Are Services Taxable? Sales Tax on Services by State

Quick answer: Are services taxable? In most states, most services, including professional, consulting and personal services, are not subject to sales tax. Hawaii, New Mexico, South Dakota and West Virginia tax services broadly, and Washington expanded its sales tax to many business services from October 1, 2025. Other states tax only listed services, such as repairs or cleaning.

For service businesses, sales tax is often an afterthought until a client asks why it is on an invoice or an auditor asks why it is not. The answer depends on the state, the exact service and sometimes the customer. This guide explains how states approach services, lists the broad-base states, covers commonly taxed services, shows an invoice that mixes taxable and exempt lines, and gives a checklist for staying compliant. It is general information as of October 2026, not tax advice.

Are services subject to sales tax? The basic rule

State sales taxes traditionally apply to tangible personal property: things you can touch. Services are taxable only when a state's law specifically includes them. That gives three broad models:

• Broad-base states tax most services unless the law exempts them.
• Enumerated-service states tax only services listed in the law, such as repairs, landscaping or data processing.
• Minimal-service states tax very few services, often only those connected to goods (installation, fabrication).

The five states with no statewide sales tax (Alaska, Delaware, Montana, New Hampshire and Oregon) do not tax services through a sales tax, though Alaska localities and Delaware's gross receipts tax are exceptions to keep in mind. For state base rates, see our sales tax by state table.

Which states tax services broadly?

State	Tax and rate	Approach to services
Hawaii	General excise tax, 4% plus county surcharges (0.5% in Honolulu)	Applies to nearly all business activity, including professional services
New Mexico	Gross receipts tax, 4.875% state plus local	Applies to most services performed in the state, with deductions for some B2B sales
South Dakota	Sales tax, 4.2% plus local	Most services taxable unless specifically exempt
West Virginia	Sales tax, 6% plus local	Many services taxable; professional services are generally exempt
Washington	Retail sales tax, 6.5% plus local	Since October 1, 2025, adds advertising, IT, custom website development, investigation and security, and temporary staffing services

The Tax Foundation notes that Hawaii, New Mexico and South Dakota have unusually broad bases that include many business-to-business services (Tax Foundation, 2026). For Washington's expansion, see the Department of Revenue's page on services newly subject to retail sales tax. Washington's law (ESSB 5814) has faced legal challenges and the Department has issued interim guidance, so check the current position before you invoice.

Which services are commonly taxable in other states?

Outside the broad-base states, certain categories show up again and again. Whether a specific service is taxable still depends on the state's wording.

Service category	Often taxable in	Notes
Repair and maintenance of tangible goods	Many states	Car, appliance, equipment repair; labor may or may not be taxed
Installation of goods sold	Many states	Often taxable when bundled with the sale
Landscaping and lawn care	Some states	Examples include several Midwestern and Southern states
Janitorial and building cleaning	Some states	Texas and New York tax certain building maintenance services
Data processing and information services	Some states	Texas taxes data processing (with a partial exemption); Connecticut taxes computer services at a reduced rate
SaaS and digital products	Roughly half of sales tax states	Rapidly changing; check each state
Security and protective services	Some states	Examples include New York and Texas
Amusement, admissions, lodging	Most states	Often under separate excise or lodging taxes
Professional services (legal, accounting, medical, consulting)	Rarely	Mainly broad-base states such as Hawaii, New Mexico and South Dakota

Freelancers in creative and digital work should look closely at deliverables. A logo design service may be exempt, but the same design delivered as a downloadable digital product, or printed on goods, may be taxable in some states. Our guide to sales tax on US invoices covers the invoicing side.

How to tell if your service is taxable: step by step

1. List where you have nexus. Your home state plus any state where you have physical presence or pass economic nexus thresholds; see sales tax nexus.
2. Describe the service precisely. "Marketing" could be advertising, consulting, content writing or software. Each may be treated differently.
3. Check each state's taxable services list. State revenue departments publish guidance and taxability matrices.
4. Check the true object of the sale. If the customer mainly wants a product (a printed report, a custom app), product rules may apply.
5. Check sourcing. Services are often sourced to where they are received or used, which may not be where you are.
6. Register if needed and get a seller's permit before charging tax.
7. Collect exemption or resale certificates from qualifying buyers.
8. Document your conclusion. A short memo or a ruling request protects you in an audit.

Worked example: an invoice with taxable and non-taxable services

An IT services company in Seattle invoices a Washington client after October 2025. Assume custom website development and IT support are taxable under the 2025 expansion, while a separately stated management consulting workshop is not. The combined rate is illustrative at 10.35%; look up the exact rate for the client's address.

Line item	Taxable?	Amount
Custom website development, 40 hours at $110	Yes	$4,400.00
Managed IT support, monthly	Yes	$900.00
Strategy workshop (management consulting)	No	$1,500.00
Subtotal		$6,800.00
Taxable subtotal		$5,300.00
Sales tax (10.35% x $5,300, illustrative)		$548.55
Total due		$7,348.55

Had the company billed one lump sum of $6,800 for "technology services", it would have risked tax on the whole amount. Separate lines and clear descriptions do the work. Build itemized invoices like this with our free invoice generator and check the arithmetic with our sales tax calculator.

How are services sourced for sales tax?

Sourcing decides which state's (and which locality's) rules and rate apply. For goods it is usually where the buyer receives them. Services are harder because nothing is shipped. States use different tests:

• Where the service is performed, common for hands-on services such as repairs, cleaning or landscaping.
• Where the benefit is received or where the customer uses the service, common for digital, IT and advertising services.
• The customer's address on file as a fallback when the place of use is unclear.

If a customer uses a taxable service in several states, for example a SaaS tool used by staff in five offices, some states let the customer provide a multiple points of use certificate so tax can be apportioned. Remote service providers should note that a service performed from a home office in a state that does not tax it can still be taxable where the client receives it, if you have nexus there.

Digital products, software and SaaS: the fastest-changing area

The biggest growth in taxable services is digital. States increasingly tax prewritten software delivered electronically, digital downloads such as e-books and stock photos, streaming, and software accessed online. Custom software written for one client is often exempt, while canned software is often taxable. Hosting, data processing and information services are taxable in some states and not others. If you sell anything digital, keep a short list of each state's position and recheck it every year, because legislatures have been expanding these bases since the Wayfair decision in 2018.

Common mistakes with sales tax on services

• Assuming services are never taxable. True in many states for many services, but not in all, and the list is growing.
• Bundling taxable and exempt items. A single price for a mixed package can make everything taxable.
• Ignoring remote clients. Taxability is decided by the client's state rules when the service is sourced there.
• Forgetting materials. Parts and materials sold with a service are usually taxable even when labor is not.
• Charging tax without a permit. Collected tax must be remitted; collecting it without registration causes trouble.
• Not tracking law changes. Several states have considered taxing more services; review annually.

Services sales tax checklist

• Every service you sell written down with a plain description
• Taxability checked in each nexus state, with sources saved
• Invoice template separating taxable and non-taxable lines
• Exemption and resale certificates on file
• Seller's permits where needed, and a filing calendar; see how to file a sales tax return
• Annual review of new laws in your states

For how sales taxes compare internationally, where VAT and GST usually tax services by default, see sales tax vs VAT vs GST.

So, are services taxable? Usually not, but often enough that every service business should check its states. When you do charge tax, show it clearly on itemized invoices made with our free invoice generator: no sign-up, no account, and a PDF built in your browser.