Are Services Taxable in New York? NYC Rules, Repairs, and SaaS

Most services in New York are not subject to sales tax. The state’s default rule flips the one that applies to goods: tangible personal property is taxable unless exempted, but a service is exempt unless the tax law specifically names it as taxable.¹ So the practical question for anyone asking whether services are taxable in New York is narrower than it sounds: does your service appear on the state’s enumerated list? If not, no sales tax applies. Combined state and local rates run from 7% to roughly 9.125%, so getting the answer right matters for both providers and their customers.²

Professional and personal services that most people encounter every day sit outside the taxable list. Legal work, accounting, medical care, engineering, architecture, and instruction and training are all exempt. Barbering and personal care services are exempt everywhere in the state except New York City. If a service does not appear on the taxable list below or the New York City list further down, you can generally assume it is exempt.¹

Services Taxable Throughout New York

New York Tax Law Section 1105 identifies the categories of services subject to sales tax statewide. The list is broader than a first read suggests, so compare what you actually do against each entry.³

Repairs, maintenance, and installation of tangible personal property. Fixing a car, servicing an appliance, or installing equipment that stays personal property rather than becoming part of a building.
Maintenance and repair of real property. Work that keeps a building in its existing condition, such as fixing a leaky faucet or repainting a room. Capital improvements are treated differently and are covered below.
Information services. Collecting, compiling, or analyzing information and furnishing reports to others is taxable when the report is delivered in writing, electronically, or by any other non-oral means. Purely oral information is excluded.⁴
Protective and detective services. Private investigation, armored car transport, guard services, alarm monitoring, bodyguards, and bonded courier services.⁵
Interior decorating and design. Both the planning phase and the physical implementation are taxable. When a decorator also performs construction, that portion is taxed as a service to tangible or real property instead.⁶
Parking, garaging, and storing motor vehicles.
Passenger transportation with a driver in limousines, black cars, and similar vehicles. Standard taxi and bus service is excluded.
Intrastate telecommunications, telephone answering services, prepaid calling services, and mobile telecom services.
Admissions to places of amusement charging more than ten cents. Movie theater admissions and charges for patron participation in sporting activities such as bowling lanes or swimming pools are exempt.
Hotel occupancy, social and athletic club dues, and certain cabaret charges.

Rates vary by where the service is delivered. The state portion is 4%, counties and cities add 3% to 4.75%, and businesses within the Metropolitan Commuter Transportation District pay an additional 0.375% surcharge.² The location that determines the rate depends on the service. Protective services are taxed at the rate where the property being protected sits; detective services are taxed at the rate where the investigative report is delivered.⁵

Services Taxable Only in New York City

Several categories are taxable only inside New York City and are exempt in the rest of the state. These include beautician and barbering services, hair restoration, tanning, manicures and pedicures, electrolysis, and massage. Charges at weight-control salons, health clubs, gyms, and Turkish or sauna baths are also taxable inside the city. Written and oral credit rating and certain oral credit reporting services follow the same city-only pattern.³

If your business has locations both inside and outside the city, only the city locations collect tax on these services. A salon in Manhattan collects sales tax on a haircut; the same chain’s location in Buffalo does not.

Repairs Versus Capital Improvements to Real Property

Because repair and maintenance of real property is taxable but a capital improvement is not, this line is where the biggest disagreements arise. A capital improvement must meet all three of these conditions:⁷

It substantially adds value to the property or appreciably extends its useful life.
It becomes part of the real property or is permanently affixed so that removing it would cause material damage.
It is intended to be a permanent installation.

Installing a hot water heater or building a deck qualifies. Replacing the thermostat on that water heater or repainting existing cabinets does not, and those charges carry sales tax.⁷ To claim the exemption, the property owner gives the contractor a completed Form ST-124, Certificate of Capital Improvement. Without that certificate, the contractor can be held liable for tax that should have been collected.

Software and SaaS

Prewritten computer software is taxable in New York regardless of how it is delivered. A physical disc, an electronic download, and remote cloud access are all treated the same way, because the state considers the buyer to have constructive possession and the right to use the software.⁸ That treatment pulls Software as a Service into the tax base even though it looks like a service to the customer.

Custom software written for a specific customer is generally exempt. Prewritten software that is modified for a buyer remains taxable if the prewritten portion is the primary component. Electronic news services may qualify for a separate exemption in certain circumstances.⁹

What You Have to Do if You Sell Taxable Services

Any business selling taxable services in New York has to register as a sales tax vendor before its first taxable sale. Registration goes through Form DTF-17, and you will need your federal EIN, business structure information, and a physical business address.¹⁰ Once approved, the state issues a Certificate of Authority, which must be displayed in plain view at your place of business. Each location needs its own certificate, and vendors without a fixed location must attach it so customers can see it. Collecting sales tax without a valid certificate is not allowed.

Out-of-state sellers can still be pulled in. New York’s economic nexus rule requires registration when, during the previous four sales tax quarters, a business had more than $500,000 in gross receipts from sales delivered into New York and made more than 100 separate sales delivered into the state. Both conditions must be met.¹¹

Filing frequency is set by your tax volume:¹²

Annual filers owe $3,000 or less in sales tax during the annual filing period.
Quarterly filers have taxable receipts under $300,000 per quarter and have not been classified as annual filers.
Monthly (part-quarterly) filing kicks in when combined taxable receipts reach $300,000 or more in any quarter, starting the next quarter.

Returns are filed through the Department of Taxation and Finance’s Online Services portal.¹³ Late filing carries a penalty of 10% of the tax due for the first month, plus 1% for each additional month, capped at 30%, with a $50 minimum even when no tax is owed. Failing to file, or filing more than 60 days late, raises the floor to the greater of the percentage calculation, $100 (or 100% of the tax due if lower), or $50, and interest accrues on top of the penalty.¹⁴

1
New York State Department of Taxation and Finance. Products, Services, and Transactions Subject to Sales Tax
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New York State Department of Taxation and Finance. Sales and Use Tax – Tax Expenditure Estimates
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New York State Department of Taxation and Finance. Quick Reference Guide for Taxable and Exempt Property and Services
4
Cornell Law School / Legal Information Institute (LII). New York Comp Codes R and Regs Tit 20 527.3 – Sale of Information Services
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New York State Department of Taxation and Finance. N-90-20 – New York State Sales and Use Tax on Protective and Detective Services
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New York State Department of Taxation and Finance. Interior Decorating and Design Services
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New York State Department of Taxation and Finance. Tax Bulletin ST-104 – Capital Improvements
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New York State Department of Taxation and Finance. Computer Software
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New York State Department of Taxation and Finance. Sales and Use Tax Exemption for Electronic News Services
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New York State Department of Taxation and Finance. Instructions for Form DTF-17 – Application to Register for a Sales Tax Certificate of Authority
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New York State Department of Taxation and Finance. Sales Tax Nexus
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New York State Department of Taxation and Finance. Filing Requirements for Sales and Use Tax Returns
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New York State Department of Taxation and Finance. Sales Tax Web File
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New York State Department of Taxation and Finance. Sales and Use Tax Penalties