Is labor taxable in California?

It depends which kind. CDTFA Publication 108 makes fabrication labor — work done in creating, producing, processing or assembling a product — taxable whether or not you itemize it. Repair labor and installation labor are generally not taxable when you itemize them. Publication 108 names "labor is exempt" as a common misconception, but the opposite over-collection is just as common: itemized repair and installation charges do not belong in the California tax base. CDTFA source data retrieved 2026-08-13.

Is repair labor taxable in California?

No, generally not. Publication 108 states that tax generally does not apply to your itemized charges for repair labor, which it defines as work performed on a product to repair or restore it to its intended use — replacing a broken water pump on a customer's used car, replacing a hard drive in a used computer, restoring a damaged painting, or altering a customer's used suit to fit better. Itemize the labor separately from the parts, because the parts are treated under a different rule.

Is installation labor taxable in California?

No, generally not. CDTFA Regulation 1546 excludes charges for labor or services used in installing or applying the property sold from the measure of the tax, and Publication 108's example is an itemized charge for installing a car stereo in a used car. Publication 108 warns that fabrication performed on site can be hard to distinguish from nontaxable installation, so describe the work accurately on the invoice.

Do I charge California sales tax on the parts used in a repair?

Regulation 1546 decides it with a ten percent test. If the retail value of the parts and materials is more than ten percent of the total charge, or you bill them separately, you are the retailer: segregate the parts' fair retail selling price from the labor on the invoice and in your records, and tax applies to the parts. If the parts are ten percent or less of the total charge and you make no separate charge for them, you are the consumer — your supplier charges you tax and you charge your customer none. "Total charge" means the retail value of the parts plus installation, repair labor and other services including in-plant or on-location handling, disassembly and reassembly, but not pick-up or delivery charges.

Which services are taxable in California?

Where a service or labor charge does get taxed in California: Fabrication labor — creating, producing, processing or assembling a product, and modifying an item or system as part of a sale. Publication 108 makes it taxable "whether you itemize your labor charges or include them in the price of the product", and whether you supply the materials or the customer does; Publication 108's own fabrication examples: manufacturing a new piece of machinery, sizing and engraving a new ring you are selling, altering a customer's cutting die to produce a different item, cutting metal or lumber the customer provided, assembling a customer's new barbecue or new bicycle that came in parts, and altering a new suit to better fit the buyer; Reconditioning or rebuilding where you return a different part than the one brought in — Publication 108 makes you the retailer of the rebuilt part, so tax applies to the entire charge rather than to the parts alone; Services related to a taxable sale, itemized or not: Publication 108 gives 20 hours of training the customer cannot buy the program without, and a "trip charge" made in association with a taxable sale. The full list on this page is drawn from CDTFA Regulation 1501 — Service Enterprises Generally (true-object test), retrieved 2026-08-13.

Do I need to register in California if I only sell services?

Registration follows from nexus, not from what you sell. California's economic nexus test is $500,000. Whether your service receipts count toward that threshold, and whether California still expects a registration when your particular service is not taxable, are separate questions that the state answers per service — confirm both with the California revenue agency before deciding you have no filing obligation.

How do I check whether my specific service is taxable in California?

Start from California's posture — services largely outside the tax — except labor — then check your own service against the official guidance rather than against a general rule. The primary source for this page is CDTFA Regulation 1501 — Service Enterprises Generally (true-object test), linked in full under Sources below, retrieved 2026-08-13. Taxability of services changes by statute more often than tax rates do, so re-check the source date before relying on it for a filing.

Sales Tax on Services in California (2026) — What's Taxable

Updated 2026-08-13

Reviewed by Nexus by State research team using official state tax sources. Last reviewed 2026-08-13.

Guide content last reviewed: 2026-08-13

Whether California taxes a service depends on how the state draws its tax base, not on how professional the work looks — Services largely outside the tax — except labor. Below: the direct answer, which services are taxable, how professional services are treated, and the official CA source behind each rule (retrieved 2026-08-13).

Does California charge sales tax on services?

