Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2013
 

Sales and Use Tax Annotations


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S

515.0000 SERVICE ENTERPRISES GENERALLY—Regulation 1501

Annotation 515.1181.300

(e) MISCELLANEOUS ACTIVITIES

515.1181.300 Medical Monitoring Service. A taxpayer provides an emergency response system to the customer. The service consists of an easy to use electronic device designed to signal a friend, relative, or emergency service whenever help is needed.

The taxpayer buys or leases these units from the company who does the monitoring from a center located out of state. The taxpayer bills customers separately stated amounts for rental and monitoring of the equipment. The taxpayer, in turn, pays the monitoring company for the purchase or lease of the equipment and the monitoring of all units in service.

The taxpayer acknowledges that the monthly fee charged to its customers for the equipment rental is subject to tax. The only question is whether the monthly fee for monitoring the equipment is subject to tax. The operation of the monitoring service is explained as follows. When a customer presses the button on the portable transmitter installed in the customer's home, it sends a radio signal to the receiver, which then dials the central monitoring system located out of state. The center then notifies one of the three emergency contacts designated by the customer at the time of installation of the unit. There is no charge for the number of times the system is used by the customer. Based on this unique situation presented by specific facts provided, the monthly fee for monitoring the unit is regarded as a nontaxable charge for services. Thus, the contract between the taxpayer and its customer is for both the lease (sale) of tangible personal property and the provision of services. In other words, the monthly fee for monitoring the equipment is not subject to tax. 7/15/96.