State-by-state guide to charging sales tax on services

In the 1930s, when state legislatures implemented the first sales tax laws to boost revenues, the American economy depended on the manufacture and sale of physical goods. For the most part, early sales tax laws allowed for the taxation of tangible personal property (TPP), not services. Tangible personal property is a term for items that can be touched and moved.

As the United States shifted from a manufacturing-based economy to a service-based economy, several states began to impose sales and use tax on services as well. Many businesses that provide services are still unaware of these statutory changes — some mistakenly believe they don’t have to pay any sales tax at all, even if they’re selling services all over the U.S.

Every state taxes services in its own way

This guide provides an overview of the complexities of sales tax on services specific to each state. You may be wondering, Should I charge sales tax on services? The short answer is, It depends. Each state makes its own regulations as the examples of taxable services listed below demonstrate.

Five U.S. states (Alaska, Delaware, Montana, New Hampshire, and Oregon) do not impose any general statewide sales tax on goods or services. Of the 45 states remaining, four (Hawaii, New Mexico, South Dakota, and West Virginia) tax services by default, with exceptions for services specifically exempted by law.

This leaves 41 states — and the District of Columbia — where services aren’t taxed by default, but services enumerated by the state may be taxed. Every one of these states taxes a different set of services, making it difficult for service businesses to understand in which states they’re required to file a sales tax return, and which specific elements of their services are taxable.

Categories of taxable services

What are taxable services? No two states tax exactly the same specific services, but the general types of services being taxed can be divided roughly into six categories.

Services to tangible personal property: Many states have started to tax services to tangible personal property at the same rate as sales of TPP itself. These services typically improve or repair property. Examples of services to tangible personal property include carpentry services, car repair, and tailoring. Some states consider pets to be tangible personal property and tax services like grooming.

Services to real property: Work done on buildings and land fall into this category. One of the most commonly taxed services in this area is landscaping and lawn service. Janitorial services also fall into this category.

Business services: Services performed for companies and businesses fall into this category. Examples include telephone answering services, services provided by credit reporting agencies and credit bureaus, and extermination services.

Personal services: Personal services include a range of businesses that provide personal grooming or other types of self-improvement. For example, tanning, body piercing, and massages not performed by a licensed massage therapist can be considered personal services.

Professional services: This is the least taxed service area, in large part because professional groups have powerful lobbying presences. Professional services include those provided by attorneys, physicians, accountants, and other licensed professionals.

Amusement/recreation: This includes admission to amusement parks, concerts, live theater, professional ball games, and other types of entertainment and recreation. Some states that tax very few other services, like Utah and Wyoming, still tax admission charges to most sporting and entertainment events.

Understanding the U.S. state-by-state map to services taxability

Remember that within each category of services, states can still have drastically different regulations. For instance, both Florida and Iowa are marked as taxing business services, even though Iowa taxes a wide range of these services and Florida only taxes security and detective services.

For more details about the specific tax liability of your business in individual states, consult state Departments of Revenue for additional information.

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Summary of service taxability for U.S. states

Alabama service taxability

Are services taxable in Alabama?

Services generally aren’t taxable in Alabama. However, there are a few exceptions including services to tangible personal property. Services subject to sales and use tax in Alabama include:

Alaska service taxability

Are services taxable in Alaska?

Services generally aren’t taxable in Alaska because the state doesn’t levy a sales tax. However, some cities and boroughs do have a sales tax.

Business services impacted by taxation:

The Alaska Department of Commerce, Community, and Economic Development recommends checking with local jurisdictions to determine taxability rules for your service.

Arizona service taxability

Are services taxable in Arizona?

Arizona has a transaction privilege tax (TPT) that operates similarly to sales and use tax in other states. Some professional services, amusement/entertainment services, and services to tangible personal property are taxable in Arizona.

Business services impacted by taxation:
Businesses that perform the following activities may be subject to transaction privilege tax in Arizona:

Arkansas service taxability

Are services taxable in Arkansas?

Some services are taxable in Arkansas, including certain services to tangible personal property, business services, personal services, and amusement/entertainment services.

Business services impacted by taxation:

Services subject to sales and use tax in Arkansas include but aren’t limited to:

California service taxability

Are services taxable in California?

Services in California generally aren’t taxable.

Business services impacted by taxation:

Some labor services and associated costs are subject to sales tax if they are involved in the creation or manufacturing of tangible personal property.

