When it comes to sales tax, service providers must have a different perspective than retailers in most states. Companies that provide strictly tax-exempt services do not need to collect or remit sales tax for their services. However, certain services are subject to sales tax when provided to consumers. This article will provide an overview of the categories of services that are subject to sales tax, as well as some examples and additional resources. Installation and warranty may be subject to sales tax, depending on the condition.
If a service is provided in conjunction with a tangible product, but the product is secondary or incidental, the service may not be taxed at all. Retail services are services subject to sales tax. These include:
- Telecommunications services, such as telephone, telegraph, radio, and television services
- Cable television services, which is the distribution of video programming with or without the use of cables to subscribed or paying customers
- Data processing services, such as computer programming, data entry, and data analysis
- Debt collection services, such as assessing damages and losses, inspecting, investigating, adjusting or processing claims, actuarial analysis or investigation, and preventing insurance losses
- Insurance services, such as assessing damages and losses, inspecting, investigating, adjusting or processing claims, actuarial analysis or investigation, and preventing insurance losses
The Voluntary Classification Settlement Program (VCSP) is an optional program that provides taxpayers with the opportunity to reclassify their workers as employees for future tax periods for employment tax purposes with partial relief from federal employment taxes for eligible taxpayers who commit to treating their workers (or a class or group of workers) prospectively as employees.