What kind of services are taxable

Motor vehicle parking and storage services include charges for parking meters including private and municipally-owned meters ; parking decals and permits; valet parking services; and impound fees. All charges for labor and materials to rebuild, replace, alter, modify or upgrade existing nonresidential realty are taxable. The repair, restoration or remodeling of nonresidential real property does not include the addition of new usable square footage or scheduled and periodic maintenance.

Services such as shoe shining or repair, appliance repair, furniture refurbishing or upholstering, jewelry repair or cleaning and dog grooming are taxable. Massage parlors include any business that provides massage services for a fee, but does not include massage services performed by a licensed physical or massage therapist.

A Turkish bath is a business where a customer first uses a steam room and then receives a massage or rubdown. Pest control and extermination, garbage and other waste collection or removal, janitorial and custodial services including parking lot sweeping or cleaning , landscaping and lawn maintenance including tree surgery and plant leasing and surveying are taxable real property services.

Security services include any service for which a license is required by the Private Security Bureau of the Texas Department of Public Safety under sections Taxable security services also include computer forensic services that constitute the analysis of computer-based data, particularly hidden, temporary, deleted, protected or encrypted files, for the purpose of discovering information related generally to the causes of events or the conduct of persons; as well as computer repair and support services that include reviewing computer data for the purpose of investigating potential criminal or civil matters.

Telecommunications services involve the electronic or electrical transmission, conveyance, routing or reception of sounds, signals, data or information using wires, cable, radio waves, microwaves, satellites, fiber optics or any other method now in existence or that may be devised. Examples of telecommunications services include long-distance and local telephone service, including mobile or satellite phone service and Voice over Internet Protocol VoIP , fax service, pager services, texting services and electronic mail unless sold bundled with internet access.

Receiving and relaying of telephone messages by a human operator is a taxable telephone answering service. Taxable telephone answering services do not include call center operations such as handling customer complaints and receiving orders. Services provided by a transmission and distribution utility are taxable if the transmission or delivery is directly to an end-use customer whose consumption of the electricity is subject to sales tax.

In addition to the taxable services noted above, other types of sales that may commonly be considered "services" are taxable as the sale, processing or remodeling of tangible personal property. For example, tax is due on charges for manufacturing, assembling, fabricating or processing products, even when the customer provides the raw materials, tools or equipment.

See Rules 3. In , the Texas Legislature passed House Bill , which requires state agencies to publish a list of the three most commonly used Web browsers on their websites. The Tax Law exempts purchases for resale; most sales to or by the federal and New York State governments, charitable organizations, and certain other exempt organizations; sales of most food for home consumption; and sales of prescription and nonprescription medicines.

Sales tax also does not apply to most services. Examples of services not subject to sales tax are capital improvements to real property, medical care, education, and personal and professional services. See Transactions that are not subject to sales tax for details. Having a physical presence in a state always triggers nexus, but thanks to the United States Supreme Court decision in South Dakota v.

Wayfair, Inc. June 21, , nexus can also be created by economic activity alone economic nexus. As of June , 43 states and the District of Columbia require out-of-state businesses with a certain volume of sales or number of transactions in the state to collect and remit sales tax. Many businesses that provide customer support, installation, or warranty services in conjunction with the sale of a physical good need to hire an army of accountants to determine what's taxable and what's exempt.

If you sell service contracts separately or in tandem with sales of tangible goods, you may be liable to collect sales tax. While Hawaii, New Mexico, and South Dakota generally tax all sales of services, many other states tax some services but not others. The challenge for businesses is determining which services are taxable in states where they have nexus an obligation to collect sales tax. In some states, businesses must charge sales tax on services provided in conjunction with sales of physical goods.

When a sale includes both a product and a service, some states use a true object test to determine the taxability of the transaction. If the main purpose of the transaction the true object is the sale of taxable property or equipment, the entire transaction is subject to sales tax.

If the main purpose of the transaction is instead the sale of an exempt service, the entire transaction is generally exempt.

Combined sales of products and services are more common in some industries than others, notably the construction, manufacturing, and medical industries. For example, an insulin monitor often accompanies the sale of diabetes treatment.

In this case, the product is secondary to the service, and taxability is based on the real object of the transaction — the service provided. Reduce tax risk. Increase the accuracy of your tax compliance with up-to-date rates and rules with our cloud-based tax engine.

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