Automotive repair shop sales tax audit – Is your automotive repair shop undergoing a sales tax audit? Make sure to pay special attention to the differences between consumables, repairs, and fabrication. Warranties also require different taxation rules.
Transcript
Is your automobile repair business under a sales tax audit? I’m Mansoor Ansari with Nexus Tax Defense. Let’s go over a few short rules on the taxation of auto repair. Repair labor is the labor used to fix an automobile. This is non-taxable. Repair parts are the actual parts such as brakes and rotors that are used to repair automobiles. These are taxable. Consumables are the supplies that you use such as grease or wipes when you are performing an automobile repair. These are taxable, unless you have a resale certificate. But warranty repairs and maintenance agreements are not as straightforward. The repair labor or parts provided by manufacturer under main factors warranty are non-taxable. You can also purchase parts to be used in repairs under main factors warranty or recall tax-free by issuing an exemption certificate. Maintenance agreements by the manufacturer are also fully tax-free for both parts and labor. But, when you’re dealing with extended warranty or optional maintenance contracts, the contracts themselves are not taxable but the parts used in performing repairs of the motor vehicle are taxable. The service provider must collect sales tax on these parts.
Now, here’s the biggest twist: when a dealer repairs an automobile within seven days of purchase, a warranty is implied, and it becomes a non-taxable sale. But if the invoice states “as is,” then the parts are taxable. Call us if you need a hand with this. Thank you.
