Are Services Taxable in Idaho? A Detailed Look at the Rules
Unravel the intricacies of Idaho sales tax on services. This guide clarifies the specific conditions and scenarios that determine taxability for various offerings.
Sales tax generally applies to the sale of tangible personal property, which refers to physical goods that can be seen, touched, weighed, or measured. Each state has its own specific rules regarding what is subject to sales tax. In Idaho, the state imposes a 6% sales tax on retail sales, which can increase to a combined rate of 6% to 9% depending on local sales taxes. Understanding these distinctions is important for businesses to ensure proper compliance with tax regulations.
General Rules for Services
In Idaho, services are not subject to sales tax. Many pure services, such as consulting, cleaning, or professional advice, are exempt. The state’s sales tax framework primarily targets the sale of physical goods.
The distinction between a service and a tangible good is fundamental for sales tax purposes. If a transaction involves only the performance of an action or the provision of expertise without the transfer of a physical item, it generally falls under the non-taxable service category. However, this general rule has specific exceptions defined in Idaho law.
Specific Enumerated Taxable Services
Idaho law specifically enumerates certain services as taxable, even when not directly tied to tangible personal property. This includes the furnishing, preparing, or serving of food, meals, or drinks, making sales at restaurants, cafes, and catering services taxable.
Other taxable services involve admission charges to events or places, such as tickets to movies, concerts, or sporting events. Fees for the use of a facility or tangible personal property for recreational purposes are also taxable, including membership fees to health clubs or green fees at golf courses. Additionally, providing hotel, motel, lodging, or campground accommodations for 30 days or less is subject to sales tax.
Services Related to Tangible Personal Property
Services performed on or in connection with tangible personal property can also be subject to sales tax in Idaho. This includes labor for the repair, alteration, installation, or fabrication of tangible goods. If a service results in the creation of a new product, or is part of the sale of an item, it may become taxable.
For example, labor fees to make a table from a customer’s lumber, cut or form a customer’s metal, or embroider a logo on customer-owned clothing are taxable. Similarly, the labor fee to assemble a bicycle is also subject to sales tax. This rule applies to custom-made tangible personal property, where both the materials and labor for items like a custom-built desk or a made-to-order suit are taxable.
Bundled Transactions and Digital Products
When a single transaction includes both taxable tangible personal property and non-taxable services, it is considered a bundled transaction. In Idaho, if a digital product is sold as part of a bundle with a taxable tangible good, the entire transaction may be subject to sales tax, unless the components are separately itemized. Businesses must carefully consider how they present and charge for mixed sales to ensure proper tax application.
Idaho treats certain digital items, such as music, e-books, videos, and games, as tangible personal property subject to sales tax when sold with permanent usage rights. However, leases or rentals of these digital products and digital subscriptions are not taxable. Software as a Service (SaaS) products are not currently taxed in Idaho, as they are typically delivered via the cloud and not downloaded onto a user’s hardware.