Auto Mechanic Industry Guide – Taxable Sales

Some of the items and services used to repair motor vehicles are taxable, and some are exempt from sales tax. The taxability of a given item may depend on its exact use, the kind of business providing it, and how parts, materials, and service are broken down on the invoice.

The following definitions apply to this industry.

Auto Body Repair and Service

Fixing damaged motor vehicle structures such as frames, body panels, and trim pieces. Businesses that provide these services include:

• Automotive dealers
• Body shops
• Independent installers
• Paint shops

Mechanical Repair and Service

Fixing the mechanical systems of motor vehicles such as engines, transmissions, electrical, and braking systems. Businesses that provide these services include:

• Automotive dealers
• Garages
• Independent installers
• Service stations

Motor Vehicle

A self-propelled vehicle that must be licensed for road use. Example include:

• Cars, pickups, trucks, and vans
• Motorcycles
• Motor homes
• Semi-tractors
• Trailers

Repair Labor

Auto body and automotive repair labor is not taxable when it is separately stated from repair parts on the invoice. Repair labor restores an item to its original condition so it can be used for its original purpose.

Taxable Sales

Parts used to repair or service a vehicle are taxable to the customer. Parts are easily assigned to a repair or service and have a fixed price. Examples are listed in the table below.

Do not pay sales or use tax when you purchase these parts to use in your business. Give your supplier a completed Form ST3, Certificate of Exemption. Specify the Resale exemption.

Core Charges

A core charge is a deposit charged at the time of purchase. The core charge is part of the taxable sales price when the part is subject to sales tax.

When the old part is returned, the core charge and the sales tax collected on the charge, is refunded back to the customer.

Oil Changes

Prepaid oil changes are taxable at the time they are purchased, not when they are redeemed.

Tires

When a customer trades in an old tire for a recapped tire the entire charge is taxable, less an allowance for the trade-in.

Tire siping is taxable. The federal excise tax on tires is subject to sales tax.

Upgrades and Enhancements

Labor to add or install something new or different to a vehicle is taxable. The parts being installed are also taxable to the customer. Examples include:

• Adding customized vehicle accessories (dual exhaust, larger carburetor)
• Adding power locks, power windows, cruise control, or window defrosters
• Installing bug deflectors, lighting graphics, and running boards
• Installing remote starters, navigation systems, sunroofs, or theft alarms
• Spraying bed liners
• Tinting windows
• Upgrading a sound system

Vinyl Decals

Charges to apply vinyl decals are taxable. If the customer brings a decal for you to apply, the charge to apply the decal is taxable. If you order or make a decal and apply it to a vehicle, the charges for the decal and the labor are both taxable.

Taxable Services

The following services are taxable:

• Applying fabric protector
• Motor vehicle washing, waxing, and cleaning services, including coin-operated facilities
• Rust proofing and undercoating of vehicles

For more detailed and specific information on taxes for Auto Mechanic Industry, including in Minnesota, you can visit the Minnesota Department of Revenue website at Motor Vehicle Guide | MN Department of Revenue

Remember, tax laws and regulations can change over time, so it’s crucial to stay updated and consult with tax professionals to ensure compliance with all tax obligations specific to your location and business structure.

Contact our tax experts at Prudent Accountants today to conduct further research or personalized professional advice tailored to your specific business needs and location.