Hair salons in Texas do charge sales tax, but only on the products a client buys to take home. The services themselves — haircuts, color, styling, manicures, pedicures, perms, shampoos — are not taxable in Texas. So a client who walks out with just a fresh cut pays no sales tax at all, while a client who also grabs a bottle of shampoo from the retail shelf pays tax on that bottle.1Texas Comptroller of Public Accounts. STAR: State Automated Tax Research for the State of Texas
Services Are Tax-Free, Products Are Taxed
The Texas Comptroller draws a hard line between cosmetology services and cosmetology products. Cutting, coloring, shampooing, perms, manicures, pedicures, and similar personal care work are nontaxable services. Shampoo, conditioner, styling cream, hair extensions, nail polish, and any other physical item sold to a customer are taxable.1Texas Comptroller of Public Accounts. STAR: State Automated Tax Research for the State of Texas
The state rate on those product sales is 6.25 percent. Cities, counties, and other local jurisdictions can add up to 2 percent more, so the combined rate a salon actually charges can run as high as 8.25 percent depending on location.2Texas Comptroller of Public Accounts. Sales and Use Tax The Comptroller publishes a rate lookup tool that returns the combined rate for any Texas address, and that is the rate the salon should be programming into its point-of-sale system.
How a Mixed Receipt Should Look
The cleanest receipt itemizes services and products on separate lines. The service line carries no tax. The product line carries the combined state and local rate. If a stylist uses a product during the appointment and the client also wants to buy a bottle of that product to take home, the take-home bottle is a taxable sale and needs its own line.
Salons that fold product costs into a single service price without breaking them out create audit risk. If the Comptroller can identify a product component in a bundled charge, it can be treated as an untaxed retail sale. Itemizing avoids the argument.
The Use Tax Catch on Products Used During Services
There is a second tax question that catches many owners off guard, and it moves in the opposite direction. When a salon buys professional supplies — color, developer, back-bar shampoo — using a resale certificate, no sales tax is paid at the register because the assumption is those items will be resold to customers. If the salon then uses the product on a client’s head instead of selling the bottle, the resale never happens. The salon owes use tax on what it paid for that product, reported on the “taxable purchases” line of the sales tax return.3Texas Comptroller of Public Accounts. Texas Sales and Use Tax Frequently Asked Questions – Use Tax
A resale certificate (Form 01-339) only covers items resold in the same form they were bought. A bottle of conditioner stocked on the retail shelf qualifies. A gallon of professional color mixed and applied in the chair does not. Misusing a resale certificate carries penalties that scale with the amount of tax evaded, from a Class C misdemeanor for less than $20 up to a second-degree felony at $20,000 or more.4Texas Comptroller of Public Accounts. Texas Sales and Use Tax Frequently Asked Questions – Resale
Some owners sidestep the tracking problem by paying sales tax when they buy their professional supplies rather than presenting a resale certificate. That is legal and it eliminates the need to sort which bottles went to retail versus in-chair use. The trade-off is paying tax upfront on inventory that might later be resold, and you cannot then collect tax again from the customer on the same bottle without double-taxing it.
Who Needs a Sales Tax Permit
Anyone selling tangible personal property in Texas needs a sales tax permit before making a first sale. For a salon, that means the owner if the salon itself sells retail products, and every individual booth renter who sells products from their own station.5Texas Comptroller of Public Accounts. Texas Online Tax Registration Application
A booth renter runs a separate business as an independent contractor. The salon owner is not responsible for collecting or remitting sales tax on products a booth renter sells. Each renter files their own returns under their own permit. If the salon operates as a single business with employees, the salon holds the permit and handles all the tax on all product sales made on the premises.
There is no fee to apply for the permit. The Comptroller may require a security bond depending on the applicant’s tax history.6Texas Comptroller of Public Accounts. Texas Sales and Use Tax Frequently Asked Questions – Permit The application asks for the legal name and physical address of the business, a federal Employer Identification Number (or a Social Security number for a sole proprietor), and a NAICS code — 812111 for barber shops or 812112 for beauty salons. Once issued, the permit has to be displayed conspicuously at the business location.
What Happens If a Salon Gets It Wrong
Filing late is expensive. The Comptroller’s penalty tiers on past-due sales tax run 5 percent of the tax owed for reports 1 to 30 days late, 10 percent after 30 days, and an additional 10 percent (for a total of 20 percent) once a formal notice has been issued. Interest starts accruing on the 61st day after the due date, and a flat $50 penalty applies to every late report regardless of whether any tax is owed for that period.7Texas Comptroller of Public Accounts. Penalties for Past Due Taxes
Recordkeeping is the other place small mistakes compound. Keep resale certificates on file for at least four years, which is the retention period the Comptroller expects during an audit.4Texas Comptroller of Public Accounts. Texas Sales and Use Tax Frequently Asked Questions – Resale Track each retail product sale with the date, item, price, and tax collected, and keep purchase invoices showing whether tax was paid to the supplier or a resale certificate was used. For items bought under a resale certificate, note whether each was resold to a customer or consumed during a service, because those two paths carry different tax outcomes.
The short version for a Texas hair salon: no tax on the chair, tax on the shelf, and a use tax bill waiting for any product bought tax-free and then used on a client instead of sold to one.