Should our HOA be paying the sales tax on vendor invoices and utility bills?

By OurHOA · General information · Revised November 8, 2026

When an HOA owes sales tax on vendor invoices and utility bills in Texas, Florida and Colorado, how to spot a wrong charge, and how to get a refund.

Part of the HOA board handbook: treasurer and money.

The direct answer

Yes on some invoices, no on others, and being a nonprofit rarely changes that. In Texas, the Comptroller limits the purchase exemption to associations exempt under IRC 501(c)(3), (4), (8), (10) or (19). A typical HOA that files Form 1120-H is not on that list, so don't hand a vendor an exemption certificate on the strength of nonprofit status alone. In Florida and Colorado, ask your CPA before claiming one. The useful question is what the association bought. Texas taxes a mowing bill and leaves roof repair labor alone. Florida's list of taxed services names neither. Colorado taxes the clubhouse electric meter, and Texas treats the same meter as residential. A billing setup that is wrong can repeat for years, in either direction. This guide is education, not tax or legal advice. Rules vary by state and city, and your governing documents decide who owns and uses each area, which can affect the answer. For money coming in, see our guide on collecting sales tax on amenity fees.

Audit one year of bills

Pull 12 months of paid invoices and build a sheet with one row per vendor or utility account. Use these columns: - What the association bought - Tax charged, in dollars and as a rate - Whether labor and materials are priced separately - What the state rule below says - Match, overcharge, or tax missing Week 1, build the sheet. Week 2, send questions to vendors and the utility. Week 3, take anything unclear to the CPA. Then report at the next meeting.

Texas: routine services are taxed, repair labor is not

Tax Code 151.0048 lists these as taxable real property services, with no exception for existing homes: landscaping, lawn and tree care, garbage collection, building or grounds cleaning, janitorial work, structural pest control, and surveying. Security services that require a state license, such as alarm monitoring, are taxable too under 151.0075. Expect 6.25% state tax plus up to 2% local on those bills. A tax line on the landscaper's invoice is normal, unless the operator works alone with no employees and has $5,000 or less in receipts over the last four quarters. Repair is where boards overpay. Labor to repair or remodel residential real property is not taxable. Comptroller Rule 3.357 defines residential property to include "homeowners association-owned and apartment-owned swimming pools, laundry rooms, and other common areas for tenants' use," but not a "commercial area open to nonresidents." So repair labor at a residents-only clubhouse should carry no tax. A clubhouse that sells memberships to the public may. How the contractor bills matters. Under a lump-sum contract, the contractor pays tax on materials when buying them and charges you no tax. Under a separated contract, the contractor charges tax on materials and none on labor. Tax on the whole amount fits neither, so ask. If taxable work is more than 5% of a single combined charge, the Comptroller presumes the whole charge is taxable unless documents show otherwise. Ask the landscaper to price a new sprinkler installation or retaining wall separately, because those are not landscaping under Rule 3.356. The Comptroller's taxable services list does not name pool service, so ask a pool company that charges tax what the tax covers.

Florida: a short list of taxed services

Section 212.05(1)(i) taxes three groups of services at 6%, plus any county surtax: detective and protection services, nonresidential cleaning, and nonresidential building pest control. Landscaping and pool service are not on that list. Rule 12A-1.0091 says cleaning detached homes, residential condominiums and cooperatives, and "the common areas of those residential facilities" is not taxable. Neither is pressure washing building exteriors and parking lots. If your janitorial company charges 6% to clean a residents-only clubhouse, raise it with the vendor. Security is taxed even at homes. Rule 12A-1.0092 taxes patrols and gate guards for "all persons, businesses, residences, or nonresidential properties." The trap for gated communities: the same rule says homeowner associations that charge members for security "must also charge, collect, and remit tax." It treats a charge as made when security is noted on an invoice or included by agreement in a package of services. If your dues statement has a security line, or your documents make guard service part of the dues package, ask your CPA whether the association needs to register. Real property contractors are the consumers of their materials under Rule 12A-1.051(4), so they pay the tax themselves unless the contract is a retail sale plus installation. A tax line on a lump-sum roofing bill deserves a phone call.

