Tax Type
Retail Sales and Use Tax
Description
Supplies used by automobile body shop
Topic
Taxability of Persons and Transactions
Date Issued
10-15-1985
-
October 15, 1985
Re: §58.1-1821 Application/Sales and Use Tax
Dear ****
This will reply to your letter of July 11, 1985, on behalf of ***** (Taxpayer), seeking correction of an audit assessment issued in the above referenced case for the period February 1, 1982 through December 31, 1984
Facts
During the period covered by the audit, Taxpayer - automobile dealer operated an automotive service department and an auto-body repair shop. Taxpayer contests the imposition of sales tax on supplies used or consumed by its mechanics in making automobile repairs. It is the department's understanding that such items included shampoos, cleaning compounds, sandpaper, and masking tape. Taxpayer also contests the imposition of sales tax on its purchases of paint materials and miscellaneous supplies used in its body shop. Taxpayer asserts that it should not be taxed on its purchases of such materials and supplies since it collects the tax on these items at the point of sale to its customers
Lastly, Taxpayer contests the imposition of sales tax on its sales of vehicle maintenance contracts, but provides no information in support of this contention.
Determination
§58.1-603(1) of the Virginia Code imposes a sales tax on "the gross sales price of each item or article of tangible personal property when sold at retail or distributed in this State." §58.1-6O2(17) of the Code defines "sales price" to mean, "the total amount for which tangible personal property or services are sold, including any services that are a part of the sale,...without any deduction therefrom on account of the cost of the property sold, the cost of materials used...or any other expenses. whatsoever." However, the section continues, "sales price" does not include, "an amount separately charged for labor or services rendered in installing, applying, or remodeling or repairing property sold."
§63O-10-90 of the Virginia Sales and Use Tax Regulations provides that "any person engaged in the business of repairing tangible personal property is required to register and to collect and pay the tax. If the dealer performing work does not separately state, itemize or segregate at a fixed or retail price, the parts, materials and supplies sold, the tax will apply to the total charge including repair labor." In addition while any "[r]eplacement parts, materials and supplies that are transferred to the customer may be purchased. [exempt of the tax] under certificates of exemption, [t]he tax must be paid on equipment, tools and all other tangible personal property used. in performing the repair work." Ibid.
Therefore, Taxpayer in the present. case is liable for the use tax on all of its purchases of materials and supplies used or consumed by its repairmen in performing automobile repairs or body work. In addition, and notwithstanding the above, if Taxpayer continues to make. a separate charge. for shop supplies. to its customers, based on some flat percentage, it will also have to add the sales tax to such charge, since only separately stated labor charges qualify for exemption from the tax.
Taxpayer further contests the imposition of sales tax on its sales. of vehicle maintenance contracts.
§630-10-62.1(A) of the Regulations defines "maintenance. contract" to mean, "any agreement whereby a person agrees to maintain and/or repair an item of tangible personal property over a specified period of time for a fee which is determined at the time the agreement is entered into."
Furthermore, "[m]aintenance contracts, the terms of which provide both repair or replacement parts and repair labor, represent a [taxable] sale of tangible personal property. The total charge for such contracts is subject to the tag since at the time the contract is; entered into it is impossible to ascertain what portion of future repair transactions will represent labor." See, §630-10-62.1(D) of the Regulations
The maintenance contracts in the present case cannot be considered exempt as insurance transactions since, according to our records, they are not issued by an insurance company regulated by the Bureau of Insurance of the State Corporation Commission.
Therefore, based on all of the foregoing, I find no basis to adjust the assessment in this case, which is hereby due and payable in full.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner