Being Taxed by Taxes

Dear Readers:

Complete this sentence: Two certain things in life are death and…yes, taxes. Sure you hate them but are you stuck with them even if it means your business will suffer? Alarm installations in the state of New Jersey are now subject to a 3% sales tax. Effective Oct. 1, 2006, New Jersey began taxing charges to install burglar and fire alarm systems in businesses and homes because these jobs are now considered capital improvements to real property. The state also now taxes security guard and patrol services as well as armored car services. The State of New Jersey’s Division of Taxation defines “Investigation and Security Services” as:

1. Investigation and Detective Services, including detective agencies and private investigators, and fingerprint, polygraph; missing person tracing and skip tracing services.
2. Security Guard and Patrol Services, including bodyguard and personal protection, guard dog, guard, patrol, and security services.
3. Armored Car Services.
4. Security Systems Services, including security, burglar, and fire alarm installation, repair or monitoring services.

The law goes on to explain the particulars of the different service categories. Under the heading, “Security Systems Services/Installation Service,” it states: Previously, the installation of a security system (i.e., security, burglar, or fire alarms) was not subject to tax if the installation of the system resulted in a capital improvement to real property. On and after October 1, 2006, charges for the installation of security systems are specifically subject to tax. Thus, the installation of the following types of security systems is subject to tax on and after October 1, 2006:

A hardwired security system, where the wires are placed within the walls. There is no change in the law regarding the taxability of the installation of mobile or portable alarm systems, a closed circuit television system (cameras, monitors, recorders), and an alarm system which is rented or leased. Such installations, which are not considered to result in a capital improvement to the real property, continue to be subject to tax.

Purchase of Materials. When sold to individual property owners, other vendors or to contractors, the systems are taxable. The customer may install the system himself or hire an outside contractor to install the system. Either way, the customer is subject to sales tax on the purchase of the equipment.

Monitoring. Although the new law specifically imposes tax upon alarm monitoring service, note that this service has been subject to tax since July 1, 1990, as a telecommunications service.

I spoke with a well respected real estate appraiser in the Palm Beach, FL area and in his view, an alarm system does not increase the value of the home so it should not increase the assessed value. The home may be more desirable but it will not bring the seller more money. Besides, isn’t the licensing fee often required for an alarm system a form of taxation and isn’t the fee from false alarms a form of taxation? Will this taxing not end until dealers are taxed right out of business?

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