|(a) Security service. Any service for which a license
is required under Occupations Code, §1702.101 or §1702.102,
Private Security Chapter, and includes any service 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, private investigator, locksmith company,
or private security consultant company.
(b) Permit required. A provider 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 §3.285
of this title (relating to Resale Certificate; Sales for Resale) and §3.287
of this title (relating to Exemption Certificates).
(c) Employees. 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) Temporary security service personnel. A security
service is taxable even when provided on a temporary basis unless:
(1) the security service is performed by a temporary
help service for an employer to supplement the employer's existing
security service personnel on a temporary basis;
(2) the security service is normally performed by the
employer's own employees;
(3) the employer provides all supplies and equipment
(4) the temporary employee is under the direct or general
supervision of the employer to whom the security service is furnished.
(e) Security services provided in Texas. Charges for
providing security service to property or persons located in Texas
are subject to Texas sales tax. Unless a customer claims multistate
benefit as provided in subsection (p) of this section, if any portion
of the security service originates in Texas, Texas sales tax is due
even though a portion of the service may be performed in another state.
Credit will not be allowed against Texas sales tax for use tax imposed
by another state when the service benefit location is in Texas. Detective
and investigation services of corporate locations or premises located
outside Texas are not taxable if the investigation is unrelated to
any investigation of corporate locations in Texas.
(f) Credit for security services originating in another
state. If a security service originates in another state and sales
tax is legally paid on that service in the other state, credit against
the Texas use tax will be allowed. See §3.338 of this title (relating
to Multistate Tax Credits and Allowance of Credit for Tax Paid to
(g) Resale certificates.
(1) A seller of a security service may issue a resale
certificate in lieu of tax to a supplier of tangible personal property
only if care, custody, and control of the property will be transferred
to the service provider's client. For example, a security service
provider purchases a DVD to transfer the results of an investigation
to a customer. The DVD is transferred to the customer, and the customer
owns and uses the DVD to review the results of the security service.
The security service provider may purchase the DVD tax free by issuing
a resale certificate. Tax is due on the total amount charged the customer,
including amounts for the DVD and for the services.
(2) A resale certificate may be issued for a taxable
service if the buyer intends to transfer the service as an integral
part of a taxable service. 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.
(3) A resale certificate may be issued for a taxable
service if the buyer intends to incorporate the service into tangible
personal property that 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 be exempt only
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 sale of the tangible personal property to the extent
the service was actually incorporated into the tangible personal property.
(h) Sales price, unrelated services.
(1) Providers of taxable security services must collect
state and all applicable local sales tax on the total sales price
of the services provided unless they receive a properly completed
resale or exemption certificate from the purchaser.
(2) The total sales price includes charges for services
or expenses directly related to and incurred while providing a taxable
security service, even if billed separately. Examples include charges
for meals, telephone calls, hotel rooms, or airplane tickets.
(3) Where nontaxable unrelated services and taxable
services are sold or purchased for a single charge and the portion
relating to taxable services represents more than 5.0% of the total
charge, the total charge is presumed to be taxable. The service provider
may overcome the presumption by separately stating to the customer
at the time the transaction occurs a reasonable charge for the taxable
services. However, if the charge for the taxable portion of the services
is not separately stated at the time of the transaction, the service
provider or the purchaser may later establish for the comptroller,
through documentary evidence, the percentage of the total charge that
relates to nontaxable unrelated services. The service provider's books
must support the apportionment between taxable and nontaxable 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 for
nontaxable services is unreasonable when the overall transaction is
reviewed, the comptroller will adjust the charges and assess additional
tax, penalty, and interest on the taxable services.
(4) Charges for services or expenses directly related
to and incurred while providing a taxable service are taxable and
may not be separated for the purpose of excluding those charges from
the tax base. Examples include charges for meals, telephone calls,
hotel rooms, or airplane tickets.
(5) A service will be considered unrelated, and thus
not part of the sales price of a taxable security service, if:
(A) it is not a security service, nor a service taxable
under other provisions of Tax Code, Chapter 151;
(B) it is of a type that is commonly provided on a
stand-alone basis; and
(C) the performance of the unrelated service is distinct
and identifiable. Examples of unrelated services that may be excluded
from the tax base include a service for which no license is required,
such as coin-wrapping services by a courier or armored car service,
or providing court testimony, training, or filing legal documents.