Colorado service taxability

Are services taxable in Colorado?

Colorado doesn’t generally impose sales tax on services.

Business services impacted by taxation:

However, if tangible personal property and services are bundled in a sale, the entire purchase price may be subject to sales tax.

Connecticut service taxability

Are services taxable in Connecticut?

Many services are subject to sales and use tax in Connecticut.

Business services impacted by taxation:

Taxable services in Connecticut include some services to tangible personal property, services to real property, business services, personal services, and amusement/recreation services. Taxable services in Connecticut include:

Delaware service taxability

Are services taxable in Delaware?

Delaware doesn’t have sales tax but imposes gross receipts tax on the seller of certain services.

Business services impacted by taxation:

Check with the Delaware Division of Revenue to learn the services impacted by gross receipts tax.

Florida service taxability

Are services taxable in Florida?

Some services are taxable in Florida including business services, services to tangible personal property, services to real property, amusement/recreation services, and professional services.

Business services impacted by taxation:

Taxable services in Florida include but aren’t limited to:

Georgia service taxability

Are services taxable in Georgia?

Most services are exempt from sales tax in Georgia but there are exceptions including amusement services.

Business services impacted by taxation:

Services subject to sales and use tax in Georgia include:

Hawaii service taxability

Are services taxable in Hawaii?

Hawaii has a general excise tax (GET) instead of traditional sales tax. Hawaii taxes services by default unless specifically exempt.

Business services impacted by taxation:

Services subject to GET in Hawaii include but aren’t limited to:

Idaho service taxability

Are services taxable in Idaho?

Some services are taxable in Idaho including services to tangible personal property and amusement services.

Business services impacted by taxation:

Examples of services subject to sales tax in Idaho include:

Illinois service taxability

Are services taxable in Illinois?

Illinois does not tax services.

Business services impacted by taxation:

Although Illinois does not typically tax services, services may be taxable in the following situations:

Indiana service taxability

Are services taxable in Indiana?

Services generally aren’t taxable in Indiana.

Business services impacted by taxation:

Although services aren’t usually taxable in Indiana, there are some exceptions:

Iowa service taxability

Are services taxable in Iowa?

Iowa taxes about 75 services, including services to tangible personal property, services to real property, business services, personal services, and amusement/recreation services.

Business services impacted by taxation:

Taxable services in Iowa include:

Kansas service taxability

Are services taxable in Kansas?

Many services are subject to sales and use tax in Kansas including services to tangible personal property, amusement/recreation services, and business services.

Business services impacted by taxation:

Taxable services in Kansas include but aren’t limited to:

Kentucky service taxability

Are services taxable in Kentucky?

Many services are subject to sales and use tax in Kentucky including business services, personal services, amusement/recreation services, professional services, services to tangible personal property, and services to real property.

Business services impacted by taxation:

Taxable services in Kentucky include:

Louisiana service taxability

Are services taxable in Louisiana?

Some services are subject to sales and use tax in Louisiana.

Business services impacted by taxation:

Taxable services in Louisiana include certain services to tangible personal property and amusement/recreation services:

Maine service taxability

Are services taxable in Maine?

Maine has both a service provider tax and sales tax.

Business services impacted by taxation:

Taxable services in Maine include some services to tangible personal property:

Maryland service taxability

Are services taxable in Maryland?

Some services are taxable in Maryland including services to tangible personal property, services to real property, business services, and amusement/recreation services.

Business services impacted by taxation:

Taxable services in Maryland include:

Massachusetts service taxability

Are services taxable in Massachusetts?

Services in Massachusetts are generally not taxable.

Business services impacted by taxation:

Although services in Massachusetts are not usually taxable, businesses that rent or lease tangible personal property in Massachusetts may need to collect and remit sales and use tax.

Michigan service taxability

Are services taxable in Michigan?

Services in Michigan are generally not taxable.

Business services impacted by taxation:
While services are not typically taxable in Michigan, delivery and installation services remain subject to sales and use tax unless separately itemized on the customer’s invoice and properly recorded by the seller.

Minnesota service taxability

Are services taxable in Minnesota?

Some services are taxable in Minnesota including certain services to tangible personal property, services to real property, business services, personal services, or amusement/recreation services.

Business services impacted by taxation:

Services subject to sales and use tax in Minnesota include:

Mississippi service taxability

Are services taxable in Mississippi?

