Think about a hair salon. A customer comes in for a haircut and picks up a bottle of shampoo on the way out. That single ticket has two different items with two different tax treatments. The haircut is a service, and in Massachusetts most services aren’t subject to sales tax. The shampoo is a tangible product, and that gets taxed at 6.25 percent.

Massachusetts generally doesn’t tax services. You can provide a haircut, a consultation, a cleaning, a massage, or most other services without charging sales tax. But the moment you sell a physical product, the 6.25 percent applies. If your business does both, you need to separate them at the point of sale and in your books.

Your POS system needs to distinguish between taxable and non-taxable items. When you ring up that haircut and shampoo together, the system should apply sales tax only to the shampoo. Most modern systems handle this if you set up the items correctly, flagging products as taxable and services as non-taxable.

The same separation needs to happen in your bookkeeping. You need to track taxable sales and non-taxable sales separately so you know exactly what sales tax you collected and what you owe when it’s time to file. If everything is lumped together, you’re either overpaying sales tax or underpaying it. Our bookkeeping and tax services help businesses get this set up correctly in QuickBooks Online from the start so the reports you need for filing are already built.

This comes up in a lot of service businesses. Salons and spas sell styling products and skincare. Auto repair shops sell parts along with labor. Even a consultant who sells a physical workbook alongside their services needs to think about this. The key is making sure your systems and your books reflect the distinction.

Sales tax rules can vary by state and sometimes by the specific type of service, so if you’re selling across state lines or have questions about whether your particular services are taxable, reach out for a consultation on your situation.