Do I Charge Sales Tax on Services in Texas? The Full List
Short answer: Do I charge sales tax on services in Texas? Only if your service falls in one of the 16 categories of taxable services listed in Texas Tax Code Section 151.0101. Lawn care, janitorial work, pest control, security, data processing and repairs to nonresidential buildings are on the list. Accounting, legal work, most consulting and repair labor on a home are not.
If your service is on the list, you need a free Texas sales tax permit and you collect 6.25% state tax plus up to 2% local tax. If it is not on the list, you charge nothing. The hard cases are the businesses that do a bit of both.
It’s 9:40 on a Friday night and Renee — I’ll call her Renee — is at her kitchen table in Garland with a laptop, a plate of brisket going cold, and three invoices she has to send before Monday. Her two-person crew mowed a homeowner’s yard for $180. They rehung a sagging gate at that same house for $240. Then they rehung an identical sagging gate behind a dentist’s office for $240.
Three jobs, one truck, one week. She has a feeling the tax answer is not the same for all three, and she is right. It is three different answers.
Renee isn’t disorganized. She’s running a business that Texas has quietly sorted into three separate drawers.
Here is how the drawers work, checked line by line against the Texas Comptroller’s own publications, including what happens to those two gates.
Texas taxes services by list, not by logic
Texas sales tax starts with goods. The state imposes a 6.25% tax on retail sales, leases and rentals of most goods, and then adds a specific set of services on top. The Comptroller’s guide to taxable services explains that the term is defined in Tax Code Section 151.0101, which names 16 broad categories.
That is the whole mechanism. Think of it as a guest list at a door. Texas does not ask how skilled the work was, how long it took, or whether it feels like the kind of thing that ought to be taxed. It checks whether your service is on the list.
- On the list: you collect tax. State tax plus whatever local tax applies, on the charge for the service.
- Not on the list: you don’t. There is no general sales tax on services in Texas, so an unlisted service is simply not taxed.
- Some of each: you separate them. This is where most of the mistakes happen, and it gets its own section below.
The reason people get this wrong is that the list is not intuitive. Nobody would guess, standing in a parking lot, that mowing is in and rehanging a homeowner’s gate is out. You have to read it.
The 16 taxable service categories in plain English
The category names are the Comptroller’s. The translations are ours. Small service businesses mostly meet the first few.
- Real property services. Pest control and extermination, garbage and waste removal, janitorial and custodial work, parking lot sweeping, landscaping and lawn care, and surveying.
- Nonresidential real property repair, restoration or remodeling. Rebuilding, replacing, altering or upgrading an existing business property. Labor and materials are both taxed.
- Personal property maintenance, remodeling or repair. Appliance repair, furniture refurbishing and upholstering, shoe repair, jewelry repair or cleaning, and dog grooming.
- Security services. Anything that needs a private security license: locksmiths, private investigators, armored cars, and burglar alarm installation or monitoring.
- Data processing and information services. Data entry, data storage, web hosting, check preparation, newsletters and database access. Twenty percent of the charge is exempt.
- Amusement services. Movies, concerts, sporting events, bowling alleys, fitness centers, sightseeing tours, online games and fortune telling.
- Personal services. A narrow one: massage parlors, Turkish baths and escort services. A massage by a licensed massage therapist or physical therapist is not taxed under this category.
- The remaining eight. Cable television, credit reporting, debt collection, insurance services, motor vehicle parking and storage, telecommunications, telephone answering, and utility transmission and distribution.
Read top to bottom, it has the feel of a small-town classifieds page: a locksmith, a dog groomer, an exterminator, and a fortune teller, who is taxable and presumably saw it coming.
Renee’s first invoice is settled here. Mowing and trimming are lawn care, lawn care is a real property service, and the $180 is taxable. It does not matter that the customer is a homeowner.
Services Texas does not tax
Everything that is missing from the list. That turns out to be most of the professional world, plus a few carve-outs the Comptroller spells out by name.
- Professional services that aren’t listed. Accounting, legal work and consulting are not among the 16 categories. The Comptroller even notes that an accountant using a computer to prepare financial statements is not selling data processing.
- Design work. The Comptroller’s publication on landscaping and lawn care services says the professional services of landscape designers and architects are not subject to sales tax. Drawing the yard is not taxed. Planting it is.
- Repair labor on a home. Labor to repair, remodel or restore residential real property is not taxable.
- New construction labor. Building something new is not a repair, and the construction labor is not taxable. Adding new usable square footage to a business property is not treated as taxable remodeling either.