Many services are subject to sales and use tax in Mississippi.

Business services impacted by taxation:

Taxable services in Mississippi include these services to tangible personal property, services to real property, business services, and amusement/recreation services:

Missouri service taxability

Are services taxable in Missouri?

Services in Missouri generally aren’t subject to sales and use tax but there are a few exceptions.

Business services impacted by taxation:

Businesses may need to collect and remit sales tax on certain services to tangible personal property and amusement/recreation services:

Montana service taxability

Are services taxable in Montana?

Montana doesn’t have a state sales tax, so services generally aren’t taxable.

Business services impacted by taxation:

Check with the Montana Department of Revenue for any taxed services.

Nebraska service taxability

Are services taxable in Nebraska?

Some services are subject to sales and use tax in Nebraska.

Business services impacted by taxation:

Taxable services in Nebraska include these services to tangible personal property, services to real property, business services, and amusement/recreation services:

Nevada service taxability

Are services taxable in Nevada?

Most services aren’t taxable in Nevada but services to tangible personal property are taxable.

Business services impacted by taxation:

Services subject to sales and use tax in Nevada include:

New Hampshire service taxability

Are services taxable in New Hampshire?

Services aren’t taxable in New Hampshire because the state doesn’t have a sales tax.

Business services impacted by taxation:

Even though New Hampshire doesn’t have a statewide sales tax, check with the New Hampshire Department of Revenue Administration for exceptions to the taxability of services.

New Jersey service taxability

Are services taxable in New Jersey?

Many services are taxable in New Jersey including services to tangible personal property, services to real property, business services, some personal services, and amusement/recreation services. However, some services are exempt in New Jersey including professional services such as those provided by accountants, lawyers, and doctors and certain personal services such as those provided at barber shops and beauty parlors.

Business services impacted by taxation:

Common services subject to sales and use tax in New Jersey include:

New Mexico service taxability

Are services taxable in New Mexico?

Most services are taxable in New Mexico. New Mexico has a gross receipts tax that functions similarly to a sales tax. According to the New Mexico Taxation and Revenue website, “Although the gross receipts tax is imposed on businesses, it is common for a business to pass the gross receipts tax on to the purchaser either by separately stating it on the invoice or by combining the tax with the selling price.”

Business services impacted by taxation:

Taxable services in New Mexico include services to tangible personal property, services to real property, business services, personal services, professional services, and amusement/recreation services.

Some services are exempt from the New Mexico gross receipts tax including:

New York service taxability

Are services taxable in New York?

Services are generally exempt from New York sales tax but there are exceptions.

Business services impacted by taxation:

Taxable services in New York include some services to tangible personal property, services to real property, business services, and amusement/recreation services, as well as certain personal services performed in New York City.

Services subject to sales and use tax in New York state include:

Services subject only to New York City sales tax include:

North Carolina service taxability

Are services taxable in North Carolina?

Few services in North Carolina are taxable but there are exceptions for certain services to tangible personal property and entertainment services.

Business services impacted by taxation:

Businesses may need to collect and remit sales tax on services if they provide these services:

North Dakota service taxability

Are services taxable in North Dakota?

Services generally aren’t taxable in North Dakota but there are a few exceptions for amusement/recreation services and certain services to tangible personal property.

Business services impacted by taxation:

Services subject to sales and use tax in North Dakota include:

Ohio service taxability

Are services taxable in Ohio?

Many services are taxable in Ohio.

Business services impacted by taxation:

Taxable services in Ohio include services to tangible personal property, services to real property, business services, personal services, professional services, and amusement/recreation services. However, professional and personal services aren’t taxable when they include the transfer of a “small item” of tangible personal property for which no separate charge is made. Services subject to sales and use tax in Ohio include:

Oklahoma service taxability

Are services taxable in Oklahoma?

Some services to tangible personal property and amusement/recreation services are taxable in Oklahoma.

Business services impacted by taxation:

Businesses may need to collect and remit sales tax on services if their work includes:

Oregon service taxability

Are services taxable in Oregon?

Services aren’t taxable in Oregon because there is no general sales or use tax.

Business services impacted by taxation:

As Oregon has no statewide sales tax, there are no taxable services in Oregon.

Pennsylvania service taxability

Are services taxable in Pennsylvania?

