Texas Comptroller of Public Accounts    STAR System


8709E1161A04



STATE SALES AND USE TAX
SECURITY SERVICES
Rule 3.333


The Comptroller of Public Accounts adopts on an emergency basis new Rule 3.333 
concerning Security Services. During the last special session of the 
legislature, security services were added to Chapter 151 of the Tax Code upon 
which sales tax must be collected. Since the change in the Tax Code becomes 
effective October 1, 1987, the emergency rule is needed so that persons engaged 
in this activity will be aware of their sales tax responsibilities.

This new section is adopted on an emergency basis under Texas Tax Code, Section 
111.002, which provides that the Comptroller may prescribe, adopt, and enforce 
rules relating to the administration and enforcement of the provisions of Title 
2 of the Tax Code.

Rule 3.333. Security Services. (Texas Tax Code Section 151.0075, Section 
151.0101).

(a) Security services means any service for which a license is required under 
Section 13, Private Investigators and Private Security Agencies Act, Texas 
Civil Statutes, Article 4413 (29bb), and includes any services provided within 
the scope of the required license as an investigations company, guard company, 
alarm systems company, armored car company, courier company, guard dog company, 
security services contractor, private security officer, detective service, or 
private investigator.

(b) 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 Section 3.285 of this title (relating to Resale 
Certificate; Sales for Resale) and Section 3.287 of this title (relating to 
Exemption Certificates).

(c) Security services performed by an employee for his employer in the regular 
course of business, within the scope of the employee's duties, and for which 
the employee is paid his regular wages or salary are not taxable.

(d) Charges for guarding or providing surveillance or security to property or 
persons located in Texas are subject to Texas tax. Detective and investigative 
services of persons located in Texas are subject to Texas tax, provided, 
however, that investigation of corporate locations or premises located outside 
Texas are not taxable. Armored car and courier services are subject to tax if 
the property is delivered in Texas.

(e) If courier services originate in another state and sales tax is legally 
paid on that service in the other state, credit against the Texas tax will be 
allowed.

(f) Providers of security services may issue a resale certificate in lieu of 
tax to suppliers of tangible personal property only if care, custody, and 
control of the tangible personal property is transferred to the customer. A 
resale certificate may be issued for a service if the buyer intends to transfer 
the service as an integral part of taxable services. A service will be 
considered an integral part of a taxable service if the service purchased is 
essential to the performance of the taxable service and without which the 
taxable service could not be rendered. A resale certificate may be issued for a 
taxable service if the buyer intends to incorporate the service into tangible 
personal property which will be resold. If the entire service is not 
incorporated into the tangible personal property, it will be presumed the 
service is subject to tax and the service will only be exempt to the extent the 
buyer can establish the portion of the service actually incorporated into the 
tangible personal property. If the buyer does not intend to incorporate the 
entire service into the tangible personal property, no resale certificate may 
be issued, but credit may be claimed at the time of the sale of the tangible 
personal property to the extent the service was actually incorporated into the 
tangible personal property.

(g) Where nontaxable unrelated services ad taxable services are sold or 
purchased for a single charge, the total charge is presumed to be taxable. The 
presumption may be overcome by the seller at the time the transaction occurs by 
separately stating to the customer a reasonable charge for the taxable 
services. The service provider's books must support the apportionment between 
exempt and nonexempt activities based on the cost of providing the service or 
on a comparison to the normal charge for each service if provided alone. If the 
charge of exempt services is unreasonable when the overall transaction is 
reviewed considering the cost of providing the service or a comparable charge 
made in the industry for each service, the Comptroller will adjust the charges 
and assess additional tax, penalty and interest on the taxable services. 
Charges for services or expenses connected to the provision of a taxable 
service are taxable and may not be separated for the purpose of excluding these 
charges from the tax base.

(h) Persons excepted from the licensing requirements of the Private 
Investigators and Private Security Agencies Act, Texas Civil Statutes, Article 
4413(29bb), under Section 3 of that Act, are not providing "security services" 
subject to the sales tax since they are not required to hold a license to 
provide their services. Examples include but are not limited to:

(1) persons employed exclusively and regularly by one employer in connection 
with the affairs of the employer;

(2) officers or employees of the United States, this state, or a political 
subdivision of either, while engaged in the performance of official duties;

(3) persons who have full time employment as a peace officer as defined by Code 
of Criminal Procedure, Article 2.12, and who receive compensation for private 
employment on an individual or an independent contractor basis as a patrolman, 
guard, or watchman;

(4) locksmiths who do not install or service detection devices, do not conduct 
investigations, and are not security service contractors;

(5) persons who sell burglar alarm or other protective devices exclusively 
over-the-counter or by mail order, and

(6) persons who sell or install automobile burglar alarm devices.

(i) Persons whose activities are not defined as "security services" may 
nonetheless be performing a service which is taxable under other provisions. 
Examples include but are not limited to:

(1) persons engaged in the business of obtaining and furnishing credit 
information. See Section 3.343 of this title (relating to Credit Reporting 
Service).

(2) insurance adjusters, agents and insurance brokers licensed by the state, 
performing duties in connection with insurance transacted by them. Although not 
taxable as security services, some insurance services are taxable under the 
sales tax act. See  Rule 3.55 of this title (relating to Insurance Services).

(j) The fact that a security service provider may be performing his services by 
furnishing an undercover agent will not affect the applicability of sales tax 
to the service transaction between the employer and the consumer. The employer 
of the undercover agent is considered to be providing security services to a 
client, and that transaction is subject to the sales tax.

(k) For purposes of city, MTA, or county taxes, if the service provider's place 
of business (the location where clients request service) is within the 
boundaries of a local taxing entity, the taxable service shall be deemed to be 
performed at the service provider's place of business. In the case of multiple 
locations, the place of business where the customer contacted the service 
provider for service will determine to which local taxing entity (city, MTA or 
county) the tax is allocated. If the service provider's place of business is 
outside the boundaries of a local taxing entity, the service provider will be 
required to collect local use tax if the client is within the local taxing 
entity and the service provider has representation in the local taxing entity 
as outlined in  Rule 3.286 of this title (relating to Buyer's and Seller's 
Responsibilities). Even if the service provider is not required to collect 
local use tax, the client is still liable for the tax if the service is 
performed or a benefit is derived from the service within the boundaries of a 
local taxing entity.

(1) If a seller of a service or tangible personal property is not doing 
business in Texas and is not required to collect Texas tax, it is the Texas 
customer's responsibility to report the tax directly to this office.


Issued in Austin, Texas on 9/30/87


BOB BULLOCK
Comptroller of Public Accounts
of the State of Texas




ACCESSION NUMBER: 8709E1161A04   
SUPERSEDED: Y
DOCUMENT TYPE: E
DATE: 09/30/1987
TAX TYPE: SALES