Quick Answer
Currently, only 4 states broadly tax professional services: Hawaii (4.712% GET), New Mexico (5.125-8.6875%), South Dakota (4.2-6.4%), and Washington (varies by location, 6.5-10.4%). Most states only tax tangible goods or specific enumerated services, but 23 states are considering expanding to professional services by 2027.
Best Answer
James Okafor, Self-Employment Tax Specialist
Experienced freelancers with established businesses who need comprehensive state tax compliance guidance
Which states currently tax professional services?
As of 2026, only a handful of states require freelancers to charge sales tax on professional services. The landscape is complex because most states primarily tax tangible goods, not services.
The four states that broadly tax professional services:
Example: Freelance graphic designer earning $75,000/year
Let's say you're a graphic designer with $75,000 in annual revenue. Here's what you'd owe in sales tax by state:
States with limited service taxation
Several states tax specific enumerated services but not general professional services:
Texas: Taxes specific services like telecommunications, cable TV, and some business services, but not most freelance work like writing, design, or consulting.
Florida: Taxes enumerated services including commercial cleaning, security services, and pest control, but exempts most professional services.
Connecticut: Taxes computer and data processing services, but exempts most creative and consulting services.
States considering expansion (2026-2027)
According to the Tax Foundation, 23 states are actively considering expanding sales tax to professional services to increase revenue. States most likely to implement changes include:
How to determine if you need to charge sales tax
Step 1: Identify your state's current rules
Check your state's Department of Revenue website for the most current list of taxable services.
Step 2: Classify your services correctly
Step 3: Consider where your clients are located
If you provide services to clients in multiple states, you may need to charge sales tax based on where the service is performed or delivered, not where you're located.
Special considerations for digital services
Many states are updating their rules for digital services:
What you should do
1. Register for a sales tax permit in states where you're required to collect sales tax
2. Set up separate tracking for taxable vs. non-taxable income
3. Use accounting software that can handle multi-state sales tax calculations
4. File returns on schedule (monthly, quarterly, or annually depending on state requirements)
5. Monitor proposed legislation in states where you have clients
Key takeaway: Only 4 states broadly tax professional services as of 2026, but 23 states are considering expansion. Most freelancers only need to worry about sales tax if they sell physical products or operate in Hawaii, New Mexico, South Dakota, or Washington.
*Sources: [State Tax Foundation Database](https://taxfoundation.org), [Streamlined Sales Tax Agreement](https://www.streamlinedsalestax.org)*
Key Takeaway: Only 4 states broadly tax professional services as of 2026, but 23 states are considering expansion by 2027.
Sales tax requirements for freelancers by state type
| State Type | Professional Services Taxed? | Physical Products Taxed? | Digital Products Taxed? |
|---|---|---|---|
| Most states (46) | No | Yes | Varies |
| Hawaii | Yes (4.712% GET) | Yes | Yes |
| New Mexico | Yes (5.125-8.6875%) | Yes | Yes |
| South Dakota | Yes (4.2-6.4%) | Yes | Yes |
| Washington | Some services | Yes | Some |
More Perspectives
James Okafor, Self-Employment Tax Specialist
First-year freelancers who need basic guidance on sales tax requirements
Don't panic — most freelancers don't charge sales tax
If you're new to freelancing, the good news is that most states don't require you to charge sales tax on professional services like writing, design, consulting, or coaching.
The simple rule for most states
If you provide services (not physical products), you probably don't need to charge sales tax. This applies to:
When you DO need to charge sales tax
You sell physical products: If you create and sell physical items (art prints, handmade goods, books), you'll need to charge sales tax in most states.
You live in one of these 4 states: Hawaii, New Mexico, South Dakota, or Washington have broader service taxes.
You provide specific enumerated services: Some states tax particular services like cleaning, security, or telecommunications.
Example: New freelance writer in Texas
Sarah just started freelance writing in Texas. She earns $2,000/month writing blog posts and website copy for clients.
Quick check: Do I need a sales tax permit?
Answer "yes" to any of these questions means you probably need one:
If you answered "no" to all three, you probably don't need to worry about sales tax right now.
What to do as a new freelancer
1. Check your state's Department of Revenue website for a list of taxable services
2. Keep it simple — focus on income tax compliance first, sales tax second
3. Separate business and personal expenses regardless of sales tax requirements
4. Plan for growth — you may need sales tax compliance as your business expands
Key takeaway: Most new freelancers providing professional services don't need to charge sales tax unless they sell physical products or live in Hawaii, New Mexico, South Dakota, or Washington.
Key Takeaway: Most new freelancers providing professional services don't need to charge sales tax unless they sell physical products or live in one of 4 specific states.
Sources
- Tax Foundation State Tax Database — Comprehensive database of state sales tax rates and service taxation
- IRS Publication 535 — Business Expenses including state tax deductibility
Related Questions
Reviewed by James Okafor, Self-Employment Tax Specialist on February 28, 2026
This content is for educational purposes only and is not a substitute for professional tax advice. Consult a qualified tax professional for advice specific to your situation.