Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2014
Sales and Use Tax Annotations
315.0000 INSTALLING, REPAIRING, RECONDITIONING IN GENERAL—Regulation 1546
(a) IN GENERAL
315.0108 "Fair Retail Selling Price." A company proposes that it segregate repair parts and materials from labor on each billing by ascertaining an average cost of materials used in each repair category (i.e., minor, general, major, or maximum repairs). It plans to use available statistics and compute an average as a constant or weighted percentage of the total charge which would be representative of the cost of parts for each type of repair. The balance of the charge would constitute labor and thus not be subject to the sales tax.
It appears reasonable to conclude that the charges to be made by the company, using its minor, general, major, and maximum classifications, may within each category reasonably approximate the fair retail selling price of parts and materials. It is clear that tax reimbursement may not be charged to the customer based upon the total repair price and that any charge for parts and materials cannot be based upon an average of parts and materials used in all classifications of repair. It is reasonable, however, to accept the practice that has been proposed as being in compliance with the regulation if in effect the "fair retail selling price" of the parts and materials used in any particular repair transaction is reasonably ascertained.
The exception to the acceptance of this procedure would occur where no parts or materials are utilized in a repair. The company would not be permitted to collect tax or tax reimbursement from its customers based upon the "fair retail selling price" of parts where in fact no parts were sold. 6/4/76.