(i) Excepted persons. Persons excepted from the licensing
requirements of the Private Security Act are not providing security
services subject to the sales tax because 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 peace
officers as defined by Code of Criminal Procedure, Article 2.12, and
who satisfy the requirements of Occupations Code, §1702.322,
and who receive compensation for private employment on an individual
or an independent contractor basis as patrolmen, guards, or watchmen;
(4) persons who provide telematics services (a service
that may rely on global positioning system satellite data to fix the
exact location of a vehicle) as defined in Occupations Code, §1702.332(a),
and who have satisfied exemption requirements as set out in Occupations
(5) persons who sell burglar alarm or other protective
devices exclusively over-the-counter, by mail order or by e-commerce;
(6) persons who sell or install automobile burglar
(7) persons set out in Occupations Code, §1702.331(b),
who provide personal emergency response systems as defined in Occupations
Code, §1702.331(a), that are not part of a combination of alarm
systems that include burglar alarm or fire alarm; and
(8) a person or firm licensed as an accountant or accounting
firm under Occupations Code, Chapter 901, an owner of an accounting
firm, or an employee of an accountant or accounting firm.
(j) A charge for using a slim-jim or similar device
to open a locked vehicle is not taxable, even when the service provider
is a licensed locksmith.
(k) Taxable under other provisions. Persons whose activities
are not defined as security services may nonetheless be performing
a service that 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 §3.343 of this title (relating
to Credit Reporting Services);
(2) insurance adjusters, insurance investigators, and/or
claims processors performing services in connection with a policy
of insurance. Although not taxable as security services, some insurance
services are subject to sales and use tax. See §3.355 of this
title (relating to Insurance Services);
(3) persons who install electronic access control devices,
as that term is defined in Occupations Code, §1702.002(a)(6-a)
in existing nonresidential improvements to real property. Although
not taxable as a security service, the installation of such a device
in an existing nonresidential real property improvement may be taxable
as nonresidential real property repair, remodeling or restoration.
See §3.357 of this title (relating to Nonresidential Real Property
Repair, Remodeling, and Restoration; Real Property Maintenance).
(l) Undercover agents. 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.
(m) Local taxes. Local sales and use taxes (city, county,
transit authority, and special purpose district) apply to services
in the same way as they apply to tangible personal property. A service
provider must collect local sales taxes if the service provider's
place of business is within a local taxing jurisdiction, even if the
service is actually provided at a location outside that jurisdiction.
If the place of business is outside such a jurisdiction but the service
is provided to a customer within a local taxing jurisdiction, local
use taxes apply and the service provider is responsible for collecting
them. For information on the collection and reporting responsibilities
of providers and purchasers of taxable services, see §3.334 of
this title (relating to Local Sales and Use Taxes).
(n) Use tax. If a seller of a service is not engaged
in business in Texas or in a specific local taxing jurisdiction and
is not required to collect Texas state or local tax, it is the Texas
customer's responsibility to report the use tax directly to this office.
(o) Service benefit location. If the security service
provider is in Texas and the customer is located only in Texas, Texas
tax is due, and must be collected by the security service provider.
(p) Service benefit location--multistate customer.
(1) To the extent a security service is provided for
a separate, identifiable segment of a customer's business, the service
is presumed to benefit the location where that part of the customer's
business is conducted.
(2) To the extent the use of the service cannot be
assigned to an identifiable segment of a customer's business, the
service is presumed to be used to support the administration or operation
of the customer's business generally. The security service is presumed
to be used at the customer's principal place of business. The principal
place of business means the place from which the trade or business
is directed or managed.
(3) If a multistate customer claims that part of the
security service benefits the customer's business at locations both
within and outside the state, the customer must provide the security
service provider with an exemption certificate in lieu of tax. It
will then be the customer's responsibility to report the tax to this
office for that portion of the security service that benefits Texas
locations. The security service will not be taxable to the extent
the customer can establish benefit outside Texas. A multistate customer
may use any reasonable method for allocation that is supported by
(4) A security service provider who accepts an exemption
certificate in good faith is relieved of responsibility for collecting
and remitting tax on transactions to which the certificate relates.