Understanding sales tax can be confusing, especially when it comes to auto repairs. If you’re a vehicle owner in New York or operate an auto repair shop, it’s crucial to know the rules. A common question is: is labor on car repair taxable in NY? The short answer is generally yes. In New York State, labor charges for auto repair services are typically subject to sales tax, alongside the cost of parts. This guide breaks down how New York sales tax applies to auto repair and body shops, ensuring you understand your obligations and rights.
Navigating Sales Tax on Auto Repair Services in New York
New York State requires operators of automobile repair and body shops to register with the Tax Department to collect and remit sales tax. This applies to a wide range of vehicles, including cars, trucks, RVs, motorcycles, and snowmobiles. Beyond sales tax, you might also be responsible for the New York State Waste Tire Management Fee.
Generally, almost all charges from a repair or body shop are considered taxable. This means you must collect sales tax on the total charge for both parts and labor for the repair services you provide. Sales tax also applies to any parts or supplies sold directly to customers, like windshield wipers or motor oil. To find the current sales tax rates, you can refer to official Tax Bulletins such as Sales Tax Rates, Additional Sales Taxes, and Fees (TB-ST-825) or use the Tax Department’s online Jurisdiction/Rate Lookup by Address.
Alt text: Mechanic carefully inspecting the wheel assembly of a vehicle in a repair shop, assessing for necessary repairs.
When is Towing and Storage Taxable?
Services beyond just repair work can also be taxable. Towing a disabled vehicle is taxable, whether it’s to your shop, another repair shop, or any location the vehicle owner directs. However, transporting vehicles that are not broken down, such as antique cars for a show or repossessed vehicles, is not taxable.
Similarly, charges for vehicle storage are taxable. For example, if you charge a customer for storing their repaired vehicle beyond an agreed pickup date, those storage fees are subject to sales tax.
New York State Inspections: A Tax Exemption
There’s a specific exception regarding New York State motor vehicle inspections. The fee for the inspection itself is not taxable. However, it’s important to note that any repair work required for the vehicle to pass inspection is indeed taxable, covering both parts and labor.
Sales Tax and Warranty Work
Warranty repairs involve a slightly different process. When a vehicle is brought in for repair covered by a service contract or warranty, the repair shop typically bills the warranty company directly. Crucially, your charges to the warranty company for work covered under warranty are not taxable if the warranty company provides you with Form ST-120, Resale Certificate. This exemption applies only if the warranty companies are registered vendors with New York State and properly issue the resale certificate. Any charges billed directly to the customer for repairs not covered by warranty remain taxable.
Alt text: Auto repair technician reviewing warranty paperwork and repair orders in a car service center.
Insurance Claims and Sales Tax
Repair work covered by insurance follows a straightforward tax rule. When billing insurance companies for repairs, it’s treated similarly to billing a customer directly. Both materials and labor are taxable in insurance claim repairs.
For example, if a vehicle damaged in an accident requires fender, panel, and door replacements, along with painting, the entire bill sent to the insurance company, including labor and parts, is subject to sales tax. Refer to Tax Bulletin Taxable Receipt (TB-ST-860)* for more details on taxable receipts.
Purchasing Parts and Supplies Tax-Free for Resale
As a repair shop, you can purchase certain items without paying sales tax, specifically parts and supplies that will be transferred to your customer as part of a repair job. To make these tax-exempt purchases, you need to provide your supplier with Form ST-120, Resale Certificate.
Examples of parts you can purchase for resale tax-free include:
| – Brake pads, rotors | – Headlights, brake lights |
| – Shocks, struts | – Starters, alternators |
| – Tires | – Windshields |
| – Filters | – Rear-view mirrors |
| – Fan belts | – Doors |
| – Electronic sensors | – Fenders |
However, it’s important to distinguish between parts for resale and items used in your shop’s operations.
Alt text: Organized shelves of auto parts inventory in a car repair shop, showcasing various components for vehicle maintenance and repair.
Tools and equipment used in your shop, such as wrenches, lifts, and diagnostic equipment, are taxable when you purchase, lease, or rent them because they are not transferred to the customer.
Enhanced emissions inspection equipment is an exception and can be purchased exempt from sales tax under specific conditions. This applies if the equipment is certified by the New York Department of Environmental Conservation and if you are a licensed inspection station authorized to conduct enhanced emission inspections. In this case, provide your supplier with Form ST-121, Exempt Use Certificate.
Supplies also have different tax rules depending on their use. Supplies actually transferred to the customer, such as brake fluid, paint, or motor oil used in a repair, can be purchased exempt from tax with Form ST-120.
Examples of exempt supplies for resale:
| – Brake fluid | – Paint |
| – Transmission fluid | – Automotive body fillers |
| – Antifreeze | – Flux |
| – Bearing grease | – Sheet metal |
| – Motor oil | – Thinners and solvents |
On the other hand, shop supplies not transferred to customers, like shop towels, cleaners, or sandpaper, are taxable. These are considered consumed by the business and not resold. For further details, see TSB-M-81(8)S, Taxable Status of Supplies used by Auto Body Repair Shops.
Examples of taxable shop supplies:
| – Shop towels | – Drop cloths |
| – Cleaners | – Face masks |
| – Paper floor mats | – Masking tape |
| – Office supplies | – Polishing and buffing pads |
| – Sandpaper | |
Key Points to Remember about Labor and Sales Tax in NY
- Yes, labor for car repair is generally taxable in New York. This is a core aspect of New York sales tax law for auto services.
- Auto repair shops must register with the NY Tax Department to collect and remit sales tax.
- Sales tax applies to both labor and parts in most repair scenarios, including insurance work.
- There are specific exemptions, such as for NYS motor vehicle inspections (the inspection fee itself) and warranty work (under certain conditions with a resale certificate).
- Understanding the rules for purchasing parts and supplies tax-free for resale is essential for auto repair businesses.
By understanding these guidelines, both auto repair businesses and vehicle owners can navigate New York sales tax regulations effectively. For detailed information and the most up-to-date rules, always refer to official publications from the New York State Tax Department.
References and Useful Information:
- Tax Law: Section 1105(c)(3)
- Regulations: Section 527.5
- Memorandum: TSB-M-81(8)S, Taxable Status of Supplies used by Auto Body Repair Shops
- Bulletins:
