Texas taxes 17 specific categories of services listed in Section 151.0101 of the Tax Code. Everything else is generally exempt. The state rate is 6.25%, and local jurisdictions can add up to 2% on top, so taxable services in Texas can carry a combined rate as high as 8.25%.1Texas Comptroller of Public Accounts. Sales and Use Tax The tricky part is that some services you would expect to be taxed (legal fees, accounting, medical care) are not, while others you might overlook (pest control, debt collection, data processing) are.
The 17 Taxable Service Categories
Section 151.0101 spells out the full list:2Texas Constitution and Statutes. Texas Code Tax Section 151.010 – Taxable Item
- Amusement services
- Cable television services
- Personal services
- Motor vehicle parking and storage
- Repair, remodeling, maintenance, and restoration of tangible personal property (with major exemptions for motor vehicles, aircraft, most boats, and computer programs)
- Telecommunications services
- Credit reporting services
- Debt collection services
- Insurance services
- Information services
- Real property services
- Data processing services
- Real property repair and remodeling
- Security services
- Telephone answering services
- Internet access service (now effectively preempted by federal law)
- Transmission and distribution of electricity
If your service is on that list, you need a Texas sales and use tax permit and must collect tax from customers. If it isn’t on the list, you generally don’t. Texas has no catchall tax on services.
Real Property Repair and Remodeling
This is where mistakes happen most often, because the tax turns on whether the building is residential or nonresidential.
For nonresidential property (offices, warehouses, restaurants, hospitals, retail, and other commercial buildings), the full charge for repair, remodeling, or restoration is taxable. That includes labor, materials, and pass-through costs. Separately stated building permit fees are the exception.3Texas Comptroller of Public Accounts. Real Property Repair and Remodeling
For residential property (houses, apartments, condominiums, nursing homes, retirement homes), the labor to repair, remodel, or restore is not taxable. Materials are still subject to tax. Under a lump-sum contract, the contractor pays that material tax at purchase and doesn’t charge the homeowner sales tax on anything. Under a separated contract, the contractor buys materials tax-free with a resale certificate and then charges the homeowner sales tax on the materials portion of the bill. Labor stays untaxed either way.3Texas Comptroller of Public Accounts. Real Property Repair and Remodeling
Labor for new construction is not taxable for either residential or nonresidential projects. Materials incorporated into the new structure are still subject to tax.
Real Property Services
Real property services are the maintenance side of the equation, and they are taxable across the board. Landscaping and lawn care cover mowing, trimming, fertilizing, watering, tree care, and arranging outdoor or indoor spaces for aesthetic purposes. Structural pest control, waste collection on premises, and building and grounds cleaning, janitorial, and custodial work all fall in this bucket.4Cornell Law Institute. 34 Texas Administrative Code 3.356 – Real Property Service
One exception is worth knowing. A sole operator doing lawn care or landscaping with no employees and $5,000 or less in gross receipts over the most recent four calendar quarters does not have to collect tax. Once receipts cross $5,000, the provider must start collecting on the first day of the next quarter.5Texas Comptroller of Public Accounts. Landscaping and Lawn Care Services
Tangible Personal Property Repair (and the Auto Exception)
Repairing, maintaining, or restoring tangible personal property (movable things like furniture, appliances, and equipment) is taxable on the entire charge, including parts, labor, consumable supplies, and separately stated fees.6Cornell Law Institute. 34 Texas Code 3.292 – Repair, Remodeling, Maintenance, and Restoration of Tangible Personal Property Reupholstering a couch, refinishing a table, or repairing a commercial appliance all trigger tax on the full price.
The biggest carve-out catches people off guard: motor vehicle repair labor is not taxable. Under a lump-sum auto repair contract, the shop pays tax on parts at purchase and doesn’t collect anything from the customer. Under a separated contract, the shop charges tax on parts sold to the customer but never on labor.7Legal Information Institute. 34 Texas Administrative Code 3.290 – Motor Vehicle Repair and Maintenance You will not see sales tax on the labor line of a Texas auto repair invoice.
The other statutory exemptions in Section 151.0101(a)(5):2Texas Constitution and Statutes. Texas Code Tax Section 151.010 – Taxable Item
- Aircraft repair and maintenance is fully exempt.
- Ship and most boat repair is exempt, with the exception of taxable boats and motors defined under Chapter 160, sports fishing boats, and other pleasure vessels.
- Creating, repairing, maintaining, or restoring a computer program is exempt when the person doing the work did not sell and retains no rights in the program. This “contract programming” exemption covers custom software work and maintenance on programs the customer owns or licenses.
Information Services and Data Processing
Both are taxable, but Texas exempts 20% of the charge, so tax applies to only 80% of the bill.8State of Texas. Texas Code 151.351 – Information Services and Data Processing Services
Data processing covers computerized entry, retrieval, search, compilation, manipulation, or storage of data. That takes in payroll preparation, data entry, word processing, and internet hosting where a user stores data on the provider’s hardware or runs data through the provider’s software. Software-as-a-service products generally fall here and get the same 20% exemption.9Cornell Law Institute. 34 Texas Administrative Code 3.342 – Information Services
Information services cover delivery of news, financial data, electronic research, and similar current information by any transmission method. Using a computer as a tool while performing a different professional service doesn’t convert that service into taxable data processing. A bookkeeper preparing tax returns on a computer is not selling a data processing service.10Texas Comptroller of Public Accounts. Taxable Services
A practical warning on invoicing: if a provider bundles taxable data processing with a non-taxable service on one line, the whole amount can become taxable. Separate the charges.
Personal Services
Laundry and dry cleaning are taxable, including pressing, starching, and similar treatments. Self-service coin-operated machines are the clear exception: if the customer runs the machine, no tax.11Cornell Law Institute. 34 Texas Administrative Code 3.310 – Laundry, Cleaning, and Garment Services Garment alterations, tailoring, and mending performed for a fee are taxable. Massage therapy and tanning services round out the category.