Services largely outside the tax — except labor

Mostly no, but "is labor taxable?" is the question that actually decides a California invoice, and it has two opposite answers. California sales tax is a tax on retail sales of tangible personal property, not on services, and Regulation 1501 decides mixed transactions by the "true object" of the contract. Labor then splits in two: fabrication labor — creating, producing, processing or assembling a product — is taxable whether or not you itemize it, while repair labor and installation labor are generally not taxable when itemized. So altering a new suit is taxable and altering the customer's used suit is not, on the same rack, by the same tailor. CDTFA Publication 108 and Regulation 1546 as retrieved 2026-08-13.

Where a service or labor charge does get taxed

Fabrication labor — creating, producing, processing or assembling a product, and modifying an item or system as part of a sale. Publication 108 makes it taxable "whether you itemize your labor charges or include them in the price of the product", and whether you supply the materials or the customer does
Publication 108's own fabrication examples: manufacturing a new piece of machinery, sizing and engraving a new ring you are selling, altering a customer's cutting die to produce a different item, cutting metal or lumber the customer provided, assembling a customer's new barbecue or new bicycle that came in parts, and altering a new suit to better fit the buyer
Reconditioning or rebuilding where you return a different part than the one brought in — Publication 108 makes you the retailer of the rebuilt part, so tax applies to the entire charge rather than to the parts alone
Services related to a taxable sale, itemized or not: Publication 108 gives 20 hours of training the customer cannot buy the program without, and a "trip charge" made in association with a taxable sale
Transactions where the true object of the contract is the property produced by the service rather than the service itself — Regulation 1501 gives the purchase of a painting or sculpture as the example
Gross receipts of a transaction that qualifies as a sale of tangible personal property, with no deduction for the production cost or labor that went into it

Where the service or labor charge stays untaxed

Repair labor — "work performed on a product to repair or restore it to its intended use". Publication 108 states that tax generally does not apply to your itemized charges for it, and its examples are replacing a broken water pump on a customer's used car, replacing a hard drive in a used computer, restoring a damaged painting, and altering a customer's used suit to fit better
Installation labor — Regulation 1546 excludes "charges for labor or services used in installing or applying the property sold" from the measure of the tax; Publication 108's example is an itemized charge for installing a car stereo in a used car
Parts furnished with repair work whose retail value is ten percent or less of the total charge, when no separate charge is made for them — Regulation 1546 makes you the consumer of those parts instead of the retailer, so you pay tax to your own supplier rather than charging the customer
Labor or services related to a nontaxable sale, including a sale for resale — Publication 108's example is designing and building a custom computer for a retailer who will resell it, where none of the charges are taxable provided you hold a timely, properly completed resale certificate
Service transactions whose true object is the service per se, even when tangible property is transferred incidentally — Regulation 1501 gives a business consulting firm that furnishes forms and binders as part of its advice as the worked example
Property a service provider merely uses in performing the service: Regulation 1501 treats the provider as the consumer of that property, so the provider pays tax on its own purchases instead of charging the client

Are professional services taxable in California?

Generally no. Regulation 1501 treats service enterprises as consumers rather than retailers of the property they use in performing a service, so an accounting, legal, consulting, or advisory fee is not a California sales-tax charge. The exception is not the profession but the deliverable: if the true object of the engagement turns out to be tangible property the firm produced, that transaction is a taxable sale of property. A professional practice that also repairs or installs goods is on the labor rules below rather than on this one.

How California handles services in practice

California is a property state, not a services state. Regulation 1501 makes service enterprises consumers, not retailers, of the property they use incidentally in providing a service — so a consultancy, an agency, or an advisory practice generally has no California sales tax to charge on its fees. It pays tax when it buys its own supplies instead.

The true-object test is the whole question. The regulation asks whether “the real object sought by the buyer” is “the service per se or the property produced by the service.” Advice delivered in a binder is a service. A sculpture delivered after a commission is property. Once a transaction lands on the property side, tax applies to the whole gross receipt with no deduction for the labor inside it.

