Tax Type
Retail Sales and Use Tax
Description
Alarm Systems; Medical Alert Communication Systems
Topic
Taxability of Persons and Transactions
Date Issued
03-29-1991
March 29, 1991
Re: Request for Ruling: Retail Sales and Use Tax
Dear*********************
This will reply to your letter of January 9, 1991 in which you request a ruling on the correct application of the retail sales and use tax to the sale of*********** medical alert communication systems. This is in further clarification of a previous ruling issued to you on March 7, 1990.
RULING
Virginia Regulation (VR) 630-10-17.1 provides that the tax does not apply to sales of "monitored [alarm] systems." Monitored systems are deemed to be those systems which "are furnished, installed and monitored under contract with the person furnishing and installing such systems." It specifies that systems which are monitored by a person other than the person who furnishes and installs such systems are not "monitored systems."
In the instant case, the lease and monitoring contract is between the Taxpayer and the customer although the Taxpayer does not actually provide monitoring services itself. A separate alarm monitoring service agreement for the monitoring services to be provided to a customer is signed by the Taxpayer, the customer, and the monitoring company. The monitoring company acts as the agent of the Taxpayer and the monthly payments for the lease and monitoring are made directly to the monitoring company by the Taxpayer's customers. The monitoring company, in turn, sends a portion of the payment to the Taxpayer.
Based on the foregoing, I find that the medical alert systems which the Taxpayer sells/leases and installs and for which the Taxpayer is contractually bound to its customers to provide monitoring services, qualify for exemption from the tax as "monitored systems" under VR 630-10-17.1.
Therefore, when the Taxpayer sells or leases a monitored system to a customer, the transaction represents charges for a service which is not taxable. However, since the Taxpayer is deemed to be the consumer of all property used in providing the service, it must pay the tax on such property at the time of purchase.
I trust this answers your questions, but should you need further clarification, please contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner