Sales tax on services: which states tax them

Service businesses often assume sales tax does not concern them. In most states that is largely true, but not everywhere, and some services are taxed in many states. This guide explains the patterns and how to check your own service.

By Awais Jameel, Chartered Accountant. Reviewed by Hamza Fida, Chartered Accountant. Checked against official sources on . 3 minute read.

Short answer

Most states tax goods but only a limited list of services. A few, notably Hawaii, New Mexico and South Dakota, tax most services through broad sales or gross receipts taxes. Elsewhere, commonly taxed services include repair and installation of goods, cleaning, landscaping, telecommunications and some data and information services. Professional services such as legal, accounting and consulting are exempt in most states.

At a glance

Most states
Tax goods; services only if listed
Broad service taxes
Hawaii, New Mexico, South Dakota
Commonly taxed
Repairs, installation, cleaning, landscaping, telecom
Often taxed
Some data processing and information services
Usually exempt
Legal, accounting, consulting, medical
Remote providers
Economic nexus rules can apply
Sales tax on services: which states tax themMost states: Tax goods; services only if listed; Broad service taxes: Hawaii, New Mexico, South Dakota; Commonly taxed: Repairs, installation, cleaning, landscaping, telecom; Often taxed: Some data processing and information services; Usually exempt: Legal, accounting, consulting, medical; Remote providers: Economic nexus rules can apply.KEY FACTS AT A GLANCESales tax on services: which states tax themMost statesTax goods; services onlyif listedBroad service taxesHawaii, New Mexico, SouthDakotaCommonly taxedRepairs, installation,cleaning, landscaping,telecomOften taxedSome data processing andinformation servicesUsually exemptLegal, accounting,consulting, medicalRemote providersEconomic nexus rules canapplyChecked against official sourcesTax BakersSales tax on services: which states tax themMost states: Tax goods; services only if listed; Broad service taxes: Hawaii, New Mexico, South Dakota; Commonly taxed: Repairs, installation, cleaning, landscaping, telecom; Often taxed: Some data processing and information services; Usually exempt: Legal, accounting, consulting, medical; Remote providers: Economic nexus rules can apply.KEY FACTS AT A GLANCESales tax on services: whichstates tax themMost statesTax goods; services only if listedBroad service taxesHawaii, New Mexico, South DakotaCommonly taxedRepairs, installation, cleaning,landscaping, telecomOften taxedSome data processing and informationservicesUsually exemptLegal, accounting, consulting, medicalRemote providersEconomic nexus rules can applyChecked against official sourcesTax Bakers
Key facts at a glance, as set out in this guide.

How do states approach services?

ApproachExamples
Tax most services through a broad sales or gross receipts taxHawaii, New Mexico, South Dakota
Tax a long list of specific servicesTexas, Washington, West Virginia and others
Tax few services beyond those connected with goodsMany states, including California and Florida
No statewide sales taxAlaska, Delaware, Montana, New Hampshire, Oregon

States with broad service taxes often allow deductions or exemptions for services sold to other businesses for resale, which avoids tax building up on tax.

Hawaii's general excise tax and New Mexico's gross receipts tax are legally taxes on the seller, although most businesses pass them on to customers.

Which services are commonly taxed?

  • Repair, maintenance and installation of tangible goods.
  • Cleaning and janitorial services, and landscaping, in a number of states.
  • Telecommunications and some digital services.
  • Data processing and information services in some states, such as Texas.
  • Admissions, lodging and amusement services, almost everywhere.

Professional services, such as legal, accounting, consulting, medical and most personal services, are exempt in most states outside those with broad service taxes.

Even where a service itself is exempt, materials or parts transferred to the customer as part of it may be taxable, or the provider may owe tax on materials it buys.

Services connected to real property, such as construction, follow separate contractor rules in many states.

How do you check your service?

  1. Describe the service precisely

    What is delivered, and whether goods change hands.

  2. Check each state where you have customers

    The state's list of taxable services.

  3. Check nexus

    Physical presence or economic thresholds. See economic nexus.

  4. Register and collect

    Where the service is taxable and you have nexus.

What about a sale mixing goods and services?

When an invoice combines taxable goods with services, states differ: some tax the whole amount, others only the goods if the service is separately stated. Separately stating each part on invoices is usually the safest practice. See sales tax on shipping for a related example.

Keep invoices clear.

What does an example look like?

A web design agency in Florida builds websites for clients in Florida, Texas and New Mexico. Florida does not generally tax the service. Texas may treat parts of it differently, for example hosting or data processing, so the agency checks how Texas classifies each part. New Mexico's gross receipts tax applies broadly to services performed for New Mexico customers if the agency has nexus there. Separating design, hosting and software on invoices makes each state's treatment clearer.

Do service businesses need a permit?

Only in states where their service is taxable and they have nexus, or where they also sell taxable goods. A business selling only exempt services generally does not register for sales tax.

What are the common mistakes?

  • Assuming all services are exempt everywhere.
  • Ignoring remote customers in states with broad service taxes.
  • Bundling taxable and exempt elements into one price.

Where is a service taxed?

Usually where the service is received or used, which for services delivered remotely may be where the customer is located. Rules vary, especially for services used in several states.

Does sales tax affect income tax?

No. Sales tax collected is a liability, not income. Washington's business and occupation tax, by contrast, is a tax on the provider's own gross receipts. See Washington sales tax.

Keep a note of each state's treatment of your services, and review it each year, since states add services to their tax base from time to time.

Selling services across states?

We check whether your services are taxable where your customers are, register you where needed and file the returns.

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Questions people ask

Do I charge sales tax on services?

In most states, only if your service is on the state's list of taxable services. A few states tax most services.

Which states tax most services?

Hawaii, New Mexico and South Dakota tax most services through broad sales or gross receipts taxes.

Are consulting services subject to sales tax?

In most states no, except in states with broad service taxes.

Are repair services taxable?

Repair and installation of tangible goods are taxable in many states.

Sources

Every fee, date and rule on this page was taken from these official and primary sources.

  1. Texas Comptroller: taxable services
  2. Hawaii Department of Taxation: general excise tax
  3. New Mexico Taxation and Revenue Department: gross receipts tax

Rules and fees change. If you are reading this long after October 1, 2026, confirm the figures with the source before you rely on them.

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This guide is general information. It is not tax or legal advice for your situation.