Sales tax started as a tax on goods, and in most states it still is. Services are the big exception that is not an exception everywhere: a lawn service, an IT consultant or a security company can owe tax in one state and nothing in the next. This breakdown answers are services taxable by state, groups states by how broadly they tax services, and shows the math with real local rates.
Key takeaways
- Most states tax services only when the law lists them; everything else is exempt by default.
- Hawaii, New Mexico and South Dakota tax most services, with specific exemptions.
- Texas taxes 16 categories of services, from data processing to landscaping and security.
- Professional services such as legal, accounting and medical care are exempt in most states.
Three Ways States Tax Services
- Broad base: services are taxable unless specifically exempt. Hawaii’s general excise tax and New Mexico’s gross receipts tax reach almost all business activity, and South Dakota taxes services unless an exemption applies.
- Enumerated list: the law names taxable services, and anything not listed is exempt. Texas, New York, Ohio, Washington, Iowa and Florida work this way, with lists ranging from short to long.
- Goods only, with narrow exceptions: services are generally exempt unless they are part of selling or making tangible goods. California is the best-known example; fabrication labor is taxable but most stand-alone services are not.
The five states with no statewide sales tax do not tax services through a sales tax either, though Alaska localities and Delaware’s gross receipts tax are separate cases.
State-by-State Breakdown of Common Taxable Services
| State | Approach | Examples of taxable services |
|---|---|---|
| Hawaii | Broad (general excise tax) | Nearly all services, including professional services |
| New Mexico | Broad (gross receipts tax) | Most services performed in the state, with specific deductions |
| South Dakota | Broad | Services taxable unless exempted; many repair, cleaning and business services |
| Washington | Enumerated, expanding | Construction, repair, landscaping, digital automated services; since Oct 1, 2025 also advertising, IT services, website development, security and temporary staffing |
| Texas | Enumerated (16 categories) | Data processing and information services (80% taxable), security, real property services (landscaping, janitorial, pest control), nonresidential repair, telecom, parking, debt collection |
| New York | Enumerated | Information services, protective services, maintenance and repair of real property, parking, interior decorating |
| Ohio | Enumerated | Landscaping and lawn care, janitorial, security, employment services, automatic data processing for business use |
| Maryland | Enumerated | Data, IT and software publishing services at 3% since July 1, 2025 |
| Florida | Limited list | Nonresidential cleaning and pest control, detective and security services |
| California | Goods only | Most services exempt; fabrication labor taxable |
This table is a starting point, not a full list. Each state publishes detailed rules and exemptions, so confirm your specific service with the state revenue department.
Spotlight: Texas Taxable Services
The Texas Comptroller lists 16 taxable service categories: amusement, cable television, credit reporting, data processing, debt collection, information, insurance, motor vehicle parking and storage, nonresidential real property repair and remodeling, personal property maintenance and repair, personal services, real property services, security, telecommunications, telephone answering and utility transmission and distribution. Data processing and information services get a 20% exemption, so tax applies to 80% of the charge.
Worked Examples
Example 1: $500 monthly commercial landscaping in Austin, TX (8.25%)
Real property service: $500 × 8.25% = $41.25 per month
Example 2: $2,000 IT consulting project for a Seattle business (10.55%)
Taxable IT service since Oct 1, 2025: $2,000 × 10.55% = $211.00
Example 3: $1,000 consulting engagement in Albuquerque, NM (7.625%)
Gross receipts tax: $1,000 × 7.625% = $76.25, usually passed through to the client
Example 4: the same $1,000 consulting engagement in Los Angeles, CA
Stand-alone service: $0 sales tax
Run your own numbers with the Sales Tax Calculator, or see the Austin, Seattle and Albuquerque rate pages.
Mixed Sales: Services Plus Goods
Many jobs combine labor and materials. Common rules:
- Separately stated parts: in many enumerated states, itemizing nontaxable labor keeps it out of the tax base, while the parts remain taxable.
- True object test: if the customer mainly wants the service and goods are incidental, some states treat the whole sale as a service.
- Construction: contractors are often treated as consumers of materials. See construction contractor sales tax rules.
- Shipping and delivery: treatment varies; see shipping and handling rules by state.
Nexus for Service Providers
Remote service providers face the same economic nexus thresholds as product sellers, and in most states the threshold counts all sales, not only taxable ones. Performing services on site with your own staff usually creates physical nexus immediately. If you sell to businesses, read our B2B vs B2C sales tax guide for resale and exemption rules.
Conclusion
So, are services taxable by state? In a few states almost all are, in many states only listed services are, and in some states hardly any are. Start by classifying your service, check each state’s list, and itemize mixed invoices. If you find you should have been collecting, look at a voluntary disclosure agreement and our guide to multi-state sales tax registration. For rates, browse our state sales tax pages or use the Add/Remove Sales Tax Calculator.
Frequently Asked Questions
Are services subject to sales tax?
Sometimes. Most states tax only the services listed in their law, while Hawaii, New Mexico and South Dakota tax most services unless they are exempt.
Which states tax the most services?
Hawaii and New Mexico tax nearly all services through gross receipts-style taxes, and South Dakota taxes services unless an exemption applies. Washington and Texas also tax many services.
Are services taxable in California?
Generally no. California taxes tangible goods, and most stand-alone services are exempt, although fabrication labor that produces goods is taxable.
Is IT consulting taxable?
In some states. Washington taxes IT services from October 1, 2025, Maryland taxes certain IT services at 3%, and Texas taxes data processing on 80% of the charge. Many other states do not tax it.
Are professional services like legal and accounting taxable?
Not in most states. Hawaii and New Mexico are notable exceptions because their gross receipts-style taxes reach professional services.