What States Charge Sales Taxes On Services?

Sales taxes on services are becoming increasingly common as states seek to generate revenue from sources other than traditional sales taxes on goods. Services subject to sales tax vary by state but typically include repairs, installation, labor charges, and professional services. California has long been a hub for business in the US and for entrepreneurs. Many entrepreneurs will want to know how to formally establish their business and which business entity they should choose. This resource has more information on forming an s corp in california.

While state sales taxes have always been applied to retail goods being sold, states have begun to require sales taxes on services being offered by companies in recent years. Services are difficult to tax because they’re intangible, so it can be hard to know where the service was performed and by whom. For these reasons, states have been slow to implement sales taxes on services, but as budgets continue to tighten, more and more states are turning to this revenue stream. If you’re unsure how much you should be charging companies like TaxConnex, are experts at helping your business navigate the world of taxes.

States that Charge Sales Tax on Services

Sales taxes on services are now imposed in nearly every state, with a few exceptions. These taxes typically apply to benefits not previously subject to sales tax, such as haircuts, car repairs, and laundry services. Exceptions to the rule generally include medical care and educational services. Your business might be subject to sales taxes on services in your state. If you’re not sure, here are the details from each of the 50 states:

• Alabama - Services are taxable unless specifically exempted by law.
• Alaska - No sales tax (but income tax is collected).
• Arizona - Sales tax rate varies depending on product type and location of sale.
• Arkansas - Most services are exempt from sales tax, but a few specific types may be considered taxable, such as repair or installation charges.
• California- The general rule is that if a good or service is sold to customers for their personal use, then it will not be subject to sales tax when purchased for use outside of California (e.g., clothing, food)
• Colorado- Taxable unless specifically exempted; some standard services subject to tax include telecommunications, data processing, and storage.
• Connecticut - Services are taxable in Connecticut unless they are specifically exempt under state law.
• District of Columbia- The general rule is that if a good or service is sold to customers for their personal use, then it will not be subject to sales tax when purchased for use outside of the District (e.g., clothing, food)
• Florida - Sales taxes on services became effective July 1, 2018, with a few exceptions, such as medical care and educational services.
• Georgia - Although there is no state sales tax in Georgia, some local governments collect their own sales taxes on various items and services.
• Hawaii - Services are subject to general excise tax, which is 4.16% for Oahu and 4% for the rest of the state.
• Idaho - Sales taxes on services became effective July 1, 2018.
• Illinois - Services are taxable in Illinois unless they are specifically exempt under state law.
• Indiana - Services are taxable in Indiana unless they are specifically exempt under state law.
• Iowa - Sales taxes on services became effective January 1, 2018, with a few exceptions, such as medical care and educational services.
• Kansas - Sales taxes on services became effective July 1, 2015, with a few exceptions, such as medical care and educational services.
• Kentucky - Sales taxes on services became effective July 1, 2018.
• Louisiana - Sales taxes on services became effective July 1, 2018.
• Maine - Sales taxes on services became effective September 1, 2017.
• Maryland - Services are taxable in Maryland unless they are specifically exempt under state law.
• Massachusetts - Services are taxable in Massachusetts unless they are specifically exempt under state law.
• Michigan - Sales taxes on services became effective October 1, 2015.
• Minnesota - Services are taxable in Minnesota unless they are specifically exempt under state law.
• Mississippi- Services that were not previously subject to sales tax became subject to sales tax on July 1, 2018.
• Missouri - Although there is no state sales tax in Missouri, some local governments collect their own sales taxes on various items and services.
• Nebraska - Sales taxes on services became effective October 1, 2015.
• Nevada - Although there is no state sales tax in Nevada, some local governments collect their own sales taxes on various items and services.
• New Jersey - Services are taxable unless they are specifically exempt under state law.
• New Mexico- Services not previously subject to sales tax became subject to gross receipts tax on July 1, 2018.
• New York - Services are taxable unless they are specifically exempt under state law.
• North Carolina - Sales taxes on services became effective July 1, 2016.
• North Dakota - Sales taxes on services became effective September 1, 2017.
• Ohio- Services that were not previously subject to sales tax became subject to sales tax on July 1, 2018.
• Oklahoma - Sales taxes on services became effective July 1, 2018.
• Oregon - Although there is no state sales tax in Oregon, some local governments collect their own sales taxes on various items and services.
• Pennsylvania - Services are taxable in Pennsylvania unless they are specifically exempt under state law.
• Rhode Island - Services are taxable unless they are specifically exempt under state law.
• South Carolina - Sales taxes on services became effective January 1, 2016.
• South Dakota - Sales taxes on services became effective September 1, 2017.
• Tennessee - Sales taxes on services became effective July 1, 2016.
• Texas - Although there is no state sales tax in Texas, some local governments collect their own sales taxes on various items and services.
• Utah - Sales taxes on services became effective January 1, 2017.
• Virginia - Services are taxable in Virginia unless they are specifically exempt under state law.
• West Virginia - Sales taxes on services became effective July 1, 2018.
• Wisconsin- Services that were not previously subject to sales tax became subject to sales tax on July 1, 2018.

Final Thoughts

As you can see, whether or not a state charges sales tax on services varies widely from state to state. If you're in the business of providing services, it's essential to be aware of the sales tax laws in your state so that you can charge your customers the correct amount.

Some states exempt certain services from sales tax, such as medical and educational services, while others impose sales tax on all services with few exceptions. And in some states, there is no sales tax imposed at the state level, but local governments may collect their taxes on various items and services.