Operating an auto repair or body shop involves navigating various regulations, and sales tax is a significant aspect. This guide clarifies how sales tax applies to your business, ensuring you correctly calculate and remit taxes on customer bills, warranty work, and insurance repairs. For businesses dealing with customers, cars, and parts, understanding these tax rules is crucial for compliance and smooth operations.
Navigating Sales Tax on Services and Repairs
Auto repair and body work encompass a wide range of vehicles, from cars and trucks to motorcycles and RVs. If you operate such a shop, registration with the Tax Department is mandatory for sales tax collection and remittance. For detailed registration instructions, refer to Tax Bulletin How to Register for New York State Sales Tax (TB-ST-360). Furthermore, you might be responsible for the New York State Waste Tire Management Fee.
Generally, most services offered by a repair or body shop are subject to sales tax. This means you must collect sales tax on the total charge, which includes both parts and labor for the repair services provided to your customers. Sales tax is also applicable to any parts or supplies sold directly to customers, such as windshield wipers or motor oil. For current sales tax rates, consult Tax Bulletin Sales Tax Rates, Additional Sales Taxes, and Fees (TB-ST-825) or the Tax Department’s Web site’s Jurisdiction/Rate Lookup by Address.
Towing and Vehicle Transportation
Towing a disabled vehicle is considered a taxable service. This applies whether you tow the vehicle to your own shop, another repair facility, or any location directed by the vehicle owner. This service is taxable because it is directly related to assisting a customer with their car.
However, transporting vehicles that are not broken down or disabled is not taxable. Examples include transporting classic cars to exhibitions, moving repossessed vehicles, or simply relocating a functioning vehicle from one place to another. These services are not considered part of auto repair for tax purposes.
Vehicle Storage Fees
Charges for vehicle storage are also taxable. For instance, if a customer’s car is repaired and ready for pickup, but remains at your shop beyond an agreed timeframe, the storage fees incurred are subject to sales tax. This is considered a service provided in conjunction with the repair of customers cars.
New York State Inspections
The fee for conducting a New York State motor vehicle inspection is exempt from sales tax. However, it’s important to note that any repair work necessary for a vehicle to pass inspection is taxable. So while the inspection itself is not taxed, the parts and labor needed to fix issues identified during the inspection for customers cars are taxable.
Understanding Warranty Work and Service Contracts
When customers bring in vehicles for repairs covered by a warranty or service contract, the billing process changes. You will typically bill the warranty company directly for the work. Charges to the warranty company for work covered under warranty are not taxable, provided the warranty company gives you Form ST-120, Resale Certificate. This form is crucial; only warranty companies registered as New York State vendors can issue a valid resale certificate. Any repair costs not covered by the warranty and billed directly to the customer remain taxable. This distinction is important when dealing with warranties and customers cars.
Sales Tax on Insurance Claims and Repairs
Repair work covered by insurance follows a similar billing process to warranty work, but the tax implications are different. When billing an insurance company for repairs, both the materials (parts) and labor are taxable.
Example: Imagine a customer’s car needs repair after an accident. Your shop assesses the damage and determines that a fender, front quarter panel, and passenger-side door need replacement, along with painting the repaired areas. Upon completing the work, the entire bill sent to the insurance company, covering both parts and labor, is taxable. (For further details, see Tax Bulletin Taxable Receipt (TB-ST-860)*).
Purchasing Parts, Tools, and Supplies Tax-Exempt
As an auto repair shop, you can make certain purchases without paying sales tax by providing the correct exemption certificates to your suppliers. This primarily applies to items you resell to customers as part of your services.
Tax-Exempt Purchases of Parts for Resale
You can purchase parts that will be transferred to your customers as part of a repair job without paying sales tax upfront. To do so, provide your supplier with Form ST-120, Resale Certificate. This certificate indicates that you are buying these parts for resale to your customers.
Examples of parts you can purchase for resale tax-exempt include:
| Parts for Resale | More Parts for Resale |
|---|---|
| – Brake pads, rotors | – Headlights, brake lights |
| – Shocks, struts | – Starters, alternators |
| – Tires | – Windshields |
| – Filters | – Rear-view mirrors |
| – Fan belts | – Doors |
| – Electronic sensors | – Fenders |
Tools and Equipment: Taxable Purchases
The purchase, lease, or rental of tools and equipment for your shop is generally taxable. These items are used to perform repair services but are not directly sold to customers as parts. Therefore, they do not qualify for the resale exemption.
Taxable tools and equipment include:
| Taxable Tools & Equipment | More Taxable Items |
|---|---|
| – Wrenches and sockets | – Lifts |
| – Screwdrivers and nut drivers | – Wheel balancers |
| – Pliers | – Engine analyzers |
| – Impact tools | – Pipe benders |
| – Clamps | – Alignment equipment |
| – Hammers | – Air compressors |
| – Torches | – Welding equipment |
| – Jumper cables | – Paint booths |
However, an exception exists for enhanced emissions inspection equipment. Purchases of this specific equipment can be tax-exempt under certain conditions. These conditions are:
- The equipment must be certified by the New York Department of Environmental Conservation for use in enhanced emissions inspections, as mandated by the Federal Clean Air Act and the New York Clean Air Compliance Act.
- Your shop must be an official inspection station, licensed by the Commissioner of Motor Vehicles and authorized to perform these enhanced emission inspections.
To purchase enhanced emissions inspection equipment tax-exempt, give your supplier Form ST-121, Exempt Use Certificate, at the time of purchase.
Supplies: Taxable vs. Tax-Exempt
The taxability of supplies depends on whether they are transferred to the customer as part of a repair or used in your shop’s operations. Supplies actually transferred to the customer during a repair or maintenance job can be purchased tax-exempt by providing Form ST-120, Resale Certificate, to your supplier. These are considered parts of the service provided to customers cars.
Examples of tax-exempt supplies include:
| Tax-Exempt Supplies | More Tax-Exempt Supplies |
|---|---|
| – Brake fluid | – Paint |
| – Transmission fluid | – Automotive body fillers |
| – Antifreeze | – Flux |
| – Bearing grease | – Sheet metal |
| – Motor oil | – Thinners and solvents |
On the other hand, supplies used within your shop to perform repairs but not transferred to customers are taxable. These operational supplies are necessary for your business but are not directly billed to customers as parts.
Examples of taxable shop supplies include:
| Taxable Shop Supplies | More Taxable Shop Supplies |
|---|---|
| – Shop towels | – Drop cloths |
| – Cleaners | – Face masks |
| – Paper floor mats | – Masking tape |
| – Office supplies | – Polishing and buffing pads |
| – Sandpaper |
For more detailed information, refer to TSB-M-81(8)S, Taxable Status of Supplies used by Auto Body Repair Shops.
Note: This Tax Bulletin offers general guidance and is accurate as of its issue date. However, always be aware of potential changes in Tax Law or its interpretation. This information is not exhaustive and should not replace legal counsel.
References and Further Information
Tax Law: Section 1105(c)(3)
Regulations: Section 527.5
Memorandum: TSB-M-81(8)S, Taxable Status of Supplies used by Auto Body Repair Shops
Bulletins:
How to Register for New York State Sales Tax (TB-ST-360)
Sales Tax Rates, Additional Sales Taxes, and Fees (TB-ST-825)
Taxable Receipt (TB-ST-860)
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