Tangible personal property
The repair of tangible personal property includes repairs to:
- Appliances
- Automobiles
- Bicycles
- Computers and other office electronics
- Electric motors
- Farm equipment
- Furniture
- Recreational equipment
- Saws (including sharpening)
- Shoes
- Televisions and other home electronics
- Watches
- Any other tangible personal property
(See Idaho code section 63-3616.)
If you sell tangible personal property as part of a repair, you must apply for a seller’s permit and file regular sales tax returns.
However, repairs made to real property – by plumbers, carpet layers, electricians, roofers, etc. – don’t fall into this category (see Idaho Code section 63-201(23)). Businesses that repair real property are considered contractors. See Contractors Working in Idaho for more information.
Labor, fabrication, and repairs
Repair labor isn’t taxable if you list the repair labor and parts separately on your customer’s invoice. In that case, only the parts are taxable. But if parts and labor are combined on the invoice, you must calculate sales tax on the entire amount.
- Repaired – When an item is “repaired,” it’s restored to working condition so it can be used as originally intended.
- Fabricated – When an item is “fabricated,” it’s manufactured and designed to be used for a different purpose than that of the original components and raw materials used in the fabrication process. (When a coating is applied to new tangible personal property or used tangible personal property that wasn’t previously coated, that’s fabrication labor, and tax applies to the total charge, including materials and labor.)
Fabrication labor is taxable, even if it’s listed separately from the parts.
Example #1
Tom’s Repair Shop fixes a customer’s broken trailer hitch. Tom bills the customer $25 for materials plus $40 for repair labor. Tax applies to the $25 for materials. The trailer hitch has been repaired – restored to working condition.
| Materials | $25.00 | |
| Repair labor | $40.00 | |
| Sales tax on materials | $1.50 | (if the tax rate is 6%) |
| Total | $66.50 |
Example #2
Tom’s Repair Shop makes a trailer hitch for a customer because the customer’s trailer hitch is broken beyond repair. Tom bills the customer $120 for materials plus $125 for fabrication labor. Tax applies to the full $245. The trailer hitch has been fabricated – manufactured from components and raw materials.
| Materials | $120.00 | |
| Fabrication labor | $125.00 | |
| Sales tax on full price | $14.70 | (if the tax rate is 6%) |
| Total | $259.70 |
Example #3
Jim’s Lawn Mower Repair replaces two wheels, does a tune-up, and replaces an axle in the drive mechanism of a customer’s self-propelled mower. The wheels, mounting bolts, and spark plug are taken from Jim’s inventory. Jim has no axles, so he has a machine shop fabricate one. The machine shop bills Jim $58 ($18 for materials and $40 for labor). When Jim bills his customer, he itemizes the bill to include the parts from his inventory ($35), a new axle ($58), and his repair labor to tune up and install parts ($70). The separately listed repair labor charge is the only item on the bill that’s not taxable.
| Parts | $35.00 | |
| Fabricated axle | $58.00 | |
| Repair labor | $70.00 | Tune-up & install |
| Sales tax on parts and fabricated axle | $5.58 | (if the tax rate is 6%) |
| Total | $168.58 |
When covered by insurance
Repair bills paid by an insurance company, in whole or in part, are treated like any other repair bill.
Example #4
Universal Insurance Company pays the bill to repair the broken windshield of a customer’s car. Sales tax is charged on the parts billed for the repair. However, if the repair labor is listed separately on the bill, it isn’t taxed.
Supplies used during repairs
Don’t charge sales tax on shop supplies used during a repair, even if you list the supplies separately on the customer’s invoice. Shop supplies include: spray bottles, buffer pads, towels, masking tape, solvents, sandpaper, and other materials that don’t become part of the item being repaired. These supplies are taxable when you buy them and shouldn’t be included in the taxable portion of your customer’s bill.
Some repairs use very small amounts of materials. The value of the material is insignificant when compared with the entire repair cost, such as when repairing a flat tire, mending clothing, repairing a watch, or stitching a shoe. The shop owner should pay tax when buying these materials. There is no need to bill your customer and collect sales tax on these insignificant material amounts.
Coatings
When used in the repair of tangible personal property, parts, materials, and coatings that have a significant value to the repair (e.g., paint coating, powder coating, spray-on bedliners applied to surfaces on which a coating has already been applied) are subject to tax. The coating material must be separately stated on the billing invoice and tax charged. If the exact amount of material can’t be determined, a reasonable estimation is acceptable.
Motor oil and tire disposal fees
Charges to recoup the overhead associated with the transfer of tangible personal property (e.g., motor oil, tires) are part of the sale of that property and should be taxed even if they’re separately stated on the billing invoice.
Discounts
In general, rebates and discounts provided by the retailer can be used to reduce the taxable sales price (except cash discounts for early or prompt payments). However, rebates and discounts provided by the manufacturer can’t be used to adjust the taxable sales price (except rebates on sales of motor vehicles). If the retailer is reimbursed by the manufacturer, the taxable sales price can’t be reduced by the value of the discount or rebate.
Example #5
Sally takes her laptop into Computer Repair Store. She purchases a new Acme hard drive from the store and has them install it. The invoice shows a $300 charge for the hard drive and a $50 charge for the installation. Sally gives the cashier a $100 manufacturer’s coupon from Acme Hard Drives. Computer Repair Store charges Sally tax on the $300 charge for the hard drive. The total invoice is then reduced by $100.
| Hard drive | $300.00 | |
| Install | $50.00 | |
| Sales tax on hard drive | $18.00 | (if the tax rate is 6%) |
| Manufacturer’s coupon | -$100.00 | |
| Total | $268.00 |
A coupon can be used for a mixed transaction that includes both taxable and nontaxable components (parts and labor). If the coupon terms don’t specify the amount of discount that applies for each component, and each component is separately stated on the invoice, the amount of discount can be proportionately allocated between the taxable and nontaxable portion.
Example #6
Bill takes his bike in for repairs at Ace Bike Shop. The total invoice is $160. The $115 charge for parts and the $45 charge for labor are separately stated. Bill has a coupon for 10% off the total $160 purchase price ($16). In this case, an $11.50 discount is allocated to parts ($115/$160 x $16) and a $4.50 discount is allocated to labor ($45/$160 x $16). Tax is due on the reduced parts price of $103.50 ($115 – $11.50).
| Parts | $115.00 | |
| Labor | $45.00 | |
| 10% off parts | -$11.50 | |
| 10% off labor | -$4.50 | |
| Sales tax on reduced parts price | $6.21 | (if the tax rate is 6%) |
| Total | $150.21 |
Sales tax exemptions
Form ST-101 – Sales Tax Resale or Exemption Certificate. Keep this completed form in your files; it also applies to future exempt sales to these customers. Buying parts and materials
When you buy parts and materials to resell, you can buy them without paying tax if you give the vendor a completed Form ST-101 – Sales Tax Resale or Exemption Certificate.
However, when you buy goods that you won’t resell, such as shop supplies, insignificant amounts of material used in repairs, and tools, you must pay sales tax. (See the “Supplies used during repairs” section above.) You must also pay tax on your office supplies, things you give away to your customers (calendars, etc.), and any other goods you buy that you don’t resell.
If you do more fabrication work than repair work, you may qualify for the production exemption.
Laws and rules
- Sales Tax Rule 029 – Producing, Fabricating And Processing
- Sales Tax Rule 046 – Coatings On Tangible Personal Property
- Sales Tax Rule 062 – Repairs Sale Of Parts And Material
- Sales Tax Rule 065 – Tires Balancing, Studding, And Siping
- Sales Tax Rule 128 – Certificates For Resale And Other Exemption Claims