Friday, April 16, 2010

Security Services

In many states, security services are taxable. Items that fall under this category include:
  • Security guards
  • Private detectives
  • Polygraph experts
  • Alarm monitoring
  • Armored car services
  • Background checks
  • Drug testing
I'm trying to imaging your classic hard-boiled private detectives adding sales tax to their bills. I'm just not seeing it. So remember, if your vendors don't charge tax where it should be charged, check with them to make sure they haven't absorbed the tax. This will save you money in unnecessarily paying the use tax.

There are a couple of particular points worth noting:

1. In states where security guards are taxable, there will often be an exemption for off-duty police officers. Why? I'm guessing that it's better for all concerned if you actually have a well trained individual doing the job, particularly if you want them armed. In addition, it does encourage the use of these officers, which puts a little extra money in their college funds. And it keeps the police unions happy.

2. Some states treat the alarm wiring and equipment in the building as additions to real property and therefore the construction contracting rules apply. Other states treat this as a simple sale and installation of tangible personal property. The taxing rules are very different. If you're in that business, you need to know how it's handled in every state you do work. And if you're the buyer, you need to know too.

3. Finally, alarm monitoring is done remotely. In other words, the people watching the screens might be in Illinois, but the property being monitored is in a different state. While alarm monitoring services are not taxable in Illinois, they might be taxable in that other state.

Does the Illinois alarm company have to collect tax on the service? The answer is a definite maybe. When we look at the taxability of services, we need to consider two perspectives: where the service was performed, and where the benefit was received by the buyer. In this case, the service isn't taxable in Illinois. But it is taxable in the state where the buyer received the benefit. The alarm company might have to collect tax, depending on how the law is written there, and whether or not the alarm company has nexus in that state.

The Sales Tax Guy

See the disclaimer - this is for education only. Research these issues thoroughly before making decisions. Remember: there are details we haven't discussed, and every state is different.

Here's information on our upcoming seminars and webinars.

Picture note: the image above, which I personally think is one of the more hilarious that I've posted, is on Flickr. If you'd like to see more, click on the photo.


Facilities Management Services Mumbai said...
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janntul ferdausi said...

Most of the real people I know don't have burglar alarms on their homes. I bet most politicians and the deep pockets that support them do. Perhaps that's why everyone still foots the bill for the 14% who actually have these alarm systems in place.Alarm Monitoring
Burglar alarm monitoring