January 2, 1985
You make several inquires regarding the application of the Massachusetts sales tax to a vinyl repair service. The work consists mainly of bonding new vinyl to seats and vinyl car tops to repair tears; recoloring the new vinyl patch to match the seat or top, and restitching seams. Specifically you ask whether to charge sales tax,
1. To new and used car dealerships on repair work to ready an automobile for sale;
2. To dealerships for work performed on recently purchased cars which are still under warranty and for cars not under warranty;
3. To other businesses or medical offices for repair work; and
4. To private individuals for work performed on an automobile or vinyl chair.
You also inquire as to the vendor registration procedure and the use of resale certificates in Massachusetts.
Massachusetts General Laws Chapter 64H, Section 7 requires all vendors doing business in Massachusetts to obtain a registration certificate by completing Form TA-1 and submitting it to the Commissioner of Revenue. "Vendor" is defined in Section 18 as a retailer or other person selling tangible personal property of a kind the gross receipts of which are subject to sales tax. The gross receipts from a service enterprise, such as a repair service, are not subject to the sales tax if tangible personal property is not transferred as part of the service, or if an inconsequential transfer occurs and no separate charges are made for the property. Generally, inconsequential means less than ten percent of the total charge for the service.
However, when a transfer of tangible personal property occurs that is not inconsequential and the repairer does not separately state the charge for the material on the customer's bill, the entire amount charged is subject to the sales tax. When the labor and material charges are separately stated on the customer's bill, only that amount charged for the material is subject to the sales tax, regardless of its comparative value.
When purchasing material used in supplying the service, a repairer will pay sales tax on that material to the vendor. But when purchasing material which will be sold by the service enterprise in the regular course of its business and for which sales tax will be charged to the customer, a resale certificate may be used by the enterprise exempting its purchase from the sales tax. Resale certificates are available upon vendor registration.
Vinyl repair work does involve a transfer of tangible personal property, i.e. vinyl patches, thread and other material. When sold to individuals, medical offices, new and used car dealerships, and other businesses, this material would be subject to tax depending on its value compared to the entire charge, and whether the labor and material charges are separately stated on the customer's bill. Whether an automobile upon which work is performed is under warranty is irrelevant for sales tax purposes.
A dealer in new or used cars may present an exempt use certificate (Form ST-12) to a service enterprise for certain property purchased for use in automobiles for sale. Acceptance of the exempt use certificate by the service enterprise relieves it from liability for collection of the tax from the dealer. (G.L. c. 64H, § 8(f)). Likewise, acceptance of an exempt purchaser certificate (Form ST-5) from a qualified religious, charitable, educational, or scientific organization will relieve the vendor from liability for collection of the tax from such organization.
1. When a vinyl repairer separately states the amounts charged for labor and materials in the customer's bill, only that amount charged for materials, whether or not inconsequential, is subject to the sales tax.
2. When the repairer does not separately state the amounts charged for materials and labor, the entire value of the charge is subject to sales tax, but only if the materials comprise a consequential (ten percent or greater) amount of the total charge.
3. When the value of the material is inconsequential and not separately stated, the transaction is exempt from the sales tax.
4. Acceptance by the repairer of an exempt use or exempt purchaser certificate from the customer relieves the repairer from liability for collection of the sales tax.
Very truly yours,
/s/Ira A. Jackson
Ira A. Jackson
Commissioner of Revenue