Texas Contractor Sales Tax Guide: Every Trade, Every Job Type (2026)
The authoritative 2026 Texas sales tax guide for contractors. Covers plumbers, electricians, HVAC, roofers, painters, and landscapers — residential vs. commercial rules, local rates, and compliant invoice structure.
*Last reviewed: September 2026 by the DoxMitra Tax Compliance Team*
Texas contractors face one of the most clearly structured — yet most commonly misapplied — sales tax frameworks in the United States. The rules hinge almost entirely on a single distinction: residential vs. nonresidential (commercial) work. This guide is the definitive reference for every major trade operating in Texas in 2026.
- ---
The Foundational Texas Contractor Rule
Texas uses a separated contract model for construction and repair contractors. The Texas Comptroller's Publication 94-116 outlines the core principle: contractors can either pay sales tax on materials at purchase (lump-sum jobs) or collect it from the customer (separated/time-and-materials jobs). Regardless of contract type, labor taxability is always determined by property classification.
The master rule:
| Work Type | Property Type | Labor | Materials | |---|---|---|---| | Repair / Remodeling | Residential | Exempt | Taxable | | Repair / Remodeling | Nonresidential (commercial) | Taxable | Taxable | | New construction | Residential | Exempt | Taxable | | New construction | Nonresidential | Exempt | Taxable | | Maintenance contracts | Any | Depends on terms | Taxable |
Official source: Texas Comptroller Publication 94-116
A critical nuance: "Residential" means a structure used primarily as a home. Mixed-use properties (e.g., a building with ground-floor retail and upstairs apartments) must be treated as nonresidential for the entire job unless you can clearly demonstrate which portions are residential and which are commercial.
- ---
Trade-by-Trade Breakdown#### Plumbers
Residential repair: Labor is exempt from sales tax. Materials (pipe, fittings, water heaters, shut-off valves) are taxable at 6.25% state rate plus applicable local rate (up to 8.25% combined maximum).
Commercial repair: Both labor and materials are taxable. The Texas Comptroller treats nonresidential repair labor as a taxable service. Invoice must explicitly state "Nonresidential / Commercial" to document your tax collection correctly.
New construction (residential or commercial): Labor is exempt. Contractor pays materials tax at purchase under a lump-sum contract, or collects it from the customer under a separated contract.
*Recommended:* Texas Plumber Invoice Generator | Texas Plumber Receipt Generator
- ---
Residential repair and remodeling: Labor exempt, materials (wire, conduit, breakers, panels) taxable at 6.25%+local.
Commercial repair: Both labor and materials taxable.
Permit fees: NOT subject to sales tax in Texas. Always list permit fees as a separate line item and mark "Non-taxable — government fee."
Special case — generator installations: Permanently installed residential standby generators are treated as real property improvements. Labor is exempt; the generator unit is taxable as a fixture at retail price.
*Recommended:* Texas Electrician Invoice Generator | Texas Electrician Receipt Generator
- ---
New residential installation:
Residential maintenance/service call:
Commercial installation and maintenance:
Maintenance contracts: Bundled HVAC maintenance agreements that combine labor and parts must be carefully structured. The Texas Comptroller may treat the entire contract as taxable if not properly itemized. Always itemize maintenance contracts by line item.
*Recommended:* Texas HVAC Invoice Generator | Texas HVAC Estimate Generator
- ---
Roofers
Residential new roof and repair: Labor is exempt. Materials (shingles, underlayment, flashing, nails, ice & water shield) are taxable. Under a lump-sum contract, the contractor pays materials tax at purchase. Under a separated contract, the customer is charged tax on materials.
Commercial roofing repair: Both labor and materials are taxable. Large commercial roofing jobs often involve significant material costs — failing to collect labor tax on commercial jobs creates substantial back-tax liability.
Insurance claim jobs: For storm-damage claims, the same rules apply. Bill materials and labor separately on the insurance claim supplement to properly document tax treatment.
*Recommended:* Texas Roofer Invoice Generator
- ---
Residential: Labor exempt. Paint, primer, caulk, and other supplies directly consumed in the job are taxable.
Commercial: Both labor and paint/supplies are taxable.
Note on specialty coatings: Epoxy floor coatings, industrial coatings, and spray foam insulation may be classified differently — consult the Texas Comptroller's guidance for specialty applications.
- ---
Landscaping is classified as a taxable service in Texas — not a real property improvement. This is a critical distinction:
Many landscapers incorrectly apply contractor exemptions that do not apply to their trade.
- ---
Handymen / General Contractors
Handymen must classify each task individually because a single visit may involve both taxable and exempt work:
Invoice each task as a separate line item and apply the correct tax treatment per task.
- ---
The Local Rate Component
Texas state sales tax is 6.25%. Local taxing jurisdictions (cities, counties, transit authorities, special districts) can add up to 2%, creating a maximum combined rate of 8.25%.
| City | 2026 Combined Rate |
Always verify the rate for the specific job-site address using the Texas Comptroller Sales Tax Rate Finder before invoicing.
- ---
What Must Appear on a Compliant Texas Contractor Invoice
Every Texas contractor invoice should contain:
1. Your Business Information: Legal name, physical address, phone, and email 2. Texas Sales Tax Permit Number (required if you collect tax from customers) 3. Job Classification: Explicitly state "Residential" or "Nonresidential (Commercial)" — this determines labor taxability 4. Client Name and Job-Site Address (not just billing address) 5. Date of Service 6. Itemized Line Items: Each service or material as a separate line 7. Labor vs. Materials Separation: Clearly marked 8. Tax Calculation: Show rate and taxable base separately 9. Sequential Invoice Number 10. Payment Terms
- ---
Audit Risk and Record Retention
The Texas Comptroller can audit contractors for up to 4 years after the tax period. Retain:
Failure to properly document the residential vs. commercial classification is the single most common audit finding for Texas contractors.
- ---
Generate Compliant Texas Documents
DoxMitra pre-populates state-specific tax rules for every Texas job type:
Ready to create a professional document?
Our free tools auto-calculate regional taxes and generate perfect PDFs instantly.
Try DoxMitra Free