Sales Tax on Services: Where It Applies and Where It Doesn't
Why a service business can owe sales tax in one state and none in the next, the categories states tax most, the bundled-sale problem, and Florida's short list of taxable services.
Reviewed by the Fairlight Accounting cross-border tax team — U.S. & Canadian Tax Desks
Most states tax tangible goods and exempt services unless a service is specifically listed as taxable. A few states tax nearly all services; most tax a list such as repairs, cleaning, security, amusements, telecommunications, and software. A service business must check each state where it has nexus; the same service can be taxed in one and exempt next door.
On this page
How do states differ?
| Approach | Examples | What it means for a service business |
|---|---|---|
| Services broadly taxable | Hawaii and New Mexico (gross receipts taxes), South Dakota, West Virginia | Most services taxed unless exempted |
| Long enumerated lists | Texas, Washington (list expanded October 1, 2025), Connecticut, Iowa, Ohio, Pennsylvania | Many categories taxed; check the list |
| Short enumerated lists | Florida, Georgia, Alabama, Virginia | Few services taxed; most professional and personal services exempt |
| No sales tax | Oregon, Montana, New Hampshire, Delaware, Alaska (state level) | No state sales tax; Alaska localities may levy one, and Delaware and Oregon tax business gross receipts instead |
Which services are taxed most often?
- Repair, maintenance, and installation of tangible property
- Nonresidential cleaning and janitorial services
- Security and detective services
- Landscaping and lawn care in some states
- Admissions and amusements
- Telecommunications and streaming
- Software as a service and digital goods — treated as taxable in a growing number of states
- Data processing and information services in some states
- Personal services such as fitness, tanning, and pet grooming in some states
Professional services — legal, accounting, medical, consulting — are exempt in most states, though Hawaii's general excise tax and New Mexico's gross receipts tax generally reach them, and a few other states have debated taxing them.
What is the bundled-sale problem?
When a nontaxable service is sold with taxable goods for one price — a repair with parts, a consulting engagement that delivers software — states apply their own rules: tax the whole bundle, tax the whole if the taxable portion exceeds a threshold, or allow a reasonable separation. Invoicing goods and services separately is the usual protection.
How are remote services sourced?
Most states tax services where the customer receives the benefit, so a Florida business performing a taxable service for a customer in another state may owe that state's tax if it has nexus there. Economic nexus thresholds based on sales count service sales in many states even when the services are not taxable there.
What does Florida tax?
Florida's taxable services are a short list: nonresidential cleaning and nonresidential building pest control; detective, burglar protection, and other protection services; repairs of tangible property where parts are furnished; admissions; and a few others. Residential cleaning, professional services, and most personal services are not taxed, and the state sales tax on commercial rent ended for rental periods beginning on or after October 1, 2025. A Florida service business that sells parts or products alongside its services generally collects on the goods.
Frequently asked questions
I only provide services. Do I still need to register?
In states where none of your services are taxable, generally no, unless you also sell goods; some states require registration once economic nexus thresholds are crossed.
Is software as a service taxable in Florida?
Generally no. The Florida Department of Revenue treats electronically delivered or remotely accessed software as nontaxable when no tangible property changes hands (TAA 16A-014), though software sold with hardware or on a disk is taxable. Several other states do tax it.
Does a repair shop charge tax on labor?
In Florida, labor on a repair that includes parts is taxable with the parts; labor-only repairs are not, provided the shop documents that no parts were used. Other states vary.
What if I charge tax on an exempt service by mistake?
Refund it to the customer or remit it; a business may not keep tax collected in error.
Official sources
The Florida Department of Revenue lists, among activities that require registration: “Providing taxable services (for example, investigative and crime protection services, interior nonresidential cleaning services, or nonresidential pest control services)” — Florida Department of Revenue, Florida Sales and Use Tax, https://floridarevenue.com/taxes/taxesfees/Pages/sales_tax.aspx
The Federation of Tax Administrators explains: “The survey goal is to provide researchers with a sense of the degree to which each state taxes services by breaking services into categories.” — Federation of Tax Administrators, Sales Taxation of Services, https://taxadmin.org/sales-taxation-of-services/
Next step
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