When is auto-upholstery work a nontaxable lump-sum motor-vehicle repair, and when is installing seat covers a taxable sale?

Plain-English summary

Texas classified most of an auto trim shop's work as motor-vehicle repair. Headliners, vinyl roofs, convertible tops, carpet work, and custom seat covers that were permanently installed and required installation skill fell in that category. Because the shop paid tax on its materials and billed customers lump sum, it did not charge sales tax on those repair bills.

Noncustom or stock seat covers were different. Their replacement was a sale and installation of tangible personal property, so the entire lump-sum customer charge was taxable. The shop could buy the stock covers without tax for resale and collect tax when selling them to the customer.

What this means for you

Auto trim and upholstery shops

Classify seat-cover jobs by whether they involve custom, permanently installed repair work or installation of a stock product. The shop's lump-sum billing and tax paid on materials were part of the stated repair treatment.

Vehicle owners and dealerships

Custom upholstery repair can receive different treatment from purchasing stock seat covers, even when both are installed by the same shop.

Common questions

Q: Are headliner, vinyl-roof, convertible-top, and carpet jobs taxable?
A: The letter treats them as motor-vehicle repairs and says the shop should not tax the described lump-sum customer charge.

Q: When are seat covers treated as repair?
A: When custom made, permanently installed, and requiring skill and experience to install.

Q: Are stock seat covers taxable?
A: Yes. The full lump-sum sale-and-installation charge is taxable.

Q: Should the shop pay tax when buying stock covers?
A: No. The letter says tax is collected from the customer at sale.

Citations and references

• Rule 3.290
• Rule 3.292

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8805L0903A01

Original ruling text

May 31, 1988

Dear **:

Thank you for your recent letter concerning the tax responsibilities of an auto
trim shop.

You stated the following facts:

1. Taxpayer is an auto trim shop which provides repair services to retail
   customers (general public) as well as wholesale customers (auto dealerships,
   body & paint shops)

2. Taxpayer's services are exclusively of a repair/replacement nature; he does
   not manufacture any products. Specifically he repairs and/or replaces auto
   upholstery and trim (seat covers, carpet, headliners, vinyl and convertible
   tops).

3. Taxpayer pays sales tax on all materials and supplies purchased for use as
   described above.

4. Taxpayer sends a lump-sum statement to customers for work performed
   (includes labor and materials)

The taxability of the items listed is as follows:

Headliners, vinyl roofs and convertible tops work performed on these items is
considered repair of a motor vehicle. The taxpayer should not bill sales tax
on the lump-sum charge See enclosed Rule 3.290 and Rule 3.292.

Seat covers If the seat covers are custom made, permanently installed on the
seats, and require skill and experience to install, then the activity is repair
of a motor vehicle. Again, considering your statements 3 & 4 above, taxpayer
would not charge sales tax on the lump-sum charge to his customers.

Replacement of noncustom or "stock" seat covers is a sale and installation of
tangible property rather than repair of a motor vehicle. The total lump-sum
charge is taxable to the customer. The taxpayer should not pay sales tax on
the "stock" seat covers when he purchases them because sales tax will be
collected at the time of sale to the customer.

Carpet repair or replacement This is considered a repair of a motor vehicle.
Again, considering statements 3 & 4 above, the taxpayer would not bill sales
tax on the lump-sum charge to his customer.

This opinion is based upon the facts you presented. If there are additional or
different facts, this opinion may change.

Please feel free to contact me if you have any additional questions. You may
write me, call toll-free 1-800-531-5441 from anywhere in the United States or
phone 512/463-4685.

Sincerely,

Julie Pesl
Tax Policy Division