Locksmith Tax Guide 2026 — Which States Tax Your Work and How Much
Disclaimer
This guide is for informational purposes only and does not constitute tax advice. Sales tax laws change frequently and vary by city and county within each state. Consult a licensed CPA or tax professional for advice specific to your business. ServiceHQ calculates sales tax automatically based on job type and ZIP code but is not responsible for tax compliance decisions.
Sales tax for locksmiths is one of the most confusing and most frequently audited areas of running a locksmith business. Unlike a retail store that sells products, locksmiths provide both labor and materials on the same job — and most states tax these two things differently. This guide covers every state's rules for locksmith sales tax in 2026, explains the three types of locksmith work and how each is taxed, and shows you how to calculate the right tax on every job automatically.
What's in this guide
- The three types of locksmith work
- The lump sum rule
- The trip charge rule
- States with no sales tax
- States where only parts are taxable
- States where labor and parts are both taxable
- States to watch most carefully
- How to calculate tax automatically
The Three Types of Locksmith Work — Tax Rules Are Different for Each
Type 1 — Fabrication labor
Fabrication means you created something new. The most common example is key duplication. Another example is cutting a key by code when no original key exists. Fabrication is taxable in almost every state because you produced a physical product. When you charge a customer for key duplication the entire charge is generally taxable regardless of which state you are in.
Type 2 — Repair labor
Repair means you worked on something that already exists. Opening a locked door, rekeying an existing lock, repairing a lock mechanism, or replacing a broken lock on a car. Repair labor is taxable in some states and exempt in others. Most states that exempt repair labor still tax the parts and materials used in the repair. If you rekey a lock and install a new cylinder, the labor may be exempt but the cost of the cylinder is taxable.
Type 3 — Installation on real property
Installing new locks on a house, commercial building, or apartment is considered an improvement to real property in most states. Real property improvements are typically exempt from sales tax because you are considered the consumer of the materials. This is one of the most valuable exemptions for locksmiths who do commercial work.
The Lump Sum Rule — Critical for California and Similar States
Several states including California use a lump sum rule that can eliminate sales tax on an entire job if the materials are a small portion of the total charge. If you charge a single lump sum and the cost of materials is less than 10% of the total charge, no sales tax applies to the entire job.
Example: You charge $150 for a residential lockout. You used $10 in parts — 6.7% of the total charge which is under the 10% threshold. Under California's lump sum rule no sales tax applies to this job at all. If the same job had $20 in parts — 13.3% of the total — the rule does not apply and sales tax is owed on the $20 in parts.
The Trip Charge Rule
If the job involves only labor with no materials transferred to the customer, the trip charge is generally not taxable. If the job involves taxable materials, the trip charge becomes partially taxable — calculated proportionally based on what percentage of the job is taxable. In states like Texas where labor and parts are both taxable, your entire trip charge is taxable.
State by State Breakdown
States with no sales tax
Montana, Oregon, New Hampshire, Delaware — No sales tax on any locksmith work.
Alaska — No state sales tax. Some local jurisdictions have local sales taxes up to 7.5%. Check your specific city and borough.
States where only parts are taxable — labor is exempt
California — Parts taxable, repair labor exempt, key duplication taxable as fabrication, lump sum rule applies, real property installation exempt. State rate 7.25% plus local.
Florida — Repair labor exempt, parts taxable, fabrication taxable. State rate 6% plus local.
Georgia — Labor exempt, parts taxable. State rate 4% plus local.
Illinois — Labor generally exempt, parts taxable. State rate 6.25% plus local.
Arizona — Repair labor exempt under Transaction Privilege Tax, parts taxable. State rate 5.6% plus local.
Colorado — Repair labor exempt, parts taxable. State rate 2.9% plus local.
Missouri — Labor exempt, parts taxable. State rate 4.225% plus local.
Indiana — 7% flat rate, no local tax. Labor exempt, parts taxable.
Wisconsin — Repair labor exempt, parts taxable. State rate 5% plus local.
Alabama — Labor exempt, parts taxable. State rate 4% plus local. Highest average combined rate in US up to 13.5%.
Louisiana — Labor exempt, parts taxable. State rate 5% plus local.
Arkansas — Repair labor generally exempt, parts taxable. State rate 6.5% plus local.
Oklahoma — Labor exempt, parts taxable. State rate 4.5% plus local.
Nebraska — Labor exempt, parts taxable. State rate 5.5% plus local.
Kansas — Labor generally exempt but installation can be taxable, parts taxable. State rate 6.5% plus local.
South Carolina — Labor exempt, parts taxable. State rate 6% plus local.
Tennessee — Labor exempt, parts and fabrication taxable. State rate 7% plus local.
Nevada — Labor exempt, parts taxable. State rate 6.85% plus local.
Idaho — Labor exempt, parts taxable. 6% flat rate.
Wyoming — Labor exempt, parts taxable. State rate 4% plus local.
North Dakota — Labor exempt, parts taxable. State rate 5% plus local.
