On this page
The short version
- Sales tax is set state by state, and cities and counties can add their own.
- Some states tax most services, some tax only services on a list, and some tax almost none. A few have no general sales tax.
- Labor and parts on the same invoice can be taxed differently, so tax each line on its own.
- Check your state revenue department’s page for your type of work, or ask an accountant, before your first invoice.
It depends on the state
There is no federal sales tax in the US. Each state that has a sales tax decides what it applies to, and states draw the line around services in very different places. That is why a lawn service can owe tax in one state and not in the next.
| Approach | Examples | What it means for a service business |
|---|---|---|
| Tax most services | South Dakota, Hawaii, New Mexico | Assume your service is taxed unless you find an exemption. |
| Tax services on a list | Texas, New York, Washington | Find your type of work on the state’s list. |
| Tax few services | California | Services are generally not taxed, but parts and some labor tied to goods are. |
| No general sales tax | Oregon | No state sales tax to charge. |
How some states treat services
California
The California Department of Tax and Fee Administration says that if you are in the business of providing a service, your charge for the service is generally not taxable. Services that are part of selling an item generally are. Its guide to labor charges says repair labor is not taxable, while fabrication labor (making or changing an item for a customer) is.
Texas
The Texas Comptroller lists 16 broad categories of taxable services. They include real property services such as landscaping and lawn maintenance and janitorial services, repair of personal property, data processing (with 20% of the charge exempt), and repair and remodeling of nonresidential real property. The state rate is 6.25%, and local taxes can apply on top.
New York
New York taxes maintaining, servicing and repairing real property, which covers work like lawn mowing and plumbing repairs. Its registration bulletin also lists appliance and computer repair, interior decorating and design, protective and detective services, and certain information services.
Washington
Washington calls the services it taxes "retail services". Its Department of Revenue lists building construction and improvement, installation, cleaning and repair services, landscaping and landscape maintenance, and tanning among them.
South Dakota, Hawaii and New Mexico
These three tax services broadly. South Dakota applies its sales tax to the sale of services as well as goods, at a state rate of 4.2%. Hawaii has no sales tax but charges a general excise tax on all business activities, 4% for most. New Mexico’s gross receipts tax counts receipts from performing services.
Check your own state
These are examples, not a full list, and states change their rules. Search your state revenue department’s site for your type of work, or ask an accountant. Our sales tax calculator links each state’s base rate to the page we read it from.
Labor and parts on the same invoice
When a state taxes goods but not a service, one invoice can hold both. Put labor and parts on separate lines and tax only the lines that are taxable.
Worked example
An appliance repair in California, at the 7.25% statewide rate
- Repair labor, 2 hours (not taxed)
- $150.00
- Replacement parts (taxed)
- $80.00
- Sales tax (7.25% of $80.00)
- $5.80
- Total
- $235.80
Local district taxes can raise the rate on the parts. Taxing the labor too would have added $10.88 the client did not owe.
In a state that taxes the service itself, the whole job is taxed:
| Item | Qty | Rate | Amount |
|---|---|---|---|
| Lawn mowing and edging4 visit × $55.00 | 4 visit | $55.00 | $220.00 |
| Hedge trimming2 hr × $60.00 | 2 hr | $60.00 | $120.00 |
Local sales tax may also apply at the job’s location.
Clients in other states
Since the Supreme Court’s 2018 decision in South Dakota v. Wayfair, states can require businesses with no physical presence there to collect their sales tax once they sell enough into the state. Washington, for example, requires a remote seller to collect once it has more than $100,000 in combined gross receipts there. Thresholds and what counts toward them differ by state.
Most local service businesses work where they live, so this rarely comes up. It matters if you sell services remotely, like design or bookkeeping, to clients across the country. If that is you, talk to an accountant about where you need to register.
Showing sales tax on the invoice
- Register first. If your state taxes your service, register with its revenue department before you collect tax.
- Show tax as its own line, with the rate, under the subtotal. Add the local rate as a second line, or combine them if your state allows.
- Mark untaxed lines so the client can see why the tax is less than the rate times the subtotal.
- Use the rate your state’s rules call for. For some work that is the rate where the job is, not where your office is.
In Sumocat you can add a state tax and a local tax to any invoice, each on its own line, and mark a line as not taxed so it stays out of the tax. The totals round to the cent the same way on every device. Free with a free account. At tax time, the Accountant Pack exports any whole tax year with a sales tax summary for free, and Sumocat Pro PRO adds the Sales Tax report for any period.
Add the right tax to a price
Every state’s base rate, a field for the local rate, and each tax line rounded to the cent. Free.
Selling in Canada too? See GST and HST on invoices in Canada.
Questions
Do I charge sales tax on labor?
It depends on the state and the kind of labor. California, for example, does not tax repair labor but does tax fabrication labor. States like Texas and Washington tax some kinds of labor on real property, such as landscaping. Check your state revenue department’s page for your type of work.
Which states do not have a sales tax?
A few states have no general statewide sales tax, Oregon among them. Our sales tax calculator shows every state’s base rate with the page we read it from.
Do I charge my client’s local rate or mine?
Each state has its own rules on which location’s rate applies. Check your state revenue department’s page, and ask an accountant if you work in several cities or counties.
Can I add a state tax and a local tax to the same invoice?
Yes. Show each as its own line with its rate. In Sumocat you can add both to any invoice for free.
Sources
The official pages this guide relies on, with the date we last checked each one. Rules and rates change, so check the page itself before you rely on it.
- California Department of Tax and Fee Administration, Tax guide for home based businesses. cdtfa.ca.gov/industry/home-based-businesses/industry-topics.htm Checked .
- California Department of Tax and Fee Administration, Publication 108, Labor Charges: taxable labor. cdtfa.ca.gov/formspubs/pub108/taxable-labor.htm Checked .
- California Department of Tax and Fee Administration, Sales and use tax rates. www.cdtfa.ca.gov/taxes-and-fees/sales-use-tax-rates.htm Checked .
- Texas Comptroller of Public Accounts, Publication 96-259, Taxable Services. comptroller.texas.gov/taxes/publications/96-259.php Checked .
- Texas Comptroller of Public Accounts, Sales and use tax. comptroller.texas.gov/taxes/sales/ Checked .
- New York State Department of Taxation and Finance, TB-ST-505, Landscapers. www.tax.ny.gov/pubs_and_bulls/tg_bulletins/st/landscapers.htm Checked .
- New York State Department of Taxation and Finance, TB-ST-175, Do I need to register for sales tax?. www.tax.ny.gov/pubs_and_bulls/tg_bulletins/st/do_i_need_to_register_for_sales_tax.htm Checked .
- Washington Department of Revenue, Services subject to sales tax. dor.wa.gov/taxes-rates/retail-sales-tax/services-subject-sales-tax Checked .
- Washington Department of Revenue, Remote sellers. dor.wa.gov/taxes-rates/retail-sales-tax/marketplace-fairness-leveling-playing-field/remote-sellers Checked .
- South Dakota Department of Revenue, Sales and use tax. dor.sd.gov/businesses/taxes/sales-use-tax/ Checked .
- Hawaii Department of Taxation, General Excise Tax (GET) information. tax.hawaii.gov/geninfo/get/ Checked .
- New Mexico Taxation and Revenue Department, Gross receipts tax overview. www.tax.newmexico.gov/businesses/gross-receipts-overview/ Checked .
- Oregon Department of Revenue, Sales tax. www.oregon.gov/dor/programs/businesses/pages/sales-tax.aspx Checked .