What Services Are Exempt From Sales Tax in Ohio?

In Ohio, a service is exempt from sales tax unless it appears on a specific list written into the Ohio Revised Code. That one rule answers most of what people want to know about what services are exempt from sales tax in Ohio: professional advice, medical care, hair cuts from a licensed barber or cosmetologist, construction labor on real property, public transit, freight, and purchases by qualifying nonprofits all fall outside the taxable list and carry no sales tax. The state rate is 5.75%, with local add-ons bringing the combined rate as high as 8.75%, but none of that matters if the service you’re buying or selling isn’t on the statutory list to begin with.¹

Ohio Taxes Only Listed Services

ORC 5739.01(B)(3) enumerates the service categories subject to sales tax. If a transaction doesn’t fit one of those categories, it isn’t a taxable sale.² This is the reverse of how Ohio treats tangible goods, where almost everything is taxable unless specifically exempted. For services, the presumption runs the other way: not on the list, not taxed.

So the practical first step for any Ohio buyer or service provider is to compare the service against the taxable list. If it isn’t there, you’re done.

The Taxable List (Everything Else Is Exempt)

The categories Ohio does tax under ORC 5739.01(B)(3) are:²

Repair of tangible personal property
Installation of tangible personal property
Motor vehicle washing, waxing, polishing, and painting
Laundry and dry cleaning
Data processing, computer services, and electronic information services (business use)
Telecommunications, including prepaid calling and wireless
Landscaping and lawn care (providers with under $5,000 in annual sales of these services are excluded)
Private investigation and security
Building maintenance and janitorial services
Exterminating services
Physical fitness facility services
Recreation and sports club services
Satellite broadcasting
Personal care services such as manicures, pedicures, tanning, tattooing, body piercing, massage, and skin care (hair care by a licensed barber or cosmetologist is specifically excluded)
Snow removal
Towing

Anything not on that list is exempt. The sections below walk through the most common exempt categories and the places where the line gets tricky.

Professional and Business Services

Legal work, accounting, tax preparation, insurance, management consulting, architecture, engineering, financial advising, and marketing strategy are all exempt. None of them appear in ORC 5739.01(B)(3), and the statute reinforces the point by stating that data processing and computer services do not include “personal or professional services.”² Even when the professional hands over a written report, the transaction stays exempt because the paper is incidental to the advice.

Staffing used to be the big exception here. It isn’t anymore. Ohio repealed the sales tax on employment services and employment placement services effective October 1, 2021, so temporary staffing and recruiting fees are no longer taxable.³

Medical and Health Care Services

Fees charged by physicians, dentists, nurses, physical therapists, and other licensed practitioners for examinations, surgeries, and therapy sessions are exempt, because health care services simply aren’t among the taxable categories.²

That exemption covers the professional service, not every item a patient takes home. Prescription drugs, durable medical equipment, and prosthetic devices have their own rules, and many qualify for separate exemptions when sold on a licensed practitioner’s prescription.⁴ Buy the same equipment off a retail shelf without a prescription and you’ll pay sales tax on it.

Hair Care at Licensed Salons

Personal care is one of the taxable categories, but Ohio law carves out a specific exception: hair care provided by a licensed barber or cosmetologist is not taxable.² Haircuts, coloring, and styling by a licensed professional are exempt.

Other services in the same salon aren’t. Manicures, pedicures, tanning, massage, tattooing, body piercing, and skin care treatments are taxable even when provided alongside hair work. Salons that offer both need to split the charges on the invoice: the hair portion stays exempt, the nail or skin portion gets sales tax.

Construction Labor on Real Property

Labor to build a home, pour a foundation, or install a permanent fixture is not a taxable service. Ohio treats a construction contract as something different from a retail sale, because the materials get incorporated into the real property and lose their identity as separate goods.²

The trade-off: the contractor is treated as the final consumer of the lumber, concrete, wiring, and other supplies, so the contractor pays sales tax when buying those materials.⁵ That cost ends up in the bid, so the property owner pays it indirectly even though no sales tax line appears on the invoice.

