The customers of the taxpayer paid to the taxpayer a flat monthly monitoring fee after the security systems were installed in their homes. The taxpayer did not pay a transaction privilege tax to any jurisdiction based upon gross income earned from security or burglar alarm service charges billed to Arizona customers. The municipal transaction privilege tax is a tax levied by the city on revenue received by the taxpayer from the security systems installed in the cities involved.

Two of the cities assessed the transaction privilege tax against the taxpayer pursuant to their city codes. The taxpayer protested the cities’ assessments. A hearing officer resolved the protests in taxpayer’s favor, concluding that the statutes precluded taxation of gross income earned from the alarm monitoring business in the cities in Arizona.