Tax Type
Retail Sales and Use Tax
Description
Resales; Parts and bulk fluids; Automotive oil change and service shop
Topic
Taxability of Persons and Transactions
Date Issued
12-30-1996
December 30, 1996
Re: Request for Ruling: Retail Sales and Use Tax
Dear***************
This is in response to your letter in which you seek a ruling on behalf of an unidentified client (the Taxpayer). The issue raised in your letter concerns the application of the tax to certain supplies used in automotive maintenance and repair. Since receiving your correspondence, the department has re-evaluated its position on this issue.
FACTS
The Taxpayer is engaged primarily in automotive maintenance and servicing. For a fixed fee the Taxpayer will change the oil, install a new oil filter, and replenish various top off fluids if necessary. These top off fluids include, for example, windshield washer fluid, power steering fluid, brake fluid, etc.
The invoice to customers will generally list (in a separate column) a "14 Point Checklist." The purpose of the checklist is to verify that the items have been checked and to note which fluids have been added or replenished. For example, the checklist will show that brake fluid levels were checked, and the level was either "OK" or replenished. I understand that the checklist may also include other service items, such as vacuuming the vehicle and washing the windows.
Also listed on the invoice are two basic charges: "Full Service Parts" and "Full Service Labor." Under the charge for "Full Service Parts" is shown oil filter, oil, and "14 Point Check." The charge for"Full Service Parts" is shown as a single price, and no separate sales price is listed for the oil, oil filter, or 14 Point Check. You therefore indicate that the charge for "Full Service Parts" includes the charge for the oil, the filter, and any necessary top off fluids. I also understand that the charge for "Full Service Parts" will not vary based on the top off fluids. In other words, this charge remains the same regardless of how many or how much top off fluids the customer is supplied.
The Taxpayer separately states sales tax which is calculated on the charge for "Full Service Parts." Further, if the customer purchases additional parts (such as an air filter or wiper blades) these items are listed separately on the invoice and the tax is also charged on these items. No tax is charged on the separately stated "Full Service Labor"
The Taxpayer suggests that the oil, oil filters, and top off fluids are taxed as tangible personal property as "Full Service Parts" when they are sold to customers. The Taxpayer further suggests that because the oil, oil filters, and top off fluids are taxed on the invoice to customers, these items may be purchased by the Taxpayer exempt for resale.
RULING
Code of Virginia § 58.1-603 imposes the sales tax on the gross sales price of each item or article of tangible personal property when sold at retail in the Commonwealth. Code of Virginia §58.1-602 defines a "retail sale" to be "a sale to any person for any purpose other than for resale in the form of tangible personal property...."
The application of the tax to repair businesses generally is set out in Virginia Regulation (VR) 630-10-90. In regards to a repairman's sales of tangible personal property, the regulation indicates that "if the dealer performing the repair 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."
When addressing purchases made by repair businesses, the regulation provides that:
Replacement parts, materials and supplies that are transferred to the customer may be purchased under certificates of exemption. The tax must be paid on equipment, tools and all other tangible personal property used in performing the repair work.
Accordingly, repair labor can be excluded from the tax when separately listed on the customer's invoice. Any tangible personal property sold to customers remains taxable. With these provisions in mind, the purchase and sale of parts, materials and supplies which are transferred to the customer, especially bulk items such as the Taxpayer's top off fluids, deserve special consideration. One major concern is that customers know what components of the invoice are taxable. A second concern is that items which are purchased exempt for resale are properly taxed at the time those items are sold.
In the instant case, the Taxpayer's charge for "Full Service Parts" includes the sales price of the oil, oil filter, and top off fluids. Further, all of these items are specifically noted on the customers' invoices. The department will allow the Taxpayer to purchase its top off fluids exempt for resale. Because the sales price for the top off fluids is included with the sales price of the oil and oil filter, the Taxpayer will need to show, if requested by the department, how the sales price of all these items (oil, oil filter, and top off fluids) is calculated. This will ensure that property purchased exempt for resale by the Taxpayer is properly taxed when sold to customers.
Transferable Bulk Supplies: The automotive fluids which the Taxpayer may purchase exempt for resale include brake fluid, grease and lubricants, windshield washer fluid, anti-freeze, power steering fluid and transmission fluid. Other transferable supplies include automotive adhesives and sealants, including gasket seal; automotive light bulbs and electrical wire for automotive repairs; and small automotive hardware, including nuts, bolts, washers, cotter pins and similar items. These items, which are transferred to customers, may be purchased exempt from the tax for resale provided that they are taxed at the time of sale to customers.
Non-Transferable Materials and Shop Supplies: The Taxpayer is deemed to be the taxable user and consumer of all property which it uses in providing its automotive services. Such items include shop cleaning supplies (including rags, drop cloths, floor sweep, mops and buckets); paper/plastic seat covers; work clothes, tools, equipment and machinery used in repair work (including repair and replacement parts and supplies for that equipment); soaps, degreasers, and thinners; and sand paper, steel wool, and emery cloth. Accordingly, the Taxpayer must pay the tax on the purchase of these items. The application of the tax to these items is also addressed in the enclosed Public Document 87-275 (12123187).
Dual Use Items: It may be that certain top off fluids are (1) transferred to customers and (2) used by the Taxpayer. For example, windshield washer fluids may be transferred to customers as a top off fluid and used by the Taxpayer to clean windshields. The latter use is a taxable use of the fluid by the Taxpayer. The Taxpayer will therefore need to accrue the tax on that portion of the windshield washer fluid which it uses.
Prospective Compliance: The determination set out in the letter represents a change in the application of the tax to top off fluids and other supplies which are purchased in bulk and then transferred to customers. Accordingly, the determination that the top off fluids and other transferable bulk supplies may be purchased under the resale exemption will apply on a prospective basis.
Automotive Refinishers, Painters and Car Washers: The application of the tax to automotive refinishers, painters and car washers is addressed in VR 630-10-70. This regulation indicates that motor vehicle refinishers and painters render personal services and are therefore required to pay the tax on their purchases of materials and supplies used in their business regardless that such materials and supplies are transferred to the customer.
Please contact ******* in my Office of Tax Policy at********* if you have any questions regarding this letter.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/1 00031
Rulings of the Tax Commissioner