In the first week of March 2025, two separate Texas tax cases were filed in Texas state district court. Each of these involves, among other claims, whether taxable security services should be rendered exempt when preempted by applicable federal law.
Houston Astros, LLC v. Hegar, D-1-GN-25-001541 (Mar. 3, 2025)
In Houston Astros v. Hegar, the Astros filed suit seeking a refund of tax paid on security services at Daikin Park in Houston, Texas. The generalized claim is that these services are either nontaxable or exempt from tax, but this is broken into several sub-arguments:
- The Astros claim that the provision of security services is mandated by the federal SAFETY Act, and that the SAFETY Act preempts the application of state tax rules.
- Additionally, the Astros claim that certain aspects of the security services do not meet the definition of a taxable security service and thus cannot be taxed (g., bomb-sniffing dogs and the employment of peace officers).
- Finally, the Astros claim that the resale exemption applies to their purchases of security services, as these services are included as part of ticket pricing and are thus resold to customers..
Newrest IAH LLC v. Hegar, D-1-GN-25-001632 (Mar. 6, 2025)
In Newrest IAH v. Hegar, Newrest filed suit seeking a refund of tax paid on four separate categories of items. Among these items are purchases of security services. Newrest is a contracted caterer for in-flight meals and logistics at the George Bush Intercontinental Airport in Houston, which includes the preparation and transportation of meals from a leased facility to planes. Newrest is required under federal law to purchase security services in connection with the provision of its catering services. Similarly to the Astros, Newrest claims that the application of state tax laws to these services is preempted by federal law, and thus the services are not subject to tax.
We will be keeping up with these cases, as well as others. The resolution of these cases will impact the taxability of certain security services in Texas, but may also have a broader impact on the application of state taxes in areas that are arguably preempted by federal law.