Fabrication is taxable, repair and installation are not. Publication 108 opens by naming “labor is exempt” as a misconception, and most summaries stop there — which leaves sellers over-collecting. The full rule has both halves. Fabrication labor, which the publication defines as work done in creating, producing, processing or assembling a product, is taxable however you bill it. Repair labor and installation labor are generally not taxable when you itemize them. The dividing line is usually new versus used: altering a new suit to fit the buyer is fabrication and taxable; altering the customer’s used suit is repair and is not. Publication 108 warns in the same breath that on-site fabrication can be hard to tell from nontaxable installation, so the invoice description matters.

The ten percent rule decides who pays on the parts. Once repair labor is out of the base, California still has to place the parts, and Regulation 1546 does it with a bright-line test. If the retail value of the parts and materials is more than ten percent of the total charge, or if you bill them separately, you are the retailer: you must segregate the parts’ fair retail selling price from the labor on the invoice and in your records, and tax applies to the parts. If the parts are ten percent or less and you make no separate charge for them, you are the consumer: your supplier charges you tax and you charge your customer none. Note what “total charge” includes — Regulation 1546 defines it as the retail value of the parts plus installation charges plus repair labor and other services performed, including in-plant or on-location handling, disassembly and reassembly, but not pick-up or delivery charges.

Returning a different part changes the whole answer. Publication 108’s worked example is a $2,800 transmission rebuild billed as $2,000 of parts and $800 of repair labor. Repair and return the customer’s own transmission and tax applies to the $2,000 of parts only, because repair labor is not taxable. Hand back a different rebuilt transmission and you have sold a rebuilt part, so tax applies to the entire $2,800. If you gave a core-charge credit, subtract it before calculating the tax. That single decision — same unit back or a swap — is worth $800 of tax base on one invoice.

Real property is a different rulebook. Labor performed on buildings and structures runs on California’s construction-contractor rules, which Publication 108 points to rather than covering. Nothing on this page decides a contractor’s liability.

Where these California rules come from

Every statement on this page traces to one of the official sources below. date_retrieved: 2026-08-13.

California nexus note

California sales tax nexus and economic nexus threshold: CDTFA guidance says remote retailers must register and collect California use tax when total combined sales of tangible personal property for delivery into California exceed $500,000 during the preceding or current calendar year. California uses a sales-only threshold — no transaction-count test. AB 147 replaced the earlier $100,000/200-transaction Wayfair threshold with the current $500,000 standard, and related-person sales count toward the threshold. CDTFA marketplace guidance says sellers include both direct California sales and marketplace-facilitated sales when testing the $500,000 threshold, but sellers whose California sales are entirely facilitated by registered marketplace facilitators may not need separate registration for those marketplace transactions. Direct-to-consumer sales outside a marketplace remain the seller's own collection responsibility once California nexus is met. CDTFA source data last retrieved 2026-07-31.

What to do next

Read the full California overview for thresholds, filing frequency, marketplace facilitator rules, and registration links. Use the nexus calculator to check whether you have crossed the threshold. For background on the post-Wayfair economic nexus framework, see the pillar guide.

Worked examples: service businesses in California

The general rule above is easier to apply against a real trade. These national industry guides walk the same question for three service verticals, and each one names the state-by-state differences that decide whether a given invoice is taxable:

Services sales tax in other states

Compare California's services rules with nearby and similar states' services sales tax guides:

