Are Services Taxable? Sales Tax on Services by State

Key Takeaways

• Hawaii, New Mexico, South Dakota, and West Virginia generally tax services unless a specific exemption applies.

• The other 41 states and Washington, D.C., tax only services specifically listed in their laws.

• Alaska, Delaware, Montana, New Hampshire, and Oregon have no statewide sales tax, although Alaska municipalities may impose local sales taxes.

• A service may be taxable based on its type, delivery method, contract terms, or combination with taxable products.

• States continue adding services and SaaS to their tax bases, so businesses should review current laws and the SST Taxability Matrix regularly.

Do all states tax services the same way?

State law determines whether services are taxable by default or only when a statute names them. Hawaii, New Mexico, South Dakota, and West Virginia generally tax services unless a specific exemption applies. A business selling into one of these states should start with the assumption that tax applies, then confirm whether the service or customer qualifies for an exemption.

Hawaii and New Mexico use taxes on a seller’s business receipts rather than conventional retail sales taxes. Hawaii imposes its general excise tax on income from most business activities, including many professional services. New Mexico applies gross receipts tax broadly to services. South Dakota also taxes most retail services unless state law exempts them. West Virginia uses a more conventional sales and use tax structure, but it treats most services as taxable by default.

The other 41 states and Washington, D.C. generally tax a service only when a statute or rule identifies it as taxable. For example, a state may tax janitorial work, data processing, or security services while leaving consulting services untaxed. Alaska, Delaware, Montana, New Hampshire, and Oregon have no statewide sales tax, though Alaska municipalities may impose local sales taxes.

Businesses should check the Streamlined Sales Tax Taxability Matrix for participating states. Each state reports its treatment of covered transactions and links that treatment to applicable laws, regulations, or written policies. Because service definitions and exemptions vary, a broad category such as repair or information services may receive different treatment across states.

Which types of services are commonly taxed?

States that enumerate taxable services often draw narrow boundaries around each category. A service may be taxable for a commercial customer but exempt for a residential customer, or taxable when sold separately but exempt when included in construction.

Cleaning and building maintenance

Commercial cleaning commonly appears on taxable-service lists. The Iowa Department of Revenue taxes janitorial, building maintenance, and cleaning services for nonresidential property, while residential cleaning falls outside that entry. The D.C. Office of Tax and Revenue also taxes services such as window cleaning, pest control, pool servicing, and grounds maintenance.

Personal care and repair

Personal care and clothing repair can qualify as taxable services when a statute names them. The Iowa Department of Revenue lists alteration and garment repair, barber and beauty services, pet grooming, tanning, and some massage services as taxable when performed for a customer rather than an employer.

Data processing and information services

Some jurisdictions tax services that process business records or supply information. The D.C. Office of Tax and Revenue includes computerized data storage, payroll processing, W-2 preparation, electronic data retrieval, mailing lists, and certain financial information services. Specific exclusions apply, so the customer, use, and type of information can affect taxability.

Security services

Security monitoring may be taxable even when related installation work is not. The D.C. Office of Tax and Revenue taxes guard services, alarm monitoring, and alarm response. D.C. excludes alarm system installation, system maintenance and repair, medical-response systems, and monitoring of property located entirely outside the district.

Health clubs and recreation

Membership-based fitness and recreation services appear on some taxable-service lists. The D.C. Office of Tax and Revenue taxes services provided by gyms, fitness centers, athletic clubs, and tanning studios, although separate room rentals and separately contracted services may receive different treatment. The Iowa Department of Revenue also lists tanning facilities, video game services, and tournaments.

Digital, streaming, and SaaS-adjacent services

Digital delivery does not automatically make a service exempt. The Iowa Department of Revenue lists software as a service, pay television, streaming video, video on demand, and pay-per-view among taxable services. D.C. separately taxes defined data processing and information services, which can overlap with software-enabled offerings depending on what the seller provides and how the contract describes it.

Which states tax services?

This table covers all 50 states and Washington, D.C. It identifies whether each jurisdiction has no statewide sales tax, taxes services by default unless exempted, or taxes only services named in law, and lists the general statewide rate for context. Local rates and service-specific rules can change the amount you collect, and this table is free to use with no signup required.

