Which US states tax services by default? Hawaii, New Mexico, South Dakota, West Virginia

In most US sales-tax states, services are taxed only when specifically enumerated by statute or regulation — the default position is that a service is NOT taxable unless the legislature has explicitly added it. Four states reverse this default: Hawaii (general excise tax, broad service taxation by design), New Mexico (gross receipts tax, modeled like Hawaii's GET), South Dakota (broad-based sales tax on services unless exempted), and West Virginia (similar broad treatment). In these states, the presumption is that your service IS taxable unless an explicit exemption applies.

If you're a foreign-owned LLC providing consulting, design, marketing, IT support, or any other service to customers in Hawaii, New Mexico, South Dakota, or West Virginia, and you exceed the state's economic nexus threshold ($100k revenue is common), you're presumptively responsible for collecting the state tax on those service receipts — even if your service wouldn't be taxable in California, New York, or any of the 40+ states that use the enumerated-list model. Hawaii's GET rate is 4% (with surcharges to 4.5% in some areas), New Mexico's GRT is 5.125%, South Dakota is 4.2%, and West Virginia is 6%.

Washington's ESSB 5814 (October 1, 2025) shifted the state significantly toward the 'default taxable' model for service categories — advertising, IT services, custom software, and similar services became retail-taxable. Washington isn't fully in the default-taxable group yet (professional services remain non-retail), but it's the closest non-traditional member of the cluster. Foreign-owned LLCs selling services into Washington post-October 2025 should treat the state more like Hawaii/NM/SD/WV than like California or Texas.

Before assuming your service is non-taxable in a state, identify whether the state uses the enumerated-list model (most states) or the default-taxable model (Hawaii, NM, SD, WV). For default-taxable states, the question shifts from 'is my service on the taxable list?' to 'is there a specific exemption that covers my service?' Hawaii in particular has very few exemptions and aggressively interprets the GET to cover almost all business activity. New Mexico's GRT is similar but has more exemption pathways for certain professional and out-of-state services. Get state-specific guidance before excluding receipts from these four states from your sales-tax compliance.