Do Hair Salons Charge Tax on Services and Products?

Sales taxes are a common feature of consumer transactions in the United States, representing a percentage of the retail price of goods and certain services. Collected by sellers and remitted to government authorities, sales tax revenue funds state and local government services. Understanding how sales tax applies to purchases, including at hair salons, helps consumers anticipate their total cost. The application of sales tax can vary significantly depending on the type of item or service and the specific location of the transaction.

When Hair Salon Services are Taxable

The taxability of hair salon services, such as haircuts, styling, coloring, or perms, depends significantly on the laws of individual states and sometimes local jurisdictions. Unlike tangible goods, services are taxed less uniformly across the U.S. Many states do not impose sales tax on personal services like those offered by hair salons. For example, states such as California, Florida, Georgia, Illinois, Massachusetts, Michigan, and Texas do not tax hair salon services. New York State also exempts most beautician and barbering services from state sales tax outside of New York City.

However, some states take a different approach, taxing services by default unless specifically exempted. Hawaii, New Mexico, and South Dakota are prominent examples where personal services, including hair care, are subject to sales tax. Hawaii, for instance, imposes a General Excise Tax (GET) on most business activities, including services. New Mexico levies a gross receipts tax on most services, operating much like a sales tax with a state rate of 5.125% plus local rates. South Dakota taxes personal services like haircuts, with a state sales tax rate of 4.2% and varying municipal taxes.

Even in states where services are not taxed, exceptions can apply. For instance, New York City specifically imposes its local sales tax on beautician and barbering services, unlike the rest of New York State. This means a haircut in New York City would be subject to a 4.5% city sales tax, even though it is exempt from the statewide sales tax.

When Hair Salon Products are Taxable

Tangible retail products sold by hair salons are almost universally subject to sales tax. This includes items such as shampoos, conditioners, styling products, hair tools, and brushes. Whether these products are sold individually or as part of a package, they are taxable. For instance, in New York, sales of products like shampoos, conditioners, and hair styling products are subject to sales tax throughout the state.

This taxability applies because these items are considered tangible personal property. The distinction is made between the service provided and the physical product sold. Even in states where hair salon services are not taxed, the sale of retail products within the salon is taxable. For example, California does not tax hair salon services, but if a salon sells hair care products, these sales are subject to sales tax.

Businesses selling these products are required to register for a seller’s permit and collect sales tax on these retail transactions. The general rule is that physical goods sold at a hair salon will incur sales tax.

Factors Influencing Hair Salon Taxation

State and local laws are the primary determinants of the sales tax a customer pays at a hair salon. Sales tax rates and the specific items or services that are taxable can differ significantly not only from state to state but also between cities and counties within the same state. For example, while some states have a single statewide sales tax rate, many allow local governments to impose their own additional sales taxes, leading to varied combined rates depending on the exact location of the salon.

When services and products are sold together in a package, such as a haircut bundled with a styling product, the application of sales tax can become more complex. Some states might require the salon to allocate the total price between the taxable and non-taxable components. For example, if a package includes a non-taxable service and a taxable product, only the portion attributed to the product might be taxed. Other states may tax the entire bundled transaction if any part of it is taxable, especially if the items are sold for a single, non-itemized price.

Salons are responsible for collecting sales tax from the customer at the point of sale and then remitting these collected funds to the appropriate tax authorities. The sales tax is displayed as a separate line item on the customer’s receipt, providing transparency regarding the amount charged. This separation helps customers understand which portion of their payment is for the service or product and which is for the tax.

Before collecting sales tax, hair salons, like other retail businesses, must obtain a sales tax permit or license from their state. This permit authorizes the business to legally collect sales tax from customers and ensures that the collected funds are properly reported and remitted to the state. Operating without the required sales tax permit can lead to penalties.