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Motor Vehicle Repairs

September 2003

There's no tax on labor to repair a motor vehicle. This means that charges for labor to replace a tire, battery, muffler, or shock absorber on a car, truck, trailer, or any other motor vehicle are not subject to sales tax.

A repair shop that charges a single price for parts and labor should not collect sales tax from the customer, but instead should pay sales tax to its supplier when buying parts. For example, a shop performs an oil change for the lump-sum price of $19.95. The shop should pay tax when buying oil, filters, and other items used in the repair, and should not collect tax on any portion of the $19.95 charge to the customer. If a shop erroneously charges tax, it must remit the tax collected in error and must still pay tax on items used in the repair.

On the other hand, a shop that charges separately for labor and parts must collect sales tax on the parts. In this situation, the shop can issue a resale certificate in lieu of paying tax when buying the parts. No sales tax is due on the charge for labor. For example, if a shop does an oil change for $10.00 labor and $9.95 materials, it can buy the oil and filter tax-free and must collect tax on the separately stated charge for materials. A repairman that separately states a charge for consumables used directly in repairing motor vehicles may collect tax on the charge for the consumables and buy these materials tax-free. Qualifying consumables do not include tools, electricity, or office supplies.

A shop that performs services under an extended warranty must collect sales tax on the separately stated parts. No sales tax is due on parts furnished by a manufacturer to repair a motor vehicle under a manufacturer's warranty.

Labor to Remodel Motor Vehicles is Taxable

All charges for both parts and labor to remodel a motor vehicle are taxable. For sales tax purposes, "remodel" means to modify the style, shape, or form of a motor vehicle. Remodeling includes such things as installing body lift kits, converting a van into a camper, and increasing vehicle performance. Remodeling also includes removing the back seat or modifying the trunk to install a car sound system.

Sale and Installation of Accessories

Sales tax is due on all parts and labor for the sale and installation of accessories such as car stereos, amplifiers, and alarm systems.

For more information, see Rule 3.290 - Motor Vehicle Repair and Maintenance; Accessories and Equipment Added to Motor Vehicles; Moveable Specialized Equipment. Tax rules are also available on the Index to Rules by Subject Matter page of our Web site.

94-113
(09/03)

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