How did Texas's 1991 motor-vehicle-repair change treat separately stated consumable supplies and lump-sum repairs?

Plain-English summary

This August 15, 1991 internal distribution memo attached a notice mailed to 32,736 taxpayers about House Bill 1458's treatment of supplies used in motor vehicle repair shops. The notice said the change applied to purchases made on or after October 1, 1991.

A repair shop that separately stated parts and labor could purchase qualifying materials consumed in a motor vehicle repair tax-free by giving its supplier a properly completed resale certificate, provided the materials were itemized on the customer's bill. The shop then collected sales tax on the separately stated customer charge. Examples included solvents, masking tape, electrical connectors, body fillers, floor sweep, sandpaper and disks, nuts and bolts, and waxes and polishes.

The notice excluded materials not directly used in the repair, reusable materials, office or showroom materials, natural gas, electricity, tools, and uniform rentals. It also said the provision did not apply to materials consumed in repairing off-road motorcycles, boats, or other items that were not motor vehicles. A lump-sum repairer had to pay tax when buying consumable materials and parts and did not charge sales tax to the customer.

What this means for you

This document is useful historical guidance on the billing-method distinction. Under the notice, separately itemizing qualifying consumables made the shop collect tax on that line and supported buying the materials for resale, while lump-sum billing shifted the tax payment to the shop's own purchase of the materials and parts.

The notice is from 1991 and does not identify the codified provisions enacted by House Bill 1458. Verify the current Tax Code and Comptroller rules before using this historical treatment today.

Common questions

Could a repair shop buy qualifying consumable repair materials tax-free? Yes, if it separately stated the customer charge and issued a properly completed resale certificate to the supplier.

What did the shop do on the customer invoice? It itemized the qualifying consumable material and collected sales tax on that separately stated charge.

Did office supplies, utilities, tools, or uniforms qualify? No. The notice said tax should be paid to the supplier on office or showroom materials, natural gas, electricity, tools, and uniform rentals.

How were lump-sum repairs treated? The lump-sum repairer paid tax when purchasing consumable materials and parts and did not charge the customer sales tax.

Citations and references

• House Bill 1458, identified in the internal memo as the source of the motor-vehicle-repair change.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9108L1126G05

Original ruling text

DATE: August 15,1991

TO: Distribution List

FROM: Karen Glasscock VIA: Charles Hill

SUBJECT: HB 1458 - Motor Vehicle Repairs

Attached is a copy of a letter that was mailed to 32,736 taxpayers on August
15, 1991.

If you have any questions, my number is 3-4143.

Thank you

Distribution List:
Wayne Aldridge, Account Maintenance
Cril Payne, General Counsel
John Neel, Administrative Law Judges
Leo Aguirre, Internal Services
Martin Cherry, Ass't General Counsel
Mike Borkland, Legal Services
Harold Lee, Audit Division Hdqtrs.
Tom Nilsen, Local Government
Linda Pava, Central Administration
Patty Leo, Research
Greg Hartman, Communications
Alvin Miller, Revenue Accounting
Sam Stewart, Data Services
Dovie Ellis, Revenue Administration
Mary Buckley, Economic Development
Jacob Salisbery, Revenue Processing
Jim Teaver, Enforcement
Tom Plaut, Revenue Estimating
Carol Willis, ESO
Mike Doyle, Tax Administration
Jeff Wiginton, Executive Administration
Wade Anderson, Tax Administration
Mike Shoemate, Field Operations
Lucy Glover, Tax Administration
T. C. Mallett, Fiscal Management
Loreto Espinoza, Tax Administration
George Tamayo, Fund Accounting
Gary Hopkins, TBO

cc: John Sharp
Tom Duffy
Billy Hamilton

JOHN SHARP - COMPTROLLER - AUSTIN, TEXAS 78774

Dear Fellow Taxpayer:

The Legislature recently changed the way sales tax is applied to certain
supplies used in motor vehicle repair shops.

Motor vehicle repair shops that separately state the charges for parts and
labor may make tax-free purchases of materials consumed in the repair of a
motor vehicle and itemized on the customer's bill. The repair shop will then
collect sales tax from the customer on the separately stated charge.
Consumable material includes, but is not limited to:

-- solvents
-- masking tape
-- electrical connectors
-- body fillers
-- absorbent floor sweep
-- sandpaper and disks
-- nuts and bolts
-- waxes and polishes

A properly completed resale certificate should be issued to the supplier when
these types of materials are purchased.

Materials and supplies not directly used in the repair shop or materials that
are reused do not qualify for the provision. Tax should be paid to the supplier
on materials used in the business office or showroom, and on natural gas,
electricity, tool purchases and uniform rentals.

The provision does not apply to material consumed in the repair of off-road
motorcycles, boats or other items that are not motor vehicles. Motor vehicles
include cars, trucks, semi-trailers and travel trailers.

A repair shop that does not separately state the charges for labor and material
is considered a lump-gum repairman and must pay sales tax when purchasing
consumable materials and parts. No sales tax should be charged to the customer.

This provision applies to your purchases made on or after October 1, 1991.

If you have any questions, please call toll free at 1-800-252-5555. Our Austin
number is 512-463-4600. From a Telecommunication Device for the Deaf (TDD)
ONLY, call 1-800-248-4099 toll free. Our Austin TDD number is 512-463-4621.

Sincerely,

Lucy Glover
Manager
Tax Administration Division