If you repair, remodel or maintain motor vehicles, or sell and install automotive accessories, you may be responsible for collecting Texas sales tax from your customers and remitting the tax to the Comptroller’s office.
Generally, a motor vehicle includes a self-propelled vehicle designed to transport people or property on public highways and a vehicle designed to be towed by a self-propelled vehicle while carrying property. A motor vehicle includes
A motor vehicle does not include
A motor vehicle repairperson, auto mechanic or technician is a person skilled in repairing, remodeling, and maintaining motor vehicles. If you restore, repair or replace an inoperable or malfunctioning components of a motor vehicle, then you are considered a motor vehicle repairperson. Your job duties may include
When you repair a motor vehicle in Texas, your sales and services determine your sales tax responsibility. Here are some questions to consider:
There is no sales tax on the labor to repair to a motor vehicle. For example, the labor to repair or replace a tire, battery, muffler or shock absorber is not subject to sales tax.
Parts used to repair motor vehicles are taxable. The sales tax is paid by the customer, the repairperson or the vehicle’s manufacturer, depending on the type of contract or invoice the repairer uses and whether a warranty covers part or all of the repair.
Consumable supplies include items that can no longer be used for their intended purposes in the normal course of business or are not retained or reusable by you. Examples of consumable supplies include (but are not limited to) shop rags, floorboard covers, solvents, masking tape, body fillers, sandpaper and disks, waxes, and polishes. Consumable supplies do not include tools, equipment, electricity or office supplies.
A repairperson is the ultimate consumer of tools and equipment used to repair a motor vehicle. You must pay sales tax to suppliers on these items at the time of purchase. You may not collect sales tax from customers on any charges for these items.
A repairperson that charges a single price for parts and labor should not collect sales tax from the customer, but instead must pay sales tax to the supplier when buying parts.
For example, a repairperson performs an oil change for the lump-sum price of $69.95. The repairperson must pay sales tax when buying oil, filters and other items used in the repair and should not collect sales tax from their customer.
As a repairperson, under a lump-sum contract, you must pay the sales tax on materials even when you repair the property for an exempt customer.
If you charge and collect sales tax from your customer in error (on parts and labor), you must still pay sales tax to your supplier on items used in the repair and remit the sales tax collected in error on your return. If you refund the sales tax collected in error to your customer, then you may amend your sales tax return and receive credit or a refund for the sales tax you paid.
As a repairperson, the purchase of consumable supplies you use under a lump-sum invoice is taxable to you, as you are the ultimate consumer of these supplies.
In contrast to lump-sum invoicing, if you itemize the parts and labor charges, you must collect sales tax on the parts. The repair labor is not taxable. In this situation, you can give a resale certificate (PDF) instead of paying sales tax to your supplier when buying the parts.
For example, if a repairperson does an oil change and charges $20 for labor and $49.95 for parts, it can buy the oil and filter tax-free using a resale certificate and should only collect sales tax from their customer on the $49.95 for the oil and filter. The $20 repair labor is not taxable.
If you charge sales tax on repair labor in error, you must still remit the sales tax collected in error on your return. If you refund the sales tax collected in error on the repair labor to your customer, then you may amend your sales tax return and receive credit or a refund for the sales tax you paid.
In repairing a motor vehicle belonging to an exempt customer under a separated contract, you may accept an exemption certificate (PDF) instead of collecting sales tax on materials incorporated into the motor vehicle.
A repairperson that separately states a charge for consumable supplies used directly in repairing or maintaining a motor vehicle must collect sales tax on the total charge for parts and consumables. You may buy the consumable supplies tax free using a resale certificate (PDF).
Repair labor or parts furnished by a manufacturer for motor vehicle repairs under a manufacturer's warranty or recall campaign are not subject to sales tax. You must keep records that show that the service and parts were used in repairing a motor vehicle under a manufacturer's warranty or recall. You may purchase parts to be used in repairs under a manufacturer's warranty or recall tax free by issuing an exemption certificate (PDF) to the supplier.
Sales tax is due on parts not covered by a manufacturer’s warranty for motor vehicle repairs performed under an extended warranty. You must pay or remit the sales tax collected based on the type of contract — lump-sum or separated.
Some manufacturers provide free maintenance agreements when a motor vehicle is purchased, and the maintenance is generally performed by an authorized dealer. Because the manufacturer provides the service at no additional charge, it is handled in the same way as a repair covered under the manufacturer’s warranty (i.e., parts are not taxable).
There may be, however, optional maintenance contracts available for a vehicle owner to purchase. The contracts themselves are not taxable, but the parts used in performing repairs of the motor vehicle are taxable. The service provider must collect sales tax on these parts.
When a dealer repairs a motor vehicle for free within seven calendar days of the vehicle sale, and the repairs are not covered by any written warranty, such "goodwill repairs" are made under an implied warranty, and sales tax is not due on the parts used.
If, however, the motor vehicle was sold "as is," there is no implied warranty, and the dealer is responsible for the sales tax on the parts used to make the goodwill repairs, even when the repairs are performed within the seven-day period. For taxability, see the Invoices and Sales Tax Collection section of this publication.
Sales tax is due on all parts and labor charges for remodeling a motor vehicle. Remodeling means to modify the vehicle’s style, shape or form. These modifications include
Remodeling does not include the repair, removal or replacement of a defective or inoperative component or accessory. A repairperson should consider this a repair of a worn out, damaged or defective component or accessory of a motor vehicle.
For example, if a repairperson fixes a factory-installed car stereo or replaces the faulty sound system with another car stereo, this is repairing (not remodeling) a motor vehicle.
Sales tax is due on all parts and labor for the sale and installation of motor vehicle accessories such as
The removal and replacement of defective, worn, or unsafe accessories or components is a repair and not a sale and installation.
Motor vehicle maintenance means all work on an operational and functioning motor vehicle that is necessary to sustain its safe, efficient, continuous operation, or keeping it in good working order by preventing its decline, failure, lapse or deterioration.
Like motor vehicle repairs, sales tax is not due on the labor to maintain motor vehicles.
Sales tax is due on parts used to maintain a motor vehicle. The sales tax is paid by the customer, the repairperson or the motor vehicle’s manufacturer, depending on the type of contract used — lump-sum or separated. See Invoices and Sales Tax Collection under Motor Vehicle Repairs above.
The taxability of consumable supplies used to maintain a motor vehicle depends on whether the maintenance is performed under a lump-sum or separated contract. See Invoices and Sales Tax Collection under Motor Vehicle Repairs above.