Detective and Security Services
Detective and security services, armored car services, and burglar and fire alarm services are taxable. Sales tax applies to the total charge to the customer. The taxable amount includes all expenses that are directly reimbursed by the client, such as mileage, travel expenses, record copies, meals, lodging, and other taxable items used in providing these services.
Taxable detective services
Detective services are any services for which a license is required under M. S. 326.32 to 326.339. The following services are taxable:
- investigating crimes or wrongs done or threatened against the government of the United States or of any state, county, or municipal subdivision
- investigating the identity, habits, conduct, movements, whereabouts, transactions, reputation, or character of any person or organization
- investigating the credibility of witnesses or other persons
- investigating the location or recovery of lost or stolen property
- investigating the origin of and responsibility for libels, losses, accidents, or damage or injuries to persons or property
- investigating the affiliation, connection, or relationship of any person, firm, or corporation with any organization, society, or association, or with any official, representative, or member thereof
- investigating the conduct, honesty, efficiency, loyalty, or activities of employees, persons seeking employment, agents, or contractors and subcontractors
- obtaining through investigation evidence to be used before any authorized investigating committee, board of award, board of arbitration, administrative body, or officer or in preparation for trial of civil or criminal cases
- investigating the identity or apprehension of persons suspected of crimes or misdemeanors
For purposes of this law, investigating means to verify or confirm information through surveillance, interviews, or physical contacts. Investigating does not mean to simply compile information available through public or other records.
If you are unsure whether or not you are required to be licensed as a private detective, contact the Private Detective and Protective Agent Services Board at 651-793-2666 for more information.
Expenses such as meals, telephone calls, hotel rooms, or plane tickets directly related to and incurred while providing detective services are taxable even if separately stated.
Nontaxable detective services
Services provided by some businesses or individuals are specifically exempted from the licensing requirements under M.S. 326.3341 or are exempt under M.S. 297A.61.
Nontaxable services include those performed by:
- an employee for an employer
- an off-duty peace officer within the jurisdiction the peace officer normally serves
- an attorney while performing duties of an attorney
- a licensed insurance adjuster
- a collection agency or finance company doing investigations relating to the business of the agency or company
- a person obtaining and furnishing financial or credit information or information on the personal habits of applicants for insurance, indemnity bonds, or commercial credit
Below are examples of services that are not taxable when billed separately and not performed as part of a taxable detective service.
- collecting payment for any debt
- court testimony
- courthouse record retrieval services
- credit rating checks
- credit reporting services
- damage appraisals
- expert witness services
- financial checks
- finger printing
- insurance services such as loss prevention, insurance reporting, or insurance research
- lien searches
- medical security system monitoring – individuals
- negotiations for insurance claim settlements
- process server services
- repossession services
- restaurant checks that provide information on cleanliness, quality, and timeliness
- service of notice or other document to a witness or any other person in connection with any criminal, civil, or administrative litigation, including filing court documents (garnishments and warrants)
- soliciting any debtor to pay bills
An attorney hires a records research compa- ny to obtain copies of liens and other public records. The records research company’s service of gathering the records is not taxable.
An insurance adjuster is hired by a company to investigate a person who filed a worker’s compensa- tion claim. The insurance adjuster is licensed as an adjuster with the state of Minnesota and is not required to be licensed as a private detective. The fees charged by the insurance adjuster are not taxable.
A businessman hires a private detective to find certain records such as birth certificates and credit reports for several of his clients. The detective also in- vestigates to verify the accuracy of the records. The entire fee charged by the detective is taxable, including fees for record retrieval.
Taxable security services are those provided by any person in the business of protecting property from theft, vandalism, or destruction or protecting individuals from physical attack and harassment. This includes security services provided by off-duty police officers, unless performed within the officer’s normal jurisdiction.
Examples of taxable security services include:
- armored car services
- badge checking
- burglar alarm maintenance and monitoring (electronic signal or visual devices)
- crowd control
- employee security services
- fire alarm maintenance and monitoring
- fire or burglar alarm system testing
- guard dog lease or rental
- off-duty police officers, unless performed within the officer’s normal jurisdiction
- passenger security
- patrol services (foot or mobile)
- security guards (plain clothes or uniformed)
- smoke detector maintenance
- ticket takers (if they have security duties)
- traffic control for escorting a funeral procession and
- ushers (if they have security duties)
The following are examples of nontaxable services:
- coat checks (without security duties)
- document storage
- shredding paper
- fire extinguisher refilling, tagging and truck charges
- traffic and parking control (unless for funeral processions or oversized loads on public roads)
Routine maintenance to check a security system to assure that the system is in working order is part of the taxable service and is taxable. However, repair labor to restore a system to working order is not taxable. Parts to repair a system are taxable.