A few things break the pattern. Carpeting sales and installation are always treated as retail sales, not construction contracts, even when the carpet is permanently attached. Landscaping and lawn care are excluded from the construction classification and taxed as a listed service. And repair or installation of standalone personal property, like a portable appliance, falls under the taxable repair and installation categories.²

Digital Services for Personal Use

Data processing, computer services, and electronic information services are taxable only when purchased for business use. The same type of digital subscription bought for personal use is exempt.² A home user’s cloud storage plan sits on the exempt side; the same vendor’s product sold to a company doesn’t.

Transactions between members of an affiliated group are also exempt, so a parent company providing data processing to a subsidiary (or the other way around) doesn’t trigger sales tax, as long as one entity owns more than 50% of the other’s voting stock.²

The harder judgment call is distinguishing a taxable digital service from an exempt professional service delivered through a screen. An attorney emailing you a PDF opinion is providing a professional service. A subscription to an online legal research database is a taxable electronic information service. The distinction turns on whether significant human effort went into creating something customized for you, or whether you’re accessing a standardized product.

Transportation and Freight

Public transit fares and standalone freight shipping aren’t on the taxable list, so they’re exempt. Bus, rail, and other public transit services carry no sales tax for riders. Freight carriers moving goods independently of a retail sale don’t charge sales tax on the transportation.

Delivery charges tied to a retail sale are different. If you buy furniture and the store adds a delivery fee, that charge generally shares the tax treatment of the item being delivered. A pure transportation service that stands on its own stays exempt; one folded into the price of a taxable product doesn’t.

Towing is the outlier. It sits on the taxable services list, so a tow truck call includes sales tax.

Nonprofit and Government Purchases

ORC 5739.02(B)(12) exempts purchases made by churches, 501(c)(3) organizations, and other nonprofits operated exclusively for charitable purposes in Ohio. The exemption covers both goods and services the organization buys. Ohio defines “charitable purposes” to include relieving poverty, improving health, running homes for the aged, operating noncommercial educational broadcasting stations, promoting education through accredited institutions, and producing community arts performances, among others.⁶

The exemption has a limit. It doesn’t cover purchases a nonprofit makes to operate a trade or business. A charity running a gift shop pays sales tax on the inventory it buys for resale through that shop. On the federal side, nonprofits that regularly carry on a trade or business unrelated to their exempt purpose may owe unrelated business income tax, which is separate from state sales tax but worth knowing about.⁷

Fees charged by state and local government entities for government services are generally outside the sales tax altogether.

When Services Are Bundled with Goods

Many real transactions mix a service with a physical item, and Ohio resolves these with the “true object test”: the taxability of the whole transaction depends on what the buyer primarily wanted.⁸

Hire a graphic designer who hands over a logo along with a printed proof, and the true object is the design service. Graphic design isn’t on the taxable list, so the whole transaction is exempt. Order a custom-printed banner and get a short design consultation thrown in, and the true object is the banner. The whole thing is taxable.

The same test applies in the digital space. If a consultant uses data analytics software during an engagement, the true object is the professional consulting, not the software output, and the transaction avoids tax.⁸ Getting the classification wrong in either direction creates audit exposure, so documenting what the customer is actually paying for matters when a business regularly sells mixed packages.

1
Ohio Department of Taxation. Sales and Use – General Information
2
Ohio Legislative Service Commission. Ohio Revised Code Section 5739.01
3
Ohio Department of Taxation. Sales and Use Tax – Repeal of Employment Service and Employment Placement Service
4
Ohio Department of Taxation. ST 2010-03 – Sales and Use Tax: Drugs, Durable Medical Equipment, Mobility Enhancing Equipment, and Prosthetic Devices
5
Ohio Legislative Service Commission. Ohio Administrative Code Rule 5703-9-14
6
Ohio Legislative Service Commission. Ohio Code 5739.02 – Levy of Sales Tax – Purpose – Rate – Exemptions
7
Internal Revenue Service. Unrelated Business Income Defined
8
Ohio Department of Taxation. ST 2010-02 – Sales and Use Tax: Bundled Transactions