Amusement Services
Amusement covers admissions for live and recorded performances, spectator sports, exhibitions, participatory games, fairs, and carnivals. Health club memberships, private club dues, and country club initiation fees are also taxable here.12Legal Information Institute. 34 Texas Administrative Code 3.298 – Amusement Services Educational services and health services prescribed by a licensed practitioner are excluded, even if they look recreational.13State of Texas. Texas Code TAX 151.0028 – Amusement Services
Security, Insurance, Debt Collection, and Credit Reporting
Security services cover anything requiring a license under the Texas Private Security Act: private investigation, guard services, alarm installation and monitoring, armored car transport, locksmith work, and computer forensic services.14Cornell Law Institute. 34 Texas Administrative Code 3.333 – Security Services15Texas Comptroller of Public Accounts. Security Services
Insurance services means damage appraisal, risk inspection, and actuarial analysis performed in connection with insurance coverage. Insurance premiums themselves are not taxable under this provision. If an agent provides services without a separate charge beyond commission, no tax is due.16Legal Information Institute. 34 Texas Administrative Code 3.355 – Insurance Services
Debt collection is taxable when the debtor’s last known address in the creditor’s records at referral is in Texas and the creditor is located in or doing business in Texas.17Legal Information Institute. 34 Texas Administrative Code 3.354 – Debt Collection Services Credit reporting is taxable when the applicant’s address is in Texas and the requester is in or doing business in Texas. Court-ordered child support collection is not taxable.10Texas Comptroller of Public Accounts. Taxable Services
Telecommunications, Cable, and Internet Access
Telecommunications services are broadly taxable, covering electronic transmission of sounds, signals, data, or information by any method (landline, mobile, VoIP, fax, paging).18Cornell Law Institute. 34 Texas Administrative Code 3.344 – Telecommunications Services Installation fees, service connection charges, call waiting, call forwarding, and equipment rented in connection with telecom service are all taxable.19Texas Comptroller of Public Accounts. Sales Tax on Telecommunications Services
Cable television, streaming video, and video on demand are subject to state sales tax. Direct-to-home satellite TV is subject to the 6.25% state tax but exempt from local sales tax under the federal Telecommunications Act of 1996.20Cornell Law Institute. 34 Texas Administrative Code 3.313 – Cable Television Service and Bundle Cable Service
Internet access still appears on the statutory list, but the federal Trade Facilitation and Trade Enforcement Act of 2015 permanently banned states from taxing it. Texas had a grandfather clause that expired on June 30, 2020. Internet access charges are no longer taxable in Texas.
Motor Vehicle Parking and Storage
Parking and storage of motor vehicles is taxable in every format. Monthly garage contracts, daily lot fees, and valet charges all count.
Services That Are Not Taxable in Texas
Because Texas taxes only the 17 listed categories, some commonly purchased professional services are notably absent:
- Legal fees. Attorney services are not taxable.
- Medical and healthcare services. Physician visits, dental work, and similar care are not on the list.
- Accounting and bookkeeping. Preparing financial reports and tax returns is not a taxable data processing service, even when done on a computer.10Texas Comptroller of Public Accounts. Taxable Services
- Residential repair and remodeling labor. Materials are still taxed; labor is not.3Texas Comptroller of Public Accounts. Real Property Repair and Remodeling
- Motor vehicle repair labor. Only parts get taxed, and only under certain contract structures.7Legal Information Institute. 34 Texas Administrative Code 3.290 – Motor Vehicle Repair and Maintenance
- Internet access. Permanently exempt under federal law since 2020.
If You Sell Taxable Services: Permits, Filing, and Penalties
Any business selling taxable services in Texas must hold a sales and use tax permit before making its first taxable sale. Applications go through the Comptroller’s eSystems portal. Sole owners, partners, and corporate officers provide Social Security numbers; Texas corporations provide the Secretary of State file number.21Texas Comptroller of Public Accounts. Texas Online Tax Registration Application
Filing frequency depends on the tax collected:
- Monthly if you collect $500 or more per month.
- Quarterly if you collect between $100 and $499 per month.
- Annually if you collect less than $100 per month.
Consumers share the responsibility. If a provider fails to charge sales tax on a taxable transaction, the buyer owes use tax directly to the Comptroller.1Texas Comptroller of Public Accounts. Sales and Use Tax
Late payments carry escalating penalties:22Texas Comptroller of Public Accounts. Penalties for Past Due Taxes
- 1 to 30 days late: 5% penalty on the unpaid amount.
- More than 30 days late: 10% penalty.
- After a Notice of Tax Due: an additional 10%, bringing the total to 20%.
Interest starts accruing on the 61st day after the due date at a variable rate set each calendar year. Every late-filed report also carries a flat $50 penalty, even when no tax was due for that period.22Texas Comptroller of Public Accounts. Penalties for Past Due Taxes The penalties stack on every missed report, so quietly accumulating past-due periods gets expensive fast.
Selling Into Texas From Out of State
Out-of-state businesses selling taxable services into Texas must register and collect once total Texas revenue (taxable and nontaxable combined, including sales for resale and sales to exempt entities) reaches $500,000 in the preceding twelve calendar months.23Texas Comptroller of Public Accounts. Remote Sellers
If you sell through a marketplace, the marketplace provider engaged in business in Texas is generally responsible for collecting and remitting both state and local tax on your sales through that platform. You still need a Texas sales tax permit and file your own returns unless you are a remote seller whose only Texas sales run through a certified marketplace provider.24Texas Comptroller of Public Accounts. Marketplace Providers and Marketplace Sellers