Service Department Sales

Motor vehicle service departments provide many services. Details about these various services and their taxability are provided below.

Repairs

Auto body and automotive repair labor is not taxable when it is separately stated from repair parts on the invoice.

• 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 or definite price.
• Repair materials and repair paint are exempt for resale if they become part of the vehicle or are consumed in providing the vehicle repair services. This does not include repair parts.

For more information, see Motor Vehicle Repair and Labor – Installation, Fabrication, Construction, and Repair.

Repair Parts

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

Paint Sealer

Applying paint sealer is not a taxable service unless it is part of the initial sale of a vehicle. Paint sealer is exempt only when it is applied as part of the original sale of the motor vehicle.

Subcontracted Repairs and Services

If you subcontract with another business for repair work or services, do not pay sales or use tax on your purchase. Instead, give the subcontractor a completed Form ST3, Certificate of Exemption. Specify the Resale exemption. You must charge sales tax to your customer for any taxable subcontracted labor, parts, or materials. Charges for repair labor are not taxable.

Towing Services

Towing a motor vehicle, including any fees relating to the service, is taxable. See Towing, Cleaning, and Rustproofing Services.

Cleaning and Rustproofing Services

The following services are taxable

• Applying fabric protector
• Interior and exterior cleaning services
• Rustproofing
• Undercoating
• Washing and waxing

For more information, see Towing, Cleaning, and Rustproofing Services.

Free Car Wash

The customer owes no sales tax on a free car wash. However, you owe sales or use tax on the cost of the materials to provide the free car wash.

Materials Used in Taxable Services

Some materials used or consumed in providing taxable washing, waxing, cleaning, rustproofing, undercoating, and towing services are exempt from tax. You must use the materials directly in providing the service to qualify for the exemption.

Give your vendor a completed Form ST3, Certificate of Exemption. Specify the Resale exemption. 

For more information, see Towing, Cleaning, and Rustproofing Services.

Upgrades, Enhancements, and Maintenance

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

• Installing remote starters, navigation systems, and sunroofs
• Installing bug deflectors and running boards
• Upgrading a sound system
• Installing customized vehicle accessories; such as adding dual exhaust, adding fuel injector control chips, etc.
• Adding power locks, remote starters, cruise control, or window defrosters
• Installing a remote car starter or theft alarms

For more information, see Motor Vehicle Repair.