Statewide rates: Tax Foundation, State and Local Sales Tax Rates, 2026, a third-party research aggregator, current as of January 1, 2026. Confirm current rates directly with each state's department of revenue before charging tax. Taxability classification (default-taxable vs. named-services-only): compiled from state statutes and the Streamlined Sales Tax Taxability Matrix; confirm current statutory definitions and specific taxable-service lists there before relying on this table.

Why does service taxability keep changing?

Service businesses need to review taxability over time because states continue to add services and digital products to their tax bases. After the Supreme Court’s 2018 Wayfair decision ended the physical presence requirement, states gained new authority to require remote sellers with economic nexus to collect tax. States have since applied that authority while expanding taxation of SaaS and other digital offerings, according to the Sales Tax Institute.

California and Colorado have enacted major changes that take effect January 1, 2027. California SB 122 brings remotely accessed prewritten software, including SaaS, into the state tax base while preserving exemptions for custom software and certain infrastructure services. Colorado HB26-1223 applies the state’s 2.9 percent tax to software regardless of delivery method. Colorado exempts custom software and some genuinely negotiated licenses, but standard click-through agreements generally do not qualify for that treatment under the new laws.

Other states show how classification and bundling can change the answer. Washington's ESSB 5814 expanded taxation to technology services such as IT support, software implementation, and website development. New York already taxes prewritten software regardless of whether customers receive it physically, download it, or access it through the cloud. Texas classifies many SaaS products as data processing services and taxes 80 percent of qualifying charges. According to Bonadio's review of recent state developments, state authorities may also examine whether a contract separately states taxable software and nontaxable consulting or combines them into one charge.

A one-time taxability determination can therefore become outdated. Delivery method and contract terms may affect classification, while bundled services can change how a state treats the full charge. You should monitor where you have economic nexus and reassess each offering when its features, delivery model, or contracts change.

How Taxwire helps

Start with Taxwire’s free nexus study to identify states where your sales or physical presence may create an obligation. Monitor Nexus then tracks economic nexus, physical locations, remote employees, and contractors as your exposure changes. The free study provides one initial assessment with no obligation, while continuous monitoring is available through a paid plan.

Taxwire calculates tax through an engine that it builds and maintains in-house rather than licensing third-party rate data. The engine applies current taxability, sourcing, and jurisdiction rules to each transaction. Taxwire’s in-house tax team can also manage registrations, filings, remittance, and historical cleanup when new obligations appear.

FAQ

Are all services subject to sales tax?

No, states apply different rules to services. Hawaii, New Mexico, South Dakota, and West Virginia generally tax services unless an exemption applies, while 41 states tax only services named in their laws. Taxwire can determine which rules apply based on the service and customer location.

How do I check whether a service is taxable in a specific state?

You should compare the service against the state’s statutes, regulations, and published guidance. The Streamlined Sales Tax Taxability Matrix provides state-reported positions and legal references, while Taxwire tracks the rules used for tax calculations. Checking the specific service prevents you from applying a state’s general treatment too broadly.

Are legal, accounting, and consulting services usually taxable?

Professional services are often exempt in states that tax only named services, but no nationwide exemption applies. Taxwire evaluates the service category and the rules in each state where you have a collection obligation. A state-specific review helps identify broad taxes such as Hawaii’s general excise tax and New Mexico’s gross receipts tax.

Is SaaS subject to sales tax?

States may treat software as a service as taxable software, a digital product, a data service, or a nontaxable service. For example, Iowa includes SaaS among its taxable services, and Taxwire applies the relevant treatment by jurisdiction. Reviewing delivery method, contract terms, and bundled features helps determine the correct tax treatment.

The bottom line

Service taxability depends on the state, the service, and how you deliver or bundle it. A correct determination can become outdated when states revise statutes or expand taxes to digital services and SaaS. Review taxability wherever your business has nexus, and repeat that review as your sales and service model changes.

Use Taxwire’s free nexus study to identify which states require closer review.

Reviewed by Steffani Pace, CPA, of Taxwire, in September 2026.