March 8, 2017
The Department of Revenue ("Department") is issuing this interim guidance statement to address the tax treatment of individual monitoring agency services ("IMAS") otherwise known as "electronic home monitoring (or EHM) services." * As defined in RCW 9.94A.736(8)(a), an IMAS provider is:
"...an entity, private or public, which electronically monitors an individual, pursuant to an electronic monitoring or home detention program, including the department of corrections, a sheriff's office, a police department, a local detention facility, or a private entity."
Not addressed - alarm monitoring services and sales of tangible personal property
Persons providing alarm monitoring services, as described in ETA 3189.2018, should continue to rely upon that ETA for tax-reporting guidance.
A seller/lessor of equipment (e.g. ankle monitors) and related services (such as online portal services and remote monitoring center services) used by IMAS providers to perform their service is not an IMAS provider for purposes of this guidance.
IMAS providers - taxability of income
For purposes of this interim guidance statement, an IMAS provider is a taxpayer that performs the following types of activities in the process of providing their IMAS:
- initial interview/consultation with individual and data entry of detailed contact information;
- creation and maintenance of daily/weekly permissible schedules for the individual;
- verification by email or phone of information and employment references provided by individual;
- instruction in the proper use and maintenance of the equipment;
- troubleshooting equipment issues;
- conducting scheduled and/or unplanned visits at individual's home;
- responding to alerts generated by the monitoring system including calling individual and verifying status of individual's location;
- generating customized reports for courts or other supervising agencies;
- various other related activities.
As evidenced by the types of activities conducted, IMAS providers provide significant human effort in conjunction with the use of remote electronic monitoring equipment and online portals.
The Department continues to review this area and intends to develop and publish final reporting guidance for IMAS providers. In the meantime, IMAS providers should report their gross income from IMAS under the service and other activities B&O tax classification.
Taxability of items purchased by service providers
Persons performing services subject to the service and other activities B&O tax classification are consumers of any goods or retail services they use to provide their services. Thus, these service providers are required to pay retail sales or use tax on those goods and services subject to retail sales or use tax, unless a specific exemption applies. RCW 82.04.190; RCW 82.04.050.
If you are not sure whether your service is an IMAS, or you owe retail sales or use tax on your purchases, please contact the Department at 360-705-6705.
* We choose not to use the EHM acronym here because "electronic home monitoring" may be confused with home alarm monitoring, which we address in ETA 3189.2014.