Tax Type
Retail Sales and Use Tax
Description
Motor vehicle repair; Insurance repair claims
Topic
Property Subject to Tax
Taxability of Persons and Transactions
Date Issued
07-31-1986
July 31, 1986
Re: Request for Ruling/Sales and Use Tax
Dear ********************
This will reply to your letter of March 12, 1986, in which you request a ruling on the application of the sales and use tax to your business.
You note in your letter that your business is engaged in the repair of motor vehicles that have suffered body damage. Such repair work is frequently paid for by insurance companies on behalf of their policyholders. You request a ruling on whether the sales tax applies to such repair transactions and whether your business should pay the sales tax to its suppliers on materials used in repairs.
Section 58.1-603 of the Code of Virginia imposes the sales tax "upon every person who engages in the business of selling at retail or distributing tangible personal property in this State." Furthermore, Virginia Code Section 58.1-612 requires that all persons making sales or distributions of tangible personal property must register and collect the sales tax from their customers on such sales. Therefore, your business will be required to collect the sales tax on repair transactions in which parts or other tangible personal property are furnished to customers.
The sales tax generally will apply to the total charge made to the customer for tangible personal property and any related services, except that in the case of a repair business like yours, repair labor or service charges can be excluded from the tax when separately listed on the customer's invoice.
The requirement to collect tax on repair transactions applies also to transactions paid for in whole or in part by insurance companies because insurance companies do not enjoy an exemption from the sales and use tax for purchases made for their own use. Nor do insurance companies enjoy a resale exemption for repair parts placed on vehicles.
As to items of tangible personal property that will be used in performing repair work, those that will actually be transferred to customers as part of repair transactions may be purchased from your suppliers under resale certificates of exemption. However, your business should pay the sales tax to its suppliers on those items used in performing repair work which are not transferred to customers. Such taxable items include rags, tools, equipment, etc., used in repair work.
I hope that this will clear up any confusion: however, please feel free to contact the department if further questions or concerns arise.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner