Sales Tax Basics for Contractors and Service Businesses
A plain-English introduction to sales tax for service and trade businesses — when it applies, the idea of nexus, and how to track what you collect.
Sales tax is one of the most confusing parts of running a service business, partly because the rules differ everywhere. This is a general overview to help you ask the right questions — not tax advice.
When does sales tax apply?
Whether you charge sales tax depends on your state, what you sell, and sometimes how labor and materials are billed. Many states tax tangible goods but treat services differently; some tax certain services and not others. Your state’s department of revenue is the authority.
Understand nexus
“Nexus” is the connection that requires you to collect tax in a jurisdiction — usually created by having a physical presence, and sometimes by crossing a sales threshold. If you work across city or state lines, you may have obligations in more than one place.
Track what you collect
- Configure the correct tax rate for each jurisdiction on your invoices.
- Keep collected tax separate in your mind (and ideally your accounting) — it isn’t your revenue.
- Report and remit on time to the correct authority.
- Keep records of exempt sales and any exemption certificates.
Seayora can calculate and display sales tax on invoices based on the rates you set and summarize what you’ve collected, but those figures are tools — Seayora doesn’t determine your obligations or file or remit taxes for you. Confirm rates, taxability, and filing with a tax professional.
Frequently asked questions
Does Seayora file my sales tax for me?
No. Seayora helps you calculate and track sales tax on invoices, but you are responsible for determining what to charge and for reporting, filing, and remitting to the proper authorities. Consult a tax professional.
Is labor taxable?
It depends on your state and how the work is billed. Some states tax certain services or the labor portion of a job; others don’t. Check your state department of revenue or ask your accountant.
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