Sales Tax
Sales Tax for Service Businesses: A Plain-English Guide
Short answer
Most US states tax tangible goods but not services. About 20 states tax some services — and almost every state taxes the materials a service business resells. If you install or supply parts, you almost certainly have a sales tax obligation.
Sales tax is the most-missed compliance item in small service businesses, because the rules vary by state and by what you actually sell. The good news: once you know the four questions to ask, you can answer it for your business in under ten minutes.
The four questions
- Do I sell tangible goods (parts, materials, finished products)? If yes, you almost certainly need to charge sales tax on those items.
- Does my state tax the specific service I provide? About 20 states tax some services — landscaping, cleaning, repair labor — but the list varies. Check your state's Department of Revenue site.
- Do I cross any economic-nexus thresholds in other states? Selling more than ~$100k or 200 transactions into another state can create a sales tax obligation there too (post-Wayfair).
- Am I selling to a tax-exempt customer? Resale, government, and 501(c)(3) buyers may be exempt — but only if you collect and keep a valid exemption certificate on file.
Common rule of thumb by trade
| Trade | Typical treatment (varies by state) |
|---|---|
| Plumber / HVAC / electrician | Labor often exempt; parts and materials taxable |
| Landscaper / lawn care | Taxable in many states (TX, NY, CT, FL on commercial) |
| Cleaning / janitorial | Taxable in NY, CT, OH, TX commercial; exempt residential in many |
| Auto repair | Parts taxable; labor often exempt |
| Beauty / barber | Service exempt in most states; product sales taxable |
| Consultant / designer | Generally exempt |
What to do this week
- Look up your state's Department of Revenue site for taxable services
- Register for a sales tax permit if you owe — it is usually free
- Decide your filing frequency (monthly/quarterly/annual based on volume)
- Set up your invoicing tool to add tax automatically per line item
- Set aside collected tax in a separate account — it is not your money
Frequently asked questions
Do I charge sales tax on labor?
In most states, labor on its own is not taxable. But if labor is bundled with a taxable repair or installation, the whole job can become taxable. Check your state.
What if I forget to collect sales tax?
You still owe it. The state will collect from you, not your customer, plus interest and penalties. File and pay anyway — voluntary disclosure usually reduces penalties.
Do I need a sales tax permit in every state?
No — only states where you have nexus (physical presence or economic threshold).
Tax-ready records, automatically.
Glo Invoice tags every expense and 1099 contractor so tax time is a download, not a scramble.
Sources & further reading
Primary sources we consulted when writing and reviewing this guide.