Taxation Policy

Established in 1948, the Electronic Security Association (ESA) represents, promotes and enhances the growth and professional development of the electronic life safety, security, and integrated systems industry. As the voice of the collective industry at all levels of government, ESA actively supports legislation and regulations that enhance public safety.  Our member companies, which represent more than 70 percent of the market for intrusion and fire/life safety systems, access control, video surveillance and monitoring, are a vital component of public safety. Together they employ more than 500,000 industry professionals, and service millions of residential and commercial accounts.

Issue Overview

Many individuals and small businesses share our commitment to public safety, and are working to make their neighborhoods safer by installing electronic alarm systems.  The Electronic Security Association believes that security systems offer direct, tangible benefits to their owners and the communities in which they are installed, and should be exempt from state and local sales tax.

Unfortunately, the ways in which alarm systems and alarm monitoring are treated from a tax perspective varies state by state, and sometimes customer by customer.  For example, businesses can deduct the cost of their security systems as an “ordinary and necessary” expense for doing business on their taxes; however, individual homeowners may not.

Nineteen states levy sales tax on alarm services and / or alarm monitoring, but not in a consistent fashion.  Some states tax alarm monitoring as a professional service, subject to sales tax in that jurisdiction.  Others consider alarm monitoring to be a telecommunications service and tax the company as if it was a telecom company.  Washington State has recently advised alarm companies that they must complete complex calculations weighing overall human effort cost to provide the service and average time spent responding to alarms to determine if that the service is “primarily a digital automated service” subject to sales tax.

Toll on Businesses and Communities

These regulations are rarely cut and dry, and can leave businesses and residents with a great deal of uncertainty as to what is and is not taxable.  Most security monitoring companies are small businesses without sophisticated tax and accounting divisions.  Complex state and local tax schemes can add what amounts to mountains of additional paperwork and additional expenses to small business owners that can’t afford them during tough economic times.

Taxing alarm systems and alarm monitoring is also regressive, as the elderly and those who live in higher crime areas, whose need for additional security is greatest, are often least able to afford to pay the tax.

A study done by researchers at Rutgers University[1] found that “residential burglar alarm systems reduce crime.”  In fact, it found that “neighborhoods in which burglar alarms were densely installed have fewer incidents of residential burglaries than the neighborhoods with fewer burglar alarms.”  When price-sensitive customers are forced to discontinue their alarm service due to the higher costs imposed by taxing bodies, their entire community suffers.  This could also drive up costs for local police departments.


ESA understands that many state and local governments continue to face budget shortfalls, and like business owners and individuals, are looking for ways to raise revenue; however, when security services are taxed, no one wins.  Our association urges lawmakers to carefully consider the unintended consequences such a tax might trigger when evaluating budget options.

[1] The Impact of Home Burglar Alarm Systems on Residential Burglaries, Seungmug (a.k.a. Zech) Lee, Ph.D., The School of Criminal Justice, Rutgers, The State University of New Jersey, 2008.

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