New York — Services generally exempt, parts taxable if separately stated. State rate 4% plus local.
New Jersey — Labor exempt, parts taxable. 6.625% flat rate.
Virginia — Services generally exempt, parts taxable. State rate 5.3% plus local.
Massachusetts — Labor exempt, parts taxable if sold separately. 6.25% flat rate.
Ohio — Repair services generally exempt, parts taxable. State rate 5.75% plus local.
Michigan — Labor exempt, parts taxable. 6% flat rate.
Minnesota — Repair labor exempt, parts taxable. State rate 6.875% plus local.
Iowa — Labor generally exempt, parts taxable. State rate 6% flat.
Maryland — Labor exempt, parts taxable. 6% flat rate.
Vermont — Services generally exempt with exceptions, parts taxable. State rate 6% plus local.
Rhode Island — Labor generally exempt, parts taxable. State rate 7% flat.
States where both labor and parts are taxable
Texas — Labor and parts both taxable. Real property installation exempt. Trip charge taxable if job is taxable. State rate 6.25% plus up to 2% local. High audit risk state.
North Carolina — Repair, maintenance, and installation all taxable including real property. State rate 4.75% plus local.
Washington — New law effective October 1, 2025. Labor is now also taxable. State rate 6.5% plus up to 3.9% local. Many locksmiths in Washington are unaware of this change.
Hawaii — General Excise Tax applies to all gross revenue. Rate 4% plus 0.5% county surcharge.
New Mexico — Gross Receipts Tax on all business receipts. Rate 5% state plus local.
South Dakota — Most services taxable. Rate reduced to 4.2% through 2027.
West Virginia — Services to tangible personal property taxable. State rate 6% plus local.
Kentucky — Services to tangible personal property taxable. 6% flat rate.
Mississippi — 7% flat rate — highest in US. All repair services taxable.
Pennsylvania — Repair and maintenance of tangible personal property taxable. State rate 6% plus local.
Utah — Security services including locksmiths specifically named as taxable. State rate 4.85% plus local.
Connecticut — Services to tangible personal property taxable. 6.35% flat rate.
Maine — Services to tangible personal property taxable. 5.5% flat rate.
Washington DC — Rate increases to 7% October 1, 2026. Services to tangible personal property taxable.
The Four States to Watch Most Carefully
Texas — everything is taxable and audits are common
Texas taxes labor, parts, and trip charges on locksmith repair work. The combined rate can reach 8.25% in Houston and Dallas. Texas is one of the most aggressive states for sales tax audits on service businesses. Real property installation is exempt but you need to be able to document that the work qualifies.
California — the lump sum rule changes everything
California has the most complex locksmith tax rules of any state. Key duplication is taxable as fabrication. Repair labor is exempt. Real property installation is exempt. And the lump sum rule can eliminate tax on an entire job if materials are under 10% of the total charge. ServiceHQ calculates California tax automatically based on job type.
Washington — new law October 2025
Washington state changed its sales tax rules for service businesses effective October 1, 2025. Labor on repair services to tangible personal property including locksmith work is now taxable. Previously only parts were taxable in Washington. The combined rate in Seattle can reach 10.4%. Many locksmiths operating in Washington are still charging the old rate. This is a significant audit risk.
North Carolina — everything including real property
North Carolina is unusual in that it taxes repair, maintenance, and installation including installation on real property. Most states exempt real property installation but North Carolina does not. If you are installing locks on a house or commercial building in North Carolina the entire job is taxable.
How to Calculate Tax on Every Locksmith Job Automatically
Calculating the right sales tax on a locksmith job requires knowing the job type, the state, and whether the lump sum rule applies. ServiceHQ calculates sales tax automatically on every job. When a partner tech completes a job they select the job type. ServiceHQ looks up the state from the job ZIP code, applies the correct tax rule for that state and job type, calculates the tax amount, and adds it as a line item on the payment link and invoice. For California jobs ServiceHQ applies the lump sum rule automatically.
ServiceHQ calculates sales tax automatically on every job based on job type and ZIP code for all 50 states. No manual lookup required. Every invoice shows the correct tax amount as a line item.
Common Locksmith Tax Mistakes to Avoid
- Charging a flat tax rate on every job regardless of type — fabrication, repair labor, and real property installation are taxed differently.
- Not charging tax in Texas and Washington — Texas taxes labor and parts. Washington changed its law in October 2025 to now also tax labor.
- Charging tax on real property installation in exempt states — installing locks on a house or commercial building is exempt from sales tax in most states.
- Ignoring the lump sum rule in California — if parts are under 10% of your job total, California's rule may eliminate tax on the entire job.
- Not keeping records of taxable vs non-taxable jobs — during an audit the burden of proof is on you.
- Not remitting collected tax to the state — collecting sales tax and not remitting it is a serious legal issue.
Stop calculating tax manually on every job
ServiceHQ calculates the correct sales tax on every locksmith job automatically — based on job type, ZIP code, and state rules for all 50 states. Every invoice shows the tax as a line item. Every job record stores the calculation permanently.
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