How does Florida sales tax work when my business sells both products and services?
The general rule in Florida is that tangible personal property (physical products) is taxable and most services are not. But when your business sells both, things get more nuanced depending on how you structure your transactions.
Florida imposes a 6% state sales tax on retail sales of tangible personal property. Orange County adds a 0.5% discretionary surtax, bringing the total to 6.5% for businesses operating in the Orlando area. This applies to physical goods you sell, whether that’s retail products, materials, parts, or supplies.
Most services in Florida are exempt from sales tax. If you’re a consultant, a graphic designer, or a marketing agency, you generally don’t charge sales tax on your service fees. But there are important exceptions. Commercial cleaning services, nonresidential pest control, detective and security services, and commercial real property rentals are among the services Florida does tax. Know which category your services fall into before assuming they’re exempt.
The tricky part comes when a single transaction includes both taxable products and non-taxable services. How you invoice matters a lot here. If you separately state the service charge and the product charge on your invoice, you only collect sales tax on the product portion. If you lump everything together into one price without breaking it out, the Florida Department of Revenue may treat the entire amount as taxable.
For example, say you run a salon and charge for a hair treatment service plus sell hair care products. The service itself isn’t taxable but the products are. If your invoice shows $80 for the treatment and $25 for product, you collect tax on the $25. Bundle it all as “$105 hair care package” with no breakdown and you could be on the hook for tax on the full amount.
This also applies to businesses like IT companies that sell software and consulting, contractors who provide labor and materials, or creative agencies that produce physical deliverables alongside strategy work. The key is separating what’s taxable from what isn’t on every single invoice.
Many businesses handle this by setting up their point-of-sale or accounting software to automatically apply tax to product line items and skip it on service line items. QuickBooks Online lets you configure tax settings at the item level, which makes this much easier if you set it up correctly from the start.
If you’re not sure whether your specific service is taxable, check with the Florida Department of Revenue or a tax professional. Getting it wrong in either direction creates problems. Failing to collect tax when you should means you owe the state out of your own pocket. Collecting tax when you shouldn’t means you’ve overcharged customers and may still owe refunds.
Filing also requires you to report taxable and exempt sales separately. This is where clean bookkeeping becomes essential. If your records don’t distinguish between product revenue and service revenue, filing accurate returns becomes guesswork. Working with bookkeepers in Orlando who understand Florida sales tax rules can prevent errors that compound month after month.
Staying on top of sales tax management is especially important for businesses with mixed revenue streams. The rules aren’t complicated once you understand them, but they require consistent application on every transaction. Set up your systems correctly, break out taxable and non-taxable items on your invoices, and file on time. Getting this right from the beginning is far easier than trying to untangle months of incorrect filings later.
Central Florida's Trusted Bookkeeping Firm
Start Here:
A 30-Minute Consultation
Tell us about your business and what's going on with your books. We'll figure out exactly what you need, and give you a straightforward quote.
More Questions
What's the difference between FIFO, LIFO, and weighted average for inventory valuation?
FIFO records the oldest inventory costs as cost of goods sold first, LIFO records the newest costs first, and weighted average blends all costs together. The method you pick directly affects your reported profit and tax liability.
Read answerHow do I separate bookkeeping when I have rental properties in different LLCs?
Each LLC needs its own bank account, credit card, and set of books. Keeping finances completely separate is what preserves the liability protection you created the LLCs for in the first place.
Read answerWhat bookkeeping does a medical practice need that other small businesses don't?
The biggest difference is how revenue works. Medical practices don't get paid at the point of service. They bill insurance, wait for reimbursement, track contractual adjustments, and manage patient balances, all of which require specialized accounts receivable tracking that most small businesses never deal with.
Read answerWhat's the best way for a landscaping company to track materials and labor per job?
Code every material purchase and labor hour to a specific job so you can compare actual costs to your estimate. Without job-level tracking, you're guessing at which jobs make money and which ones quietly lose it.
Read answerHow do I set up QuickBooks to produce the exact reports my bookkeeper or CPA needs?
The reports are already built into QuickBooks. The real work is setting up your chart of accounts, categorizing transactions consistently, and reconciling monthly so those reports actually reflect what happened in the business.
Read answerHow do I set up inventory tracking in QuickBooks Online without making it overly complicated?
Enable inventory tracking in QBO settings, create inventory-type products with accurate costs and starting quantities, and only track items you actually sell. The biggest mistake is trying to track everything.
Read answer

