Tax Type
Retail Sales and Use Tax
Description
Miscellaneous service enterprises; Monitored and non-monitored alarm systems.
Topic
Taxability of Persons and Transactions
Date Issued
10-15-1997
October 15, 1997
Re: Request for Ruling: Retail Sales and Use Tax
Dear***********
In your letter of September 11, 1997, you request a ruling concerning the application of the sales and use tax to security systems and services.
FACTS
Company A headquartered outside Virginia is planning to offer security alarm systems and monitoring services to residential customers in Virginia for a stated fee over a specified period. Title to the monitored system will remain with Company A. Charges for the monitored system will be billed in lump-sum amount on a monthly, quarterly, or annual basis. Employees of Company A will assemble and install the equipment and perform service and training at the customer's residence.
Optional add-on protection features will also be offered but will be sold to the customer in a lump-sum charge (cost of product, materials, and labor). In addition, patrol car services (i.e., Company A's employee will periodically patrol the protected premises) will be offered in connection with the monitoring services and billed separately on the invoice.
RULING
Monitored alarm systems
Title 23 of the Virginia Administrative Code (VAC) 10-210-230(A) defines "monitored systems" as "burglar, security and fire alarm systems which are furnished, installed and monitored under contract with the person furnishing and installing such systems." This regulation further provides the following:
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- Charges for monitored systems constitute charges for a service which is not subject to the tax. The person selling/leasing and installing the monitored system is deemed to be the consumer of all property used in providing the service and must pay the tax on such property at the time of purchase.
Accordingly, the charges made by Company A to its Virginia customers for a monitored alarm system are not subject to taxation. However, Company A is deemed to be the user or consumer of all equipment and other tangible personal property used in providing this service and must pay the tax on such property at the time of purchase.
Separate charges to customers for optional add-on devices (i.e., heat/smoke alarms, panic buttons, additional door/window sensors, motion sensors and remotes) which become part of the monitored security system are not taxable. To clarify the application of the tax, such add-on devices should be noted on the invoice as part of the monitored security system. Company A is liable, however, for the tax on the cost price of all add-on devices installed as part of a monitored security system.
Charges for patrol car services are exempt from the tax regardless of whether separately stated dn the invoice or billed as part of the monitoring services.
Nonmonitored alarm systems and devices
Based on Title 23 of VAC 10-210-230(B), the sale or lease and installation of nonmonitored security systems or devices are subject to the tax on the total charge. Separately stated installation charges are not taxable. However, the dealer is liable for the tax on wiring, nails, screws and similar items used in installing such systems or devices.
Accordingly, charges to customers for optional add-on devices which stand alone and are operated independent of the monitored alarm system when installed are taxable. Lump-sum charges for independent add-on devices, materials and labor are taxable, and Company A must be registered with the Virginia Department of Taxation to charge and collect the sales and use tax from the customer. However, the tax would not apply to separately stated charges for installation labor if Company A revises its proposed invoicing procedures.
I trust the foregoing has answered your questions. If you have any question on the content of this response, please contact ****** of my Office of Tax Policy at ********.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/13001R
Rulings of the Tax Commissioner