Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2014
 

Sales and Use Tax Annotations


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G

295.0000 GROSS RECEIPTS

Annotation 295.1318

(f) COSTS AND EXPENSES

295.1318 Disposal/Overhead Charges Made by Repairers. Whether a disposal or overhead charge for overhead expenses is subject to tax depends on whether the charge is regarded as related to the sale of the parts, the providing of nontaxable labor, or both.

When the overhead charge made by the repair shop is related only to the sale of the parts, the entire charge is subject to tax (e.g., a charge to cover expenses for ordering inventory and storing parts or for transportation of the parts to the repair shop). If, on the other hand, the charge is related solely to the nontaxable labor performed by the repair shop, then none of the charge would be taxable (e.g., a charge solely to cover expenses related to cleaning the oil remaining on the garage floor after draining oil from car).

The final possibility is that the charge, no matter how it is itemized on the bill to the customer, is actually related to all overhead expenses of the repair shop. The charge would be regarded as related to all overhead expenses of the repair shop if the charge cannot be shown to be clearly related solely to nontaxable labor or solely to the taxable sales of tangible personal property. Under these circumstances, a portion of the charge is taxable and a portion of the charge is not taxable, prorated in the same ratio that itemized taxable charge for parts bears to the itemized nontaxable charge for labor. 1/27/95. (Am. 2000–3).