Although sales tax laws have been around in the United States for almost a century, the dynamic of the tax base today is quite different than what it was after the great depression. At that point in history, the US was an industrial nation with its primary industry being manufacturing.  Fast forward to today and we have a completely different business climate in the country which is revolved around service based industries. While it is a highly debated issue as to which types of services should be taxed, states have come up with some broad categories to give guidance. Almost all services can be grouped in one way or another into the following categories:

➢   Tangible personal property (TPP): This is the original category that sales tax was based off of, but it was originally only the goods that were taxable. Services to tangible property include any service, repair, alteration or modification to property you can physically touch. An example would be an air conditioning technician who comes to service an air unit and replace a part.

➢   Real property: Any services that deal with the improvement or maintenance of commercial or residential real estate fall into this category. A contractor that adds a room to a house or a company that lays brick pavers in a driveway would be considered servicing real property.

➢   Entertainment based services: Some states choose to tax services that deal with recreation and leisure. Good examples of this would be admission to camp grounds, concerts, theatrical performances, sporting events, and county fairs.

➢   Professional: Mandating sales tax on services conducted by professionals is a debated topic. Many of these professions have large organizations lobbying on their behalf. Many of them believe they already pay large amounts of income tax so having to pay sales tax is overkill. This is why only a handful of states levy sales tax on professionals. Obvious examples of professionals are doctors, accountants, lawyers, and dentists.

➢   Business: These are services that are performed on behalf of companies. This is any service that supports or enhances a business’s activities. Some examples of this would be internet technology (IT) companies, logistical shipping, staffing agencies and payroll companies.

➢   Personal: Any services that deal with providing value to individuals where no professional licensing is required would fall into this category. Examples would be fitness centers, residential house cleaning, nail salons and babysitting.