Charges for monitoring and electronic surveillance of persons placed on in-home detention are not taxable if required by a court order or by the Minnesota Department of Corrections, and the service is provided by a nonprofit organization.
Beginning July 1, 2013, services provided by any organization at the direction of a county for monitoring and electronic surveillance of persons placed on in-home detention required by a court order or by the Minnesota Department of Corrections are not taxable.
Some security systems are installed and become part of the real property. Other security systems are not attached to real property. Sales tax applies as follows:
Improvements to real property
The sale and installation of a security or alarm system that becomes real property when installed is a construction contract. The charge to the customer is not taxable. The person installing the system must pay tax on the cost of all materials, supplies, and equipment used to install the system. However, if the system includes peripheral equipment that is not attached to real property, such as TV monitors, charges for that equipment is a retail sale. That retail sale is taxable to the customer; the installer can purchase the equipment exempt for resale.
Security systems that do not become real property after installation are retail sales and are taxable, including installation and delivery charges. Peripheral equipment, such as free-standing units or TV monitors, that are connected to wall or baseboard outlets are also taxable. The retailer buys the security systems exempt from tax by giving the supplier a Form ST3, Certificate of Exemption, claiming the resale exemption.
The lessor must charge sales tax on each lease payment, including installation and delivery charges. The lessor buys the security systems exempt from tax by giving the supplier a Form ST3, Certificate of Exemption, claiming the resale exemption.
There is an exemption for purchases of certain materials used or consumed in providing taxable services. To qualify for the exemption, the materials must be used in providing the taxable detective or security service. Examples of exempt materials include:
- batteries for communication equipment
- deposition copies, paper and video
- film and film processing
- guard dog food
- lubricants and antifreeze for vehicles used while providing taxable services
- pepper spray
- photocopies of medical records and other documents
- polygraph consumables
- supplies used to prepare client reports (includes paper, forms, computer disks, toner, pens)
- tapes, audio and video
To purchase supplies exempt from sales tax, give your supplier a Form ST3, Certificate of Exemption, (use reason number 17 on line N).
Note: If you buy materials exempt from tax but use them in providing non-taxable services, you must pay use tax on those materials. This exemption applies only to businesses providing taxable services and does not extend to individuals purchasing these materials for their own use.
The exemption described above does not apply to equipment, tools, accessories, appliances, furniture and fixtures. It also does not apply to utilities used for space heating or lighting, or to other taxable services. Purchases of materials used for general business or administrative purposes are taxable. Examples of taxable items include:
- building cleaning and maintenance services
- equipment and machinery
- fuel, electricity and gas used for space heating or lighting
- lawn care services
- linen supply or other laundry services
- general office supplies
- specialty advertising materials
- telephone service
- training materials and supplies
Pay sales tax to your supplier when you buy these items or report use tax on your cost of the items on your Sales and Use Tax Return. See Use tax in the next column.
Sales to nonprofit organizations
Qualifying nonprofit organizations must give you a Form ST3, Certificate of Exemption, including their exempt status number (if they have one) to claim exemption on purchases.
If you sell or lease equipment or other items that were used in your business, the sale may be subject to sales tax. See Fact Sheet 132, Occasional Sales of Business Equipment and Goods, for more information.
If you buy taxable items or services that are used, stored or consumed in Minnesota without paying sales tax, you owe use tax. If you buy taxable items and pay another state’s sales tax at a lower rate, you owe use tax based on the difference in tax rates. See Fact Sheet 146, Use Tax for Businesses, for more information.
How to report sales and use tax
Report state and local sales and use taxes electronically over the Internet at www.revenue.state.mn.us. If you don’t have Internet access, you can file by phone. Call 1- 800-570-3329.
Local sales and use taxes
If you are located or working in an area with a local tax, local sales or use tax may also be due. Local taxes are listed and explained in detail in Fact Sheet 164, Local Sales and Use Taxes.
Minnesota Statute 297A.61, Subd. 3(g)(iv) Minnesota Statute 326
Revenue Notice 98-23, Sales and Use Tax – Application of Tax to Copies Revenue Notice 03-08 Sales and Use Tax-Detective, Security,Burglar and Fire Alarm, and Armored Car Services
Other fact sheets you may need:
Click here for more Minnesota Sales Tax Guides.