34 Tex. Admin. Code § 3.333 - Security Services
(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 necessary; and
(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
Suppliers).
(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 Code,
§
1702.332(c);
(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 alarm devices;
(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 business records.
(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.
Notes
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