If a motor vehicle repair shop separately states a charge for shop supplies on a customer's bill, is the shop the 'seller' of those supplies and required to collect sales tax on them?

Subject

Repair/Body Shops/Garages — Consumable Supplies And Materials Used In The Repair Of Motor Vehicles

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9306L1259D03

Plain-English Summary

This is not a taxpayer-facing letter ruling — it is a short internal memo dated June 24, 1993, from David Somerville to Laura Biemer within the Comptroller's Tax Policy Division, addressing a question that had apparently come up in a section meeting: when a motor vehicle repair shop separately states a charge for "shop supplies" (things like rags, solvents, and other consumable materials used in the repair), is the shop the "seller" of those supplies for sales tax purposes?

The memo's answer is straightforward: effective October 1, 1991, the law changed so that a motor vehicle repair person who separately states a charge for shop supplies is a seller of those shop supplies under Texas Tax Code Sec. 151.060(a). The memo notes that the wording of the (then-applicable) Rule 3.359(c)(2) presumed nobody would separately state a shop-supplies charge unless they intended to purchase those supplies tax-free using a resale certificate — but the memo clarifies that this presumption doesn't matter for the seller determination. Regardless of whether the shop issues a resale certificate to buy its own shop supplies tax-free, separately stating the charge to the customer makes the shop a seller of those supplies, and it must collect tax on the charge, unless the shop instead operates as a "lump-sum repair person" under Sec. 151.060(b) (in which case different rules apply).

Importantly, the document as published on STAR carries an ALERT notice at the top stating that the rule it cites, 34 Tex. Admin. Code Rule 3.359, has since been repealed and superseded by Rule 3.290 for issues relating to motor vehicle repairs. That means the underlying statutory rule in Tax Code Sec. 151.060(a) — separately stating a shop-supplies charge makes you the seller of those supplies — is still the operative legal principle, but anyone relying on this memo today should look to current Rule 3.290 rather than the now-repealed Rule 3.359 for the Comptroller's current regulatory framework on motor vehicle repairs.

What This Means For You

If you separately state a "shop supplies" charge on repair invoices

Under Sec. 151.060(a), separately stating a charge for shop supplies makes your business the seller of those supplies to the customer, and you must collect sales tax on that charge. This is true whether or not you also purchased those same supplies tax-free from your own supplier using a resale certificate.

If you buy your shop supplies using a resale certificate

Using a resale certificate to purchase shop supplies tax-free does not, by itself, change your seller status. The memo makes clear that the seller determination turns on whether you separately state the shop-supplies charge to your customer — not on how you acquired the supplies.

If you use "lump-sum" repair billing instead

The memo notes an exception: a "lump-sum repair person" under Sec. 151.060(b) is treated differently. If your shop bills repairs as a single lump-sum charge rather than separately stating a shop-supplies line item, this memo's seller-status conclusion does not automatically apply — consult a tax professional about how Sec. 151.060(b) treats your specific billing method.

If you are an accountant or tax professional advising a repair shop

Remember that the specific rule cited in this 1993 memo, Rule 3.359(c)(2), has been repealed and replaced by Rule 3.290. The statutory principle (Sec. 151.060(a)) likely remains current, but you should verify current requirements against Rule 3.290 rather than relying on the repealed rule text referenced here.

Q&A

Q: If a repair shop separately states a shop-supplies charge, who is the "seller" of those supplies for sales tax purposes?
A: The repair shop itself. Per the memo, effective October 1, 1991, a motor vehicle repair person who separately states a charge for shop supplies is a seller of those supplies under Texas Tax Code Sec. 151.060(a).

Q: Does it matter whether the shop issued a resale certificate to buy the supplies tax-free?
A: No. The memo states that regardless of whether a resale certificate is issued, the person is a seller of the shop supplies (unless the Sec. 151.060(b) lump-sum exception applies).

Q: What rule did the memo originally cite, and is it still in effect?
A: The memo cited 34 Tex. Admin. Code Rule 3.359(c)(2). The document's own ALERT notice states that Rule 3.359 has since been repealed and replaced by Rule 3.290 for motor vehicle repair issues.

Q: Is there any exception to the seller-status rule described in the memo?
A: Yes. The memo notes that a "lump-sum repair person" under Sec. 151.060(b) is treated differently from a repair person who separately states the shop-supplies charge.

Q: Who wrote this memo and who was it sent to?
A: It was sent by David Somerville to Laura Biemer, both within the Comptroller's Tax Policy area, dated June 24, 1993, following discussion of the issue in a section meeting.

Q: Is this document a binding letter ruling I can rely on?
A: No. It is an internal Comptroller staff memo, not a taxpayer-specific letter ruling, and does not carry letter-ruling reliance protection under 34 Tex. Admin. Code Rules 3.1 and 3.10. It also references a since-repealed rule (Rule 3.359), so current guidance should be checked against Rule 3.290.

Original ruling text

ALERT: The cited rule, Rule 3.359 has been repealed. See Rule 3.290 for issues relating to Motor Vehicle Repairs.

DATE: June 24, 1993

TO: Laura Biemer

FROM: David Somerville

SUBJECT: Separately Stated Shop Supplies

I discussed your issue in our section meeting today. Effective October
1, 1991, the law changed and a motor vehicle repair person who
separately states a charge for shop supplies (tangible personal
property) is a seller of the shop supplies per 151.060(a) of the Tax
Code. The wording in Rule 3.359(c)(2) presumes nobody would separately
state shop supplies unless they were going to purchase the shop
supplies tax free by issuing a resale certificate. Regardless of
whether the resale certificate is issued, the person is a seller of
the shop supplies unless 151.060(b) applies and the person is a
lump-sum repair person.

NOTE: Previous Accession Number 93070187L.2 and/or 9307187L