Some cities and counties have local sales and use taxes. If you are located in or make sales into an area with a local tax, you may owe local sales and use tax. For more information, see Local Sales and Use Taxes.
To determine the sales tax rate, use the location where the product is received by the customer, typically your business or a delivery address. You can use our Sales Tax Rate Map or Sales Tax Rate Calculator to help you determine the sales tax rate.
Sales – Service Contracts
Sales tax applies to some types of service contracts for building cleaning and maintenance.
Contracts for Cleaning Mechanical Systems
Contracts for mechanical systems, such as elevators and HVAC systems, that are for cleaning are taxable building cleaning. Some items used to provide these services are not taxable. See Exempt Purchases.
Contracts for Repairing Mechanical Systems
Contracts for mechanical systems, such as elevators and HVAC systems, that are for repair are not taxable. Repair services must be separately stated.
Repair includes services to:
- Restore an item that was broken, worn, damaged, defective, or malfunctioning, to working order or operating condition
- Sustain or support safe, efficient, and continuous operations
- Prevent decline, failure, lapse, or deterioration. Repair services must be separately stated.
Contractors owe sales or use tax on the parts used for contracted repairs.
Home health care services that provide a combination of medical care, personal care, laundry, and cleaning services for one charge are exempt from sales tax. Laundry and cleaning services are considered incidental and are not taxable.
If a third party provides the residential cleaning services, the home health care provider cannot purchase those services exempt for resale.
Contracts to construct, repair, alter, or improve real property are not taxable. The contractor must pay sales or use tax on any materials, supplies, equipment, or taxable services used to complete the construction contract. For more information, see Contractor and Other Property Installers.
A lump sum contract that includes items listed under “building cleaning and maintenance,” together with construction, alteration, or improvements to real property is considered a construction contract when 50% or more of the total cost of the contract is for improvement of real property.
Examples
- Fire damage requires you to wash walls, clean carpets and Venetian blinds, paint all rooms, and reconstruct several walls. Since 50% or more of the cost of the contract is for improving real property, the contract is not taxable.
Note: If the contractor hires a subcontractor to clean, the contractor must pay tax on the taxable cleaning services. However, if the cleaning is done by the contractor’s crew, no tax applies.
-
Fire damage requires you to wash walls, clean carpets and Venetian blinds, and paint one of several rooms. Painting walls is not taxable if separately stated. Cleaning carpets, Venetian blinds, and washing walls are taxable. However, if the customer is billed a lump-sum amount for painting walls and the taxable services, the entire amount is taxable, since more than 50% of the contract is for taxable services.
Lighting maintenance, such as bulb and fuse replacement, is taxable. However, ballast replacement is only taxable when it is plugged in. When ballasts are hard wired, maintenance to replace them is not taxable because it is an improvement to real property.
