Tax Type
Retail Sales and Use Tax
Description
Installation of monitored security equipment; Lease or sale of security equipment
Topic
Exemptions
Taxability of Persons and Transactions
Date Issued
10-31-1984
October 31, 1984
Re: Request for Ruling: Sales and Use Tax
Dear *******
This will reply to your correspondence of October 21, 1982, a request for a ruling on the applicability of sales and use tax to the installation of security alarm systems by *****.
FACTS
***** is engaged in providing security alarm services to residential and commercial customers. The vast majority of its operations center on the installation of monitored security equipment on a customer's premises in accordance with a security protection agreement. Such customers pay an installation and connection fee in addition to a monthly charge for operating and servicing the system. The installed security equipment at all times remains the property of *****.
Other transactions entered into by ***** include the sale or lease of security equipment to a customer for his own use and contracts to monitor equipment installed by other companies. In the second instance, the company installs some of its own equipment for monitoring purposes.
The taxpayer requests a ruling on the correct application of sales and use tax in the situations outlined above.
RULING
The Department has consistently held that the installation and maintenance of monitored security equipment on a customer's premises in accordance with a contract constitutes a nontaxable service transaction under § 58-441.6(a) of the Code of Virginia. ***** installs and maintains such systems and is as such the user or consumer of the tangible personal property necessary in meeting the terms of its contracts. These contracts are for the fulfillment of a service rather than for the lease of equipment. Likewise, equipment installed for monitoring systems installed by other companies is not taxable to the customer as a service is being provided. In these cases where equipment is installed and maintained, ***** would be liable for use tax on items purchased from suppliers. Such tax should not be charged back to a customer but rather should be taken into consideration when determining the fee to be charged for installation and service.
The lease or sale, with or without installation, of security equipment to a customer for his own use would constitute a retail sale. In this instance, the lessor or seller would collect and remit sales tax on the lease, rental or sale of tangible personal property. All items used by a dealer in installing such a system, e.g., wiring, nails and similar items, are taxable to the dealer at the time of purchase.
Enclosed for you information is a copy of new Sales and Use Tax Regulation 630-10-17.1 relating to security systems which has been adopted and is effective January 1, 1985.
Sincerely,
W. H. Forst
State Tax Commissioner
Rulings of the Tax Commissioner