with services also taxable?
Yes, selling equipment like cameras along with your security service can make the entire transaction taxable. Texas evaluates the “entire service as a whole” when assessing taxability during audits.
What non-taxable services might be confused with taxable ones?
Medical alert services and security services provided by full-time, privately employed peace officers are not taxable. Additionally, vehicle tracking providers may qualify for licensing exemptions if specific criteria are met.
What should I expect during a sales and use tax audit for security services?
The audit will examine not just your services but also assets and consumables to ensure sales tax compliance. Items like delivery records, camera systems, and related equipment are all subject to review.