A service tool proximity detection system includes a service tool and an equipment controller. The service tool is operable to establish communication with the equipment controller of an equipment service system. At least one processor of the service tool proximity detection system is configured to generate a location proximity indicator to verify proximity of the service tool to a predetermined service location of the equipment service system, determine that the service tool is located local to the predetermined service location based on verifying that a response to the location proximity indicator matches an expected response, determine that the service tool is located remote from the predetermined service location based on verifying that the response to the location proximity indicator fails to match the expected response, and configure one or more functions of the service tool based on the location of the service tool relative to the predetermined service location.