Tax Type
Retail Sales and Use Tax
Description
Miscellaneous service enterprises; Monitored alarm systems and monitoring services.
Topic
Taxability of Persons and Transactions
Date Issued
12-23-1997
December 23, 1997
Re: Request for Ruling: Retail Sales and Use Tax
Dear*************
This is in response to your request for a ruling concerning the application of the sales and use tax to security systems and services for commercial clients. I apologize for the delay in responding to your letter.
FACTS
Company A is headquartered outside Virginia and is planning to offer security alarm systems and monitoring services to commercial customers in Virginia for a stated fee over a specified period. The systems may either be sold to customers or leased to them over a specified period. Customers who purchase the security system agree to remit periodic payments for monitoring services. Customers who lease such systems are billed monthly, quarterly, or annually in a lump-sum amount for the monitoring services and equipment use. Title to the leased systems will remain with Company A. Company A will generally subcontract out the installation of these systems. However, employees of Company A will occasionally install the equipment and perform repair service and training.
RULING
The application of the sales and use tax is essentially the same as the tax application set out in my prior response to you of October 15, 1997 (P.D. 97-417, copy enclosed) which addressed monitored burglar alarm systems provided to residential customers. That ruling referenced 23 VAC 10-210-230 (copy enclosed) which provides that:
-
- 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 user or consumer of all property used in providing the service and must pay the tax on such property at the time of purchase.
Accordingly, charges for the retail sale or lease made by Company A to its Virginia customers for a monitored alarm system are not subject to taxation. Rather, Company A is deemed to be the taxable 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 or remit it directly to the department.
However, a lump-sum charge for the sale or lease and installation of nonmonitored security systems or devices is subject to taxation. Separately stated installation charges are not taxable. In addition, the retailer is liable for the tax on wiring, nails, screws and similar items used in installing such systems and devices. See 23 of VAC 10-210-230(B).
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/13321R
Rulings of the Tax Commissioner