Are Your Services Taxable in Nevada?
Navigate Nevada's sales tax laws for services. Learn when your business offerings are taxable and how to make proper distinctions.
Nevada’s sales and use tax system applies primarily to the retail sale of tangible personal property. Businesses operating in Nevada are required to collect sales tax on taxable transactions, which includes the sale of most goods, wares, and merchandise. While services are generally not subject to sales tax, exceptions exist, particularly when services are closely tied to the sale or creation of tangible personal property.
The General Rule for Services
In Nevada, services are generally not subject to sales tax. Sales tax is predominantly imposed on the transfer of tangible personal property, meaning physical goods that can be seen, weighed, measured, felt, or touched. This includes common consumer products like clothing, electronics, and furniture.
Pure services, such as consulting work, accounting services, or legal advice, are exempt from sales tax if they are not connected to the sale of tangible personal property. This means a business providing only services, without the transfer of a physical item, does not need to collect sales tax on those services. The statewide sales tax rate in Nevada is 6.85%, with local jurisdictions adding additional taxes that can raise the combined rate, but this applies primarily to taxable goods.
When Services Become Taxable
Services can become taxable in Nevada when they are an inseparable part of the sale of tangible personal property or involve the creation or modification of tangible items. Fabrication labor, which is the work involved in creating tangible personal property that is sold at retail, is subject to sales tax. This means if a service results in a new physical product for the customer, the labor involved in its creation is generally taxable.
Installation services are also taxable if they are part of a taxable sale of tangible personal property and are not separately stated on the invoice. Similarly, repair services involving parts are taxable on the cost of the parts, but the labor for repair, reconditioning, and installation is not taxable if separately listed on the invoice.
Digital products and Software as a Service (SaaS) are generally not taxable in Nevada unless they are delivered in a tangible medium, such as a disk or CD. Services that are deemed necessary for completing the sale of tangible personal property are also taxable, even if they might otherwise be considered pure services.
Understanding the Distinction Between Services and Property
Differentiating between a non-taxable service and a taxable sale of tangible personal property is important, especially in transactions that involve both. Nevada, like many states, often uses a “true object” or “essential nature” test to determine the primary purpose of a mixed transaction. This test evaluates whether the purchaser’s main intent was to acquire a service, with any tangible property being incidental, or to acquire tangible personal property, with any service being incidental to that acquisition.
For example, a photographer’s consultation and initial image rendering services are generally exempt from sales tax. However, if the transaction includes the sale of physical prints or enlargements, those tangible items would be taxable. If a transaction combines taxable products and non-taxable services, the “true object” test helps determine if the entire bundled transaction is taxable.