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Jean   Murray

Is This Product or Service Taxable in Your State?

By October 12, 2009

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I received a  reader question this morning about state sales tax:

We recently had an individual powerwash our house and he added $25 as a tax.  He said it was legal for him to add this tax.  Can you tell me more?

Good question.  You hope the individual was correct in his statement that power washing a house is taxable, but it depends on the state.  And the myriad of products and services which are subject to sales tax in any state make your head swim.

How do you know if  a product or service you are planning to market and sell is subject to sales tax? What if you sell this product or service in several states?  It can be almost impossible to sort out and determine if sales tax must be added.

Sales Tax on Products
To make it a little easier, it is safe to say that most products are taxable.  Only a few products (food, prescription and non-prescription drugs) may be exempt from sales taxes.  But different products may be taxed at different rates within one state, and some states have different rates for these exempt items than the general sales tax rate.  For example, many states exempt food from sales tax, some states have a lower tax rate on food items, and a few states charge sales tax on food at the same rate as other items.

Sales Tax on Services
It is more difficult to find out if sales tax must be charged on services.  The Federation of Tax Administrators has a searchable data base called the Services Taxation Survey (dated 2007) which allows you to search for sales taxable services in two ways:

  • By state, listing the services subject to sales tax in that state
  • By service, listing the states which tax that service.

I looked through the data base to see if I could find "house power washing."  The closest I could come was "087 - Maintenance and Janitorial Services".  I guess power washing a house counts as maintenance. You would have to look through the list of states which charge sales tax on this service, to see if your state is listed.

Before you pay the sales tax on an item, be sure you check to see if it is taxable in your state.  The statement or invoice you receive should clearly show the taxable amount for that service. You may have to contact your state's Department of Revenue (or equivalent agency) for information on specific products or services.

For more information on state sales taxes, read my State Sales Tax FAQ article.



Comments
November 12, 2009 at 8:38 pm
(1) Laura Schofield says:

This is a great article and surprisingly one that receives very little notice! I’m doing a series on sales-tax free shopping and do an awful lot of research on the taxes.. You can save with shopping online: thanks to that constitutional order to not interfere with intra-state sales!

February 5, 2013 at 2:54 am
(2) Marc says:

I found a category item # 045 “banking services fees” on my states services tax list that show this item as exempt. I’m thinking ATM fees fall into this category

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