Ms-Drg Assignment Reports What Services Are Taxable In Texas

Texas imposes a 6.25 percent state sales and use tax on all retail sales, leases and rentals of most goods, as well as taxable services. Local taxing jurisdictions (cities, counties, special purpose districts and transit authorities) can also impose up to 2 percent sales and use tax for a maximum combined rate of 8.25 percent.

Registering and Reporting Texas Sales and Use Tax

Local Sales and Use Tax Rates

Due Dates

Taxpayers will be notified by letter after their application for a sales tax permit has been approved whether they will file monthly or quarterly. If a due date falls on a Saturday, Sunday or legal holiday, the next working day is the due date.

Quarterly Filers

For quarterly filers, reports are due on:

  • April 20 to report Jan. – March
  • July 20 to report April – June
  • Oct. 20 to report July – Sept.
  • Jan. 20 to report Oct. – Dec.
Monthly Filers

For monthly filers, reports are due on the 20th of the month following the reporting month. For example, the April sales tax report is due May 20.

Yearly Filers

For yearly filers, reports of sales for the previous year are due on Jan. 20.

Payments via TEXNET

Taxpayers required to pay electronically via TEXNET must initiate their payment by 6 p.m. CST on the last banking business day prior to the due date in order for the payment to be considered timely.

Taxpayers will be notified by letter when their business meets the threshold to be required to pay electronically via TEXNET.

Discounts, Penalties, Interest and Refunds

Discounts
  • Permitted sales taxpayers can claim a discount of 0.5 percent of the amount of tax timely reported and paid.
  • Sales taxpayers who prepay can claim 0.5 percent for timely filing and paying, plus 1.25 percent for prepaying.
Penalties
  • A $50 penalty is assessed on each report filed after the due date.
  • If tax is paid 1-30 days after the due date, a 5 percent penalty is assessed.
  • If tax is paid over 30 days after the due date, a 10 percent penalty is assessed.

Refunds

Additional Resources

Use Tax

If you operate a maid, janitorial, custodial, or swimming pool maintenance service, you should be collecting sales and use tax. Request a sales tax permit online.

Collecting Tax

You should collect state tax, plus any local (city, county, special purpose district, or transit) taxes on the amount you bill for your service.

Examples of Taxable Services

Tax is due on the charge to clean a home, office, warehouse, garage, restaurant, or any other building, or a swimming pool. For example, you should collect tax on your charges for such things as cleaning and straightening; washing windows, floors, walls, and ceilings; cleaning chimneys or air ducts; replacing light bulbs or fuses; picking up trash indoors or outdoors; and maintaining swimming pools.

Charges for minor repairs, adjustments, and maintenance of heating and air conditioning systems (for example, cleaning or changing filters) are subject to tax, if such services are done as part of your custodial service.

Charges for repair, remodeling, and restoration done on nonresidential buildings also are taxable. As an example, you should collect tax on the total charge, including labor and materials, to paint or hang wallpaper in an office.

Pressure washing is taxable as the restoration or maintenance of tangible personal property (see Rule 3.292). Pressure washing buildings, sidewalks, and parking lots is taxable as building or grounds cleaning (see Rule 3.356).

Swimming pool maintenance is a taxable real property service whether done on residential or nonresidential (commercial) property. Swimming pool maintenance includes testing, acid washing, adding and balancing chemicals, cleaning and changing filters, and vacuuming.

Examples of Nontaxable Services

There is no tax on the charges of a self-employed person who provides traditional household services such as housekeeping, babysitting, or cooking. For the charges to be exempt from tax, the person must be an employee of the household and not act as a subcontractor for a third party, such as a maid service.

The tax exemption does not include other types of real property services provided by self-employed individuals to residential customers. For example, landscaping or pool cleaning services done at a residential household by a self-employed individual are taxable as real property services. See sections (a)(7) and (b) of Rule 3.356 relating to real property services.

Building maintenance and groundskeeping are not taxable when purchased by a contractor or a home builder as part of the improvement of real property with a new residential structure to be used as a residence, or when making an improvement to residential realty that qualifies as new construction. See Homebuilders and Real Property Services for more information.

Materials, Supplies and Equipment

You must pay tax on all soap, cleaners, chemicals, materials, supplies, and equipment used to perform your services.

When performing taxable services, you can give your supplier a resale certificate instead of paying tax on goods that are transferred to the care, custody, and control of your customer as a part of your service. Examples of such items that are passed on to your customers include wax and furniture oil or polish, and toilet paper, paper towels, and hand soap left in the restrooms for your customers' use.

When performing a nontaxable service, you must pay tax on these items.

Reselling a Cleaning Service

At times, you may subcontract with a third party, such as a maid service, to clean for you. In this case, the third party will bill you, and you, in turn, will bill your customer. You can give the third party a resale certificate instead of paying tax on the sales price for the service. You must then collect tax from your customer on the total charge.

Need More Information?

See Rule 3.356 - Real Property Services.

94-111
(10/2006)

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