Texas is not a state that taxes all services. It also doesn’t exempt all of them. Instead, the Texas Comptroller maintains a specific list of taxable services, and if your service falls on that list, you’re required to collect and remit sales tax. If it doesn’t, you’re not.

The most commonly taxable services include real property repair, remodeling, and maintenance (think HVAC work, plumbing, roofing, painting), janitorial and cleaning services, pest control, security services, data processing, information services, telecommunications, and debt collection. If you run a cleaning company or a skilled trade business in the Houston area, chances are good that at least some of what you sell is subject to sales tax.

Services that are generally not taxable include professional services like consulting, accounting, legal work, and coaching. Medical services, childcare, and most personal care services like haircuts and spa treatments are also exempt. So a management consultant in Pearland won’t charge sales tax on their consulting fees, but a pressure washing company absolutely needs to.

Where it gets tricky is when your business provides a mix of taxable and non-taxable services, or when you bundle services with tangible products. Texas has rules about how bundled transactions are treated. If a landscaper sells and installs plants, the plants are taxable goods and the labor may also be taxable depending on how the work is classified. Getting the breakdown wrong means you’re either overcharging customers or underpaying the state.

Another common point of confusion involves real property services versus personal property services. Repairs to real property (a building, a home, a parking lot) follow different rules than repairs to personal property (a car, an appliance, a piece of equipment). Both can be taxable but the way you calculate and charge the tax differs.

If you’re unsure whether your specific service is taxable, the Texas Comptroller’s office publishes guidance by industry. But reading tax bulletins is not most people’s idea of a good time, and the language can be vague enough to leave you guessing. Working with a Houston fractional CFO or bookkeeper who understands Texas sales tax rules can save you from costly mistakes down the road.

The penalties for not collecting sales tax when you should are real. Texas can go back four years and assess the uncollected tax plus penalties and interest against your business. You end up owing tax you never collected from customers, which means it comes straight out of your pocket.

If you determine that your services are taxable, you’ll need a Texas sales tax permit, and you need to charge the correct combined rate for the location where the service is performed. Rates vary across Houston, Pearland, and surrounding cities. From there, filing and paying on time is critical. Sales tax management is one of those things that’s straightforward once it’s set up correctly but painful to fix after months or years of doing it wrong.

The bottom line is that you can’t assume services are exempt in Texas just because you’re not selling a physical product. Check the list, get your permit if needed, and stay current on your filings.