- The smallest lawn businesses. Lawn care is exempt when a self-employed person does the work personally, has no employees or partners, and took in $5,000 or less from it over the most recent four calendar quarters.
- Internet access. Texas no longer taxes separately stated internet access charges.
Yes, accounting is on the not-taxed side. We checked that one first, and with a level of enthusiasm we don’t usually bring to statute.
One caution on the lawn exemption: once receipts pass $5,000, you start collecting on the first day of the following quarter. And it disappears the day you hire help, which is why Renee, with one employee, does not get it.
Same job, different answer: homes versus businesses
Now the two gates. Same hinges, same ninety minutes, same $240. The hinge has no idea what kind of building it is attached to. The Comptroller does, and it is the only thing that matters.
- The gate at the house: no tax on the labor. The Comptroller’s guidance on real property repair and remodeling opens with the rule: labor to repair, remodel or restore residential real property is not taxable.
- The gate at the dentist: the whole $240 is taxed. The total amount charged for remodeling, repairing or restoring nonresidential real property is taxable. Labor and materials, together.
- “Nonresidential” is broader than offices. It covers businesses, farms, ranches, hospitals and parking lots. Family dwellings, including apartments, nursing homes and retirement homes, are residential.
- Routine maintenance is a separate question. Scheduled, periodic maintenance on a business property is not treated as taxable repair, so a standing monthly upkeep contract and a one-off fix can land differently.
Materials on the residential job follow the contract. Under a lump-sum contract, one price for everything, Renee pays tax on the hinges at the supply store and charges the homeowner no tax. Under a separated contract, materials and labor priced apart, she buys the hinges with a resale certificate and collects tax from the customer on the materials only.
If you also work across state lines, do not carry these rules with you. Our guide to whether labor is taxed in Florida shows a state that sorts the same work by a completely different test.
Mixed invoices and the 5 percent rule
Here is the rule that turns a small oversight into a large one. When taxable and non-taxable services are sold for one combined price, Texas looks at how much of that price is the taxable part.
- 5 percent or less: no tax on the bundle. If the taxable service is 5 percent or less of the overall contract price, you don’t collect tax on it.
- More than 5 percent: the total is taxable. The Comptroller’s guidance on data processing services puts it plainly: your total charge is taxable unless you separately show the charges for taxable and non-taxable services.
- Separate lines fix it. Show the two charges apart and you collect tax only on the taxable one.
It works like one red sock in a white wash. The sock is a small share of the load, and everything comes out pink anyway.
Say Renee bills a homeowner one line: “Yard design and planting, $1,000.” The design is $600 and not taxable. The planting is $400 and taxable. Planting is 40% of the price, far past 5%, so the whole $1,000 is presumed taxable. At 8.25% that is $82.50 of tax instead of $33.00, and the only cause is a missing line break. The lawn care publication gives the same warning: state non-taxable charges separately.
The 20% exemption for data processing and information services is simpler. A $500 web hosting charge is taxed on 80% of it, which is $400.
The rate, the permit and the filing dates
The mechanics are the easy half, and most single-trade Texas businesses can run them without an accountant. We keep saying things like that on this blog. Nobody in the office has taken the keyboard away yet.
- The rate is 6.25% plus up to 2%. The Comptroller’s sales and use tax page gives the state rate as 6.25% and lets local jurisdictions add up to 2%, for a maximum combined rate of 8.25%. Taxable services have no rate of their own.
- The permit is free. Anyone selling taxable services in Texas needs a sales and use tax permit. There is no fee, although you may be asked to post a security bond.
- Reports are due on the 20th. Monthly filers report by the 20th of the following month. Quarterly filers report by April 20, July 20, October 20 and January 20. Yearly filers report by January 20.
- A quiet quarter still gets a return. You are required to file even if there were no taxable sales in the period.
- On time earns a small discount. Permitted taxpayers can keep 0.5% of the tax they report and pay on time. On $1,000 of tax, that is $5. Texas is thanking you with roughly one breakfast taco.
- Out-of-state sellers get a threshold. Remote sellers with total Texas revenue under $500,000 in the preceding twelve calendar months are not required to hold a permit or collect.
On Renee’s week, at the 8.25% maximum: $14.85 on the mowing, $19.80 on the dentist’s gate, and nothing on the homeowner’s gate labor. That is $34.65 collected from customers and passed along, on $660 of work.
If you do one kind of work for one kind of customer, decide the rule once, set it in your invoicing app, and file on the state’s own system. Help is worth paying for when you straddle the drawers: homes and businesses, design and installation, repairs and maintenance contracts. Selling goods online as well adds another layer, which we cover in does Shopify collect sales tax.