Frequently asked questions

Does California charge sales tax on services in 2026?: Mostly no, but "is labor taxable?" is the question that actually decides a California invoice, and it has two opposite answers. California sales tax is a tax on retail sales of tangible personal property, not on services, and Regulation 1501 decides mixed transactions by the "true object" of the contract. Labor then splits in two: fabrication labor — creating, producing, processing or assembling a product — is taxable whether or not you itemize it, while repair labor and installation labor are generally not taxable when itemized. So altering a new suit is taxable and altering the customer's used suit is not, on the same rack, by the same tailor. CDTFA Publication 108 and Regulation 1546 as retrieved 2026-08-13.
Is labor taxable in California?: It depends which kind. CDTFA Publication 108 makes fabrication labor — work done in creating, producing, processing or assembling a product — taxable whether or not you itemize it. Repair labor and installation labor are generally not taxable when you itemize them. Publication 108 names "labor is exempt" as a common misconception, but the opposite over-collection is just as common: itemized repair and installation charges do not belong in the California tax base. CDTFA source data retrieved 2026-08-13.
Is repair labor taxable in California?: No, generally not. Publication 108 states that tax generally does not apply to your itemized charges for repair labor, which it defines as work performed on a product to repair or restore it to its intended use — replacing a broken water pump on a customer's used car, replacing a hard drive in a used computer, restoring a damaged painting, or altering a customer's used suit to fit better. Itemize the labor separately from the parts, because the parts are treated under a different rule.
Is installation labor taxable in California?: No, generally not. CDTFA Regulation 1546 excludes charges for labor or services used in installing or applying the property sold from the measure of the tax, and Publication 108's example is an itemized charge for installing a car stereo in a used car. Publication 108 warns that fabrication performed on site can be hard to distinguish from nontaxable installation, so describe the work accurately on the invoice.
Do I charge California sales tax on the parts used in a repair?: Regulation 1546 decides it with a ten percent test. If the retail value of the parts and materials is more than ten percent of the total charge, or you bill them separately, you are the retailer: segregate the parts' fair retail selling price from the labor on the invoice and in your records, and tax applies to the parts. If the parts are ten percent or less of the total charge and you make no separate charge for them, you are the consumer — your supplier charges you tax and you charge your customer none. "Total charge" means the retail value of the parts plus installation, repair labor and other services including in-plant or on-location handling, disassembly and reassembly, but not pick-up or delivery charges.
Why was my $2,800 transmission rebuild taxed on the whole amount?: Because a different part came back. Publication 108's worked example bills a $2,800 rebuild as $2,000 of parts and $800 of repair labor. If the shop repairs and returns your own transmission, tax applies to the $2,000 of parts only, because repair labor is not taxable. If the shop hands back a different rebuilt transmission, it has sold you a rebuilt part and tax applies to the entire $2,800. A core-charge credit is subtracted before the tax is calculated.
Which services are taxable in California?: Where a service or labor charge does get taxed in California: Fabrication labor — creating, producing, processing or assembling a product, and modifying an item or system as part of a sale. Publication 108 makes it taxable "whether you itemize your labor charges or include them in the price of the product", and whether you supply the materials or the customer does; Publication 108's own fabrication examples: manufacturing a new piece of machinery, sizing and engraving a new ring you are selling, altering a customer's cutting die to produce a different item, cutting metal or lumber the customer provided, assembling a customer's new barbecue or new bicycle that came in parts, and altering a new suit to better fit the buyer; Reconditioning or rebuilding where you return a different part than the one brought in — Publication 108 makes you the retailer of the rebuilt part, so tax applies to the entire charge rather than to the parts alone; Services related to a taxable sale, itemized or not: Publication 108 gives 20 hours of training the customer cannot buy the program without, and a "trip charge" made in association with a taxable sale. The full list on this page is drawn from CDTFA Regulation 1501 — Service Enterprises Generally (true-object test), retrieved 2026-08-13.
Are professional services taxable in California?: Generally no. Regulation 1501 treats service enterprises as consumers rather than retailers of the property they use in performing a service, so an accounting, legal, consulting, or advisory fee is not a California sales-tax charge. The exception is not the profession but the deliverable: if the true object of the engagement turns out to be tangible property the firm produced, that transaction is a taxable sale of property. A professional practice that also repairs or installs goods is on the labor rules below rather than on this one.
Do I need to register in California if I only sell services?: Registration follows from nexus, not from what you sell. California's economic nexus test is $500,000. Whether your service receipts count toward that threshold, and whether California still expects a registration when your particular service is not taxable, are separate questions that the state answers per service — confirm both with the California revenue agency before deciding you have no filing obligation.
How do I check whether my specific service is taxable in California?: Start from California's posture — services largely outside the tax — except labor — then check your own service against the official guidance rather than against a general rule. The primary source for this page is CDTFA Regulation 1501 — Service Enterprises Generally (true-object test), linked in full under Sources below, retrieved 2026-08-13. Taxability of services changes by statute more often than tax rates do, so re-check the source date before relying on it for a filing.

Sources

date_retrieved: 2026-07-31

Page-specific sources — date_retrieved: 2026-08-13