Colorado: goods yes, labor no, then check the city

The Department of Revenue says generally, labor and services are not subject to sales tax. The state tax of 2.9% falls on goods, and labor stays out only if it can be separated and is stated separately on the invoice. Lump parts and labor into one price and the whole sale is taxable, so ask repair vendors to list parts on their own lines. Construction runs differently. On a lump-sum contract, the contractor pays tax on building materials and adds none. On a time-and-materials contract, the contractor collects tax on the marked-up materials and none on labor. Home-rule cities write their own rules, and the state's guidance does not cover them. If you sit in one, call the city's sales tax office about your largest contracts and keep a note of the answer.

Check the utility bills

Texas. Rule 3.295 treats use "for common areas" of a homeowners' association as residential, "such as use for a recreation room, swimming pool, security gate, or for street lights and exterior lighting in a walkway or parking area." Residential gas and electricity are exempt from state sales tax. A city or a fire or crime control district may still tax it, so a small local line can be correct. If a meter serves both exempt and taxable use, the predominant use decides for that meter, and the rule requires a study on file for those claims. Ask the provider what it needs to reclassify a meter. Florida. Rule 12A-1.053 exempts electricity for residential households and for common areas of apartment houses, cooperatives, condominiums and "other residential facilities." It does not name single-family HOAs, so ask the utility how it classifies your meters and have your CPA review before you sign anything. Any nonexempt use on a meter makes the entire sale taxable at 4.35%, and section 212.08(7)(j) calls for a separate meter. Colorado goes the other way. The Department says the residential exemptions do not apply to common areas such as swimming pools, fitness centers and clubhouses, so tax on those meters is expected. A meter that serves only residences but bills at a commercial rate is different: file certificate DR 1260 with the utility. A meter serving both needs a split by square footage or measured use.

A worked Texas example

Take a made-up 80-home association at 8.25% combined tax. It paid: - Landscaping, $36,000: $2,970 in tax. Correct. - Clubhouse roof repair, $12,000, billed as $7,000 labor and $5,000 materials, with tax on all of it: $990 charged. Tax on materials alone is $412.50. Overcharge: $577.50. - Three common area electric meters, $9,600, with 6.25% state tax on each bill: $600 a year. If the city does not tax residential use, that is up to $2,400 to recover across a four-year window. Close to $3,000 would come back, enough to matter for a small reserve budget.

Getting the money back

Texas: a purchaser without a permit must first ask the seller. The seller either refunds you or signs Form 00-985, Assignment of Right to Refund, one per vendor. You then file the online claim or Form 00-957, stating each reason and the period. "Tax paid in error" alone is not enough. The window is generally four years from when the tax was due. Florida: Rule 12A-1.014(4) says a purchaser must get the refund from the dealer, not the Department. The dealer can take a credit within three years after the tax was paid, so older charges may be gone. Colorado: ask the vendor, and if it refuses, file DR 0137B with your invoices and the vendor's written explanation. The form states no filing deadline for buyers, so ask the Department and don't wait. Wording for the vendor: "Our association was charged $990 in sales tax on invoice 4471. We believe tax applies only to the $5,000 in materials because the labor was repair to residential common area under Comptroller Rule 3.357. Please issue a corrected invoice and a refund of $577.50, or send a signed Form 00-985 by [date]." A motion: "Moved that the treasurer review all vendor and utility sales tax charged in the past 12 months, seek refunds of any overcharge with the CPA's review, and report results at the next regular meeting."

Mistakes to avoid

Forgetting tax nobody charged. If an online seller or an out-of-state vendor charges no tax on a taxable item, the association may owe use tax. Texas uses Form 01-156, due January 20 of the next year if you owe under $1,000. Florida non-dealers use Form DR-15MO, due quarterly. Colorado businesses use DR 0252, due January 20 if the year's total is under $300. Stopping at the refund. Fix the account too, or the charge returns next month. Signing an exemption form you can't support. Texas assesses tax, penalty and interest on a utility refund taken without a valid study when the exemption isn't proved. For new contracts, add a tax line to the checks in our guide on vendor contract red flags.

Sources

These guides are general education for HOA boards and residents, not legal, tax, or financial advice. Rules vary by state and by your community's governing documents - check with a professional for your situation.

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