When it comes to towing services, it’s essential to understand which services are taxable and which ones are not. Whether you’re a towing company owner or a customer in need of assistance, knowing the tax implications can help you make informed decisions and avoid any surprises. In this guide, we will explore the taxable and non-taxable aspects of towing services and provide clarity on sales tax sourcing.
Towing Services
The total price charged for towing a motor vehicle is taxable, including administrative fees relating to the service. For example, if charges for calling authorities, check cashing, and completing insurance forms are included, the total amount is taxable, even if those charges are separately stated. If tax is included in the total amount rather than separately stated, the invoice must state that tax is included.
Other towing and related services are not taxable.
Taxable Towing Services
The following towing services are taxable:
- Towing, pulling, or transporting motor vehicle on a flatbed truck to any location
- Towing snowbirds or other illegally parked motor vehicles to impound lots
- Pulling or winching motor vehicles out of ditches
- Recovery services, such as up righting overturned semi tractors, trailers, or other motor vehicle
Non-taxable Services
The following are non-taxable towing services:
- Decking or stacking
- Delivering fuel to stranded motorists
- Jump starting vehicles
- Roadside repair
- Tire repair or other repair services on the road
- Towing boats
- Towing construction equipment or other equipment or machines not licensed for road use
- Towing farm tractors or farm wagons
- Towing auto hulks
Sales Tax Sourcing on Towing
Sales tax applies to the towing fees based on where the towing service began.
Example: A towing company in Maple Grove sends a tow truck to pick up a car in Minneapolis. The tow truck delivers the car to a body shop in Maple Grove. The towing service is subject to the tax rate in Minneapolis where the towing service began.
For more detailed and specific information on towing service, you can visit the Minnesota Department of Revenue website at Towing Services Guide | MN Department of Revenue
Navigating the tax implications of towing services can be complex, but understanding the difference between taxable and non-taxable services is crucial. By familiarizing yourself with these distinctions, both towing companies and customers can ensure compliance with tax regulations and avoid any unnecessary surprises.
Consult with our Tax Preparers in Minneapolis today to ensure accurate implementation of tax policies in your specific jurisdiction.