Some services are taxable in Pennsylvania including services to tangible personal property, services to real property, and business services.

Business services impacted by taxation:

Services subject to sales and use tax in Pennsylvania include:

Rhode Island service taxability

Are services taxable in Rhode Island?

Some services are taxable in Rhode Island including services to tangible personal property.

Business services impacted by taxation:

Services subject to sales and use tax in Rhode Island include but aren’t limited to:

South Carolina service taxability

Are services taxable in South Carolina?

Some services are taxable in South Carolina including amusement/recreation services, business services, and services to tangible personal property.

Business services impacted by taxation:

Services subject to sales and use tax and admissions tax in South Carolina include:

South Dakota service taxability

Are services taxable in South Dakota?

Services are taxable by default in South Dakota unless specifically exempted.

Business services impacted by taxation:

Services subject to sales and use tax in South Dakota include services to tangible personal property, services to real property, business services, personal services, professional services, and amusement/recreation services.

Tennessee service taxability

Are services taxable in Tennessee?

Services generally aren’t taxable in Tennessee unless specified in law. Services subject to sales and use tax in Tennessee include services to tangible personal property. Tennessee also imposes an amusement tax on amusement/recreation services.

Business services impacted by taxation:

Taxable services in Tennessee include:

Texas service taxability

Are services taxable in Texas?

Many services are taxable in Texas including services to tangible personal property, services to real property, business services, personal services, and amusement/recreation services.

Business services impacted by taxation:

Examples of services that are subject to sales and use tax in Texas include:

Utah service taxability

Are services taxable in Utah?

Services to tangible personal property and amusement/recreation services are taxable in Utah.

Business services impacted by taxation:

Businesses may need to charge sales tax on services in Utah for the following:

Vermont service taxability

Are services taxable in Vermont?

Services are generally tax exempt in Vermont but exceptions include certain services to tangible personal property and amusement/recreation services.

Business services impacted by taxation:

Services subject to sales and use tax in Vermont include:

Virginia service taxability

Are services taxable in Virginia?

Services are generally tax exempt in Virginia but there are some exceptions.

Business services impacted by taxation:

Services subject to sales and use tax in Virginia include services to tangible personal property:

Washington service taxability

Are services taxable in Washington?

Many services are subject to sales and use tax in Washington including services to tangible personal property, business services, personal services, and amusement/recreation services.

Business services impacted by taxation:

Taxable services in Washington include:

West Virginia service taxability

Are services taxable in West Virginia?

Services are taxable by default in West Virginia unless specifically exempted.

Business services impacted by taxation:

Services subject to sales and use tax in West Virginia include services to tangible personal property, services to real property, business services, and amusement/recreation services.

Wisconsin service taxability

Are services taxable in Wisconsin?

Some services are subject to sales and use tax in Wisconsin including amusement/recreation services, services to real property, and services to tangible personal property.

Business services impacted by taxation:

Taxable services in Wisconsin include:

Wyoming service taxability

Are services taxable in Wyoming?

Wyoming calls its sales and use tax an excise tax. Some services are subject to tax in Wyoming, including services to tangible personal property and amusement/recreation services.

Business services impacted by taxation:

Taxable services in Wyoming include:

Tips to follow when evaluating sales tax on services

1. Avoid making assumptions about taxability

Many companies assume services delivered in conjunction with goods sold (e.g., swimming pools and pool cleaning, computers and maintenance, construction materials and installation) aren’t taxable, but that’s often not the case. Delaware, Hawaii, New Mexico, and South Dakota tax most services. Still others, like Kentucky, are actively expanding service taxability.

Businesses that sell services across multiple states need to know where those services are subject to sales tax. The fact that sales tax laws aren’t universal and often change makes it challenging to remain in compliance.

Take the taxability of digital products, for example. Digital products don’t neatly fit into sales tax definitions because many state laws were written before the products were invented. Products like cloud-based software can’t be felt and held. Yet, in some states, like Kentucky, installing digital products is a taxable service lumped in with tangible personal property regulations. Digital services taxes become even more complex when companies sell internationally and need to collect and remit value-added tax (VAT) or goods and services tax (GST).

Sales tax is complicated for on-demand service marketplaces. Companies like DoorDash, Upwork, and Uber need to know when to charge tax on services and when to exempt it. On-demand service platforms must also understand marketplace facilitator laws that may apply to them.