If that is you, our services page shows what we take on, our pricing is flat and published, and we work with owners around Dallas remotely. For the multi-state picture, see our guide to sales tax compliance services. Njock is an accountant, not a CPA or a Texas tax attorney; if you are already in a dispute with the Comptroller, we will tell you that you need one of those instead.
What guessing wrong costs a Texas service business
The common mistake is the comfortable one: “I sell labor, not products, so there is no sales tax.” Suppose a lawn care business believes that on $60,000 of mowing a year. At 8.25%, that is $4,950 a year of tax nobody collected. Over three years it is $14,850.
The customers who should have paid it are not going to send a check for mowing done two summers ago, so it comes out of the business. Then the penalties stack on top: 5% if the tax is paid 1 to 30 days late, 10% after that, $50 for each report filed after its due date, and interest beginning 61 days after the due date.
The mistake in the other direction costs less money and more goodwill: charging tax a homeowner never owed on gate labor, and having to explain the refund.
None of this needs a clever fix. It needs one read of the list and an invoice with honest line breaks. Renee sent all three invoices before ten. Two with tax, one without, and the brisket reheated fine.
Frequently asked questions
- Do I charge sales tax on services in Texas?
- Only if your service falls in one of the 16 categories of taxable services listed in Texas Tax Code Section 151.0101. Services that are not on that list, such as accounting, legal work and most consulting, are not subject to Texas sales tax. If your service is on the list, you need a Texas sales and use tax permit and you collect state tax plus any local tax.
- What services are taxable in Texas?
- The Texas Comptroller lists 16 categories: amusement, cable television, credit reporting, data processing, debt collection, information, insurance, motor vehicle parking and storage, nonresidential real property repair and remodeling, personal property repair and maintenance, personal services, real property services, security, telecommunications, telephone answering, and utility transmission and distribution services. Each category covers many specific services, such as lawn care, janitorial work, pest control, locksmithing and appliance repair.
- What services are not taxable in Texas?
- Services that do not appear on the list of taxable services are not taxed. That includes professional services such as accounting, and the Comptroller states that the professional services of landscape designers and architects are not subject to sales tax. Labor to repair or remodel residential real property and labor for new construction are also not taxable.
- Is labor taxable in Texas?
- It depends on the job. All charges for labor and materials to repair, restore or remodel nonresidential real property are taxable, and so is repair of tangible personal property such as appliances and furniture. Labor to repair, remodel or restore residential real property is not taxable, and neither is labor for new construction.
- Do I charge sales tax on lawn care in Texas?
- Usually yes. Landscaping and lawn care, including mowing, trimming, planting and watering, are taxable real property services. There is an exception for a self-employed person who does the work personally, has no employees or partners, and had gross receipts from these services of $5,000 or less during the most recent four calendar quarters.
- What is the sales tax rate on services in Texas?
- Taxable services are taxed at the same rate as goods. Texas imposes a 6.25 percent state sales and use tax, and local jurisdictions can add up to 2 percent, for a maximum combined rate of 8.25 percent. For data processing and information services, 20 percent of the charge is exempt, so tax applies to 80 percent of the price.
- Do I need a sales tax permit to sell services in Texas?
- Yes, if you sell taxable services in Texas. The Comptroller requires a Texas sales and use tax permit for anyone engaged in business in Texas who sells taxable services. There is no fee for the permit, although you may be required to post a security bond.
- When is Texas sales tax due?
- Monthly filers report by the 20th of the month following the reporting month. Quarterly filers report by April 20, July 20, October 20 and January 20, and yearly filers by January 20. If the due date falls on a weekend or legal holiday, the next working day is the due date, and a return is required even when there were no taxable sales.
More plain-English answers.
- Blog
Sales Tax Compliance Services: What Small Businesses Need
How Texas, Florida and New York each tax labor, when returns are due, and when you can handle sales tax yourself.
Read more - Blog
Is Labor Taxed in Florida? Repairs, Contractors, Services
Florida sorts the same work by what you touched, and one free part can make a whole repair bill taxable.
Read more - Locations
Accounting and tax help for Dallas small businesses
Remote bookkeeping, tax and state filings for Dallas-area owners, at flat published prices.
Read more
Not sure which drawer your service is in?
Book a free 15-minute discovery call with Njock. No pitch. We just listen, look at what you have, and tell you honestly whether we’re a fit.
Prefer to read on your own? More posts from the blog.