Managing sales tax compliance can feel overwhelming. Texas, like most states, has its own set of rules regarding sales tax on services and understanding what services are taxable and which are exempt is crucial for businesses that operate in the service industry in Texas. So, do you need to charge sales tax on services in Texas, after getting your sales tax license?

Texas Sales Tax on Services and Goods: What is Subject to Exemptions and is Taxable

Generally, Texas sales tax applies to retail sales, leases, and rentals of tangible goods. However, there are some specific services that are also subject to sales tax.

Texas Sales Tax on Services vs. Goods

Texas primarily focuses its sales tax on tangible personal property, the physical products you can see and touch. Examples include clothing, electronics, and furniture.

There are, however, some “taxable services” in Texas that are subject to sales tax. These differ from goods in that they are intangible and involve the performance of a service.

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What Services are Taxable in Texas

Here are some common examples of taxable services in Texas:

• Amusement services: This includes tickets to theme parks, sporting events, concerts, and other entertainment venues.
• Cable and bundled cable television services: The service of providing cable television falls under taxable services.
• Credit reporting services: Fees associated with obtaining a credit report are taxable.
• Data processing services (with some exceptions): Using a computer for data entry, production, or manipulation can be a taxable service, though some exceptions apply.
• Laundry and dry cleaning services: Keeping your clothes clean comes at a taxable cost.
• Motor vehicle parking and storage services: Parking your car in a lot or garage typically incurs a sales tax charge.
• Nonresidential real property repair, restoration, or remodeling: If you’re in the business of fixing up commercial buildings, your services are taxable.
• Personal property maintenance, remodeling, or repair services: This applies to services like appliance repair or furniture refinishing.
• Security services: Alarm system monitoring and security guard services are generally taxable.

This is not an exhaustive list. The Texas Comptroller’s website (https://comptroller.texas.gov/taxes/publications/96-259.php) provides a comprehensive list of taxable services in Texas.

Services Not Subject to Texas Sales Tax

The good news is that most services in Texas are not subject to sales tax. Here are some examples of non-taxable services in Texas:

• Professional services: Services provided by lawyers, accountants, doctors, and other professionals are typically exempt.
• Educational services: Tuition and fees for educational institutions are generally not taxable.
• Financial services: Services like banking, money transfers, and investment management are usually exempt.

Common FAQs on Taxable and Non Taxable Services in Texas

Here are some commonly asked questions regarding taxable and non-taxable services in Texas:

Do hair salons charge sales tax in Texas? 

Yes, hair salon services are generally taxable.

Do you charge tax on labor in Texas? 

Texas sales tax applies to the service itself, not necessarily the labor involved.

Are consulting services taxable in Texas? 

It depends on the type of consulting service. Business consulting might be taxable, while educational consulting might be exempt.

Are accounting services taxable in Texas? 

Generally, no. Accounting services provided by a licensed professional are typically exempt from charging, filing, and paying sales tax.

Are architectural services taxable in Texas?  

Architectural services are usually not taxable.

Conclusion

While Texas applies sales tax to some specific services, most services are exempt. The Texas Comptroller’s website is a valuable resource to further explore Texas sales tax exemptions and what services or items are taxable in Texas.

Remember, every business situation is unique, nonetheless, consider obtaining both a sales tax permit and a resale certificate, if applicable. Managing sales tax can be complex, but AtomticTax can help! Try our free demo or 7-day free trial to see how AtomticTax can simplify sales tax for your Texas e-commerce business.