Motor Vehicles Repairs, Maintenance and Remodels

A motor vehicle is a self-propelled vehicle designed to transport people or property or a vehicle designed to be towed by a self-propelled vehicle.

This includes but not limited to:

• Automobiles
• Buses
• Motor home
• Trucks/truck tractors
• Trailers
• Travel trailers
• Motorcycles

A motor vehicle does not include:

• Road building machines
• Devices used exclusively on rails/tracks.
• Oilfield portable unit
• Vehicles declared a total loss by insurance companies.

If you restore, repair, or replace a malfunctioning component in a motor vehicle you are considered a repairperson. Some of your duties can include,

• Repair- fixing or restoring a vehicle that was broken, damaged or defective to good working order/operating condition.
• Remodel- modifying the style, shape and form of a vehicle belonging to another person.
• Maintenance- Working on operational/functioning motor vehicles to support their safe, and continuous operation; or to keep it in good working order.

What are your tax responsibilities as a motor vehicle repairperson?

This all depends on a variety of things, for example are you selling repair labor only? Or labor and parts? Are you invoicing your customers lump-sum or separated? Is the repair fully covered or partially by warranty?

Repair Labor: No sales tax

Repair Parts: Parts used to repair a vehicle are taxable. The sales tax can be paid by the customer, the repair person, or vehicles manufacturer depending on the time type of contract, invoice or warranty coverage.

Since the repairperson is the ultimate consumer of tools and equipment used, you must pay sales tax at the time of purchase. You cannot collect sales tax from a customer for these items.

Sales Tax Collection based on Invoices.

Lump Sum Invoice: If an invoice includes both parts and labor in a single price you should not collect sales tax from a customer but instead pay sales tax to the supplier when buying parts.

Separated Invoice: When you itemize the parts and labor charges you must collect tax on the parts. Labor is NOT taxable. You can give your supplier a resale certificate in this case when buying the parts.

If you’ve collected sales tax in error, you must still submit the tax collected in you return. If you refund your customer the sales tax the you can amend your sales tax return and receive credit or a refund.

Warranties

Labor or parts used in a motor vehicle repair while the vehicle is under warrant or recall is NOT taxable. You can purchase parts tax-free by issuing an exemption certificate.  Sales tax IS due on parts covered under an extended warranty not covered by the manufacturer. In this case the tax collected is based on the invoice format.

Remodeling and Installation of Motor Vehicle Accessories

Sales tax is due on both parts and labor of a remodel or accessory installs. This includes things use as:

• Installing body kits
• Converting a van into a camper
• Increasing vehicle performance
• Installing car stereos
• Installing alarm systems

If you need any assistance figuring out what are your tax responsibilities are in the motor vehicle industry give us a call!