Is Labor Taxable in Ohio? Services, Exemptions, and Mixed Bills

Whether labor is taxable in Ohio depends on what the labor is being performed on. Labor to build, remodel, or repair real property — your house, a commercial building, anything permanently attached to land — is generally not subject to sales tax on the customer’s invoice. Labor to repair or install tangible personal property, such as a car or an appliance, is taxable as part of the full repair charge. Ohio only taxes services that are specifically listed in its tax code, so anything not on that list falls outside the tax entirely.¹

Labor on Your Home or Building

This is the question most people are really asking. If a contractor builds an addition, replaces your roof, installs new windows, or remodels a kitchen, the labor on your bill is not subject to Ohio sales tax. Neither is the materials line on the invoice you receive. Under Ohio’s construction contract rules, the contractor is treated as the final consumer of the building materials and pays sales tax when buying lumber, drywall, wiring, and fixtures from the supplier.² By the time the customer gets an invoice, the tax has already been paid upstream.

The reasoning is that once materials are permanently incorporated into real property, they become part of the real estate. The customer is paying for a finished improvement, not buying goods at retail. This applies to new construction, additions, and alterations alike.²

A few situations look like construction but are not treated that way:

Carpet installation is always treated as a sale of tangible personal property, never as a construction contract. The full charge, including the installation labor, is taxable.²
Landscaping materials transferred as part of a landscaping service — trees, shrubs, sod, seed, fertilizer, mulch — are treated as sales of tangible personal property rather than construction contracts.²
Business fixtures — equipment that primarily benefits the business operating in the building rather than the building itself — are classified as tangible personal property. Commercial kitchen equipment installed in a restaurant, for example, can be treated as a taxable sale rather than a construction contract.²

Labor on Cars, Appliances, and Other Personal Property

The rule flips when the labor is performed on something movable. When a service provider repairs or installs tangible personal property, the entire bill is taxable, labor included. If a mechanic charges $100 for parts and $100 for labor, sales tax applies to the full $200.³ Breaking the labor out on a separate line does not remove it from the tax. The same rule reaches appliance repair, electronics repair, and similar work on personal property.

The test is whether the item is attached to land or a building. If it is real property, the customer’s labor charge is generally not taxable. If it is tangible personal property, the labor is taxable as part of the repair or installation charge.³

Labor-Heavy Services That Are Also Taxable

Ohio’s statute names several other categories of labor and service work as taxable, some with a dollar threshold that decides when tax starts applying.

Landscaping, Snow Removal, and Janitorial Work

Three service categories become taxable only after the provider hits $5,000 in gross sales from that service in a calendar year:

Landscaping and lawn care, including mowing, trimming, and planting. Once a provider reaches $5,000 in landscaping sales in a year, tax applies to all sales above that amount and to all future sales.⁴
Mechanized snow removal, under the same $5,000 rule.⁴
Building maintenance and janitorial services, also subject to the $5,000 threshold.¹

The threshold is not an annual exemption that resets. Once a provider crosses $5,000, they remain a taxable vendor for that service permanently unless they stop doing business.⁵

Personal Care Services

Ohio taxes skin care, cosmetic application, manicures, pedicures, hair removal, tattoos, body piercing, tanning, and massage.⁶ Haircuts, coloring, and styling are specifically excluded from the definition of taxable personal care services, and services ordered by a licensed physician, nurse practitioner, or chiropractor are also excluded.¹

Other Listed Services

Several additional categories are taxable regardless of sales volume: private investigation and security, satellite broadcasting and certain telecommunications services, storage of tangible personal property, towing of motor vehicles, in-state passenger transportation other than public transit and commercial airlines, and transient lodging of fewer than 30 consecutive days at establishments with five or more sleeping rooms.⁶¹

Cloud software used in a business also falls into a taxable category. Ohio treats it as automatic data processing or electronic information services, which are taxable when provided for business use. If an Ohio company accesses a cloud platform from its Ohio office, the benefit is received in Ohio and the charge is taxable.⁷

Common Labor That Is Not Taxed

Because Ohio only taxes services on its enumerated list, the untaxed list is far longer. Some categories are worth flagging because customers often assume otherwise:

Professional services: legal fees, accounting, medical services, and insurance agency services are not taxable. If a professional transfers a tangible item as part of the service, such as a printed tax return or a binder of documents, that transfer is not separately taxable as long as no separate charge is made for the physical item.⁶
Haircuts, coloring, and styling, even though manicures and tattoos performed in the same salon are taxable.¹
Public transit and commercial airline flights, even though other in-state passenger transportation is taxable.⁶

When a Bill Mixes Taxable and Nontaxable Labor

Some invoices combine taxable and nontaxable work into a single price. Ohio applies a “true object” test: the tax treatment turns on what the customer is really buying. If the true object of the transaction is a taxable service, the whole bundle is taxable. If the true object is nontaxable, the bundle is not taxable. A different rule applies to bundles involving telecommunications or video programming, where the nontaxable portion becomes taxable unless the provider can separately identify that portion from its regular business records.⁸

Splitting the labor and materials onto separate lines does not decide the question on its own. The test looks at the customer’s primary purpose, not the formatting of the invoice.

How the Rate Is Set

When labor is taxable, Ohio’s statewide rate of 5.75% applies, and counties and regional transit authorities can add up to 3% more.⁹ Combined rates vary by county, ranging from around 6.50% up to 8.00% in counties such as Cuyahoga and Franklin.¹⁰ For in-state service providers, Ohio uses origin-based sourcing, so the rate is set by the seller’s location, not yours. A taxable repair shop in a 7.25% county charges 7.25% to every Ohio customer regardless of where the customer lives.¹¹

1
Ohio Legislative Service Commission. Ohio Revised Code 5739.01 – Sales Tax Definitions
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Ohio Legislative Service Commission. Ohio Administrative Code Rule 5703-9-14 – Sales and Use Tax; Construction Contracts
3
Ohio Department of Taxation. Auto Repair Service and Installation of Tangible Personal Property
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Ohio Department of Taxation. Landscaping, Lawn Care, and Snow Removal
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Ohio Department of Taxation. ST 2003-02 – Landscaping, Lawn Care Services, and Snow Removal
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Ohio Department of Taxation. Sales and Use Taxability
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Ohio Department of Taxation. What Services Are Taxable – Automatic Data Processing and Electronic Information Services
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Ohio Legislative Service Commission. Ohio Revised Code 5739.012 – Taxation of Bundled Transactions
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Ohio Department of Taxation. Sales and Use – General Information
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Ohio.gov. Total State and Local Sales Tax Rates, by County
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Ohio Department of Taxation. Sales and Use Tax