HEADLIGHTS ON THE LAW THE “OLD” SALES TAX RULES ARE STILL IMPORTANT BEN JORDAN GADA GENERAL COUNSEL & DIRECTOR OF GOVERNMENTAL RELATIONS Sometimes in the law, like in life, “what is old is new again.” GADA has received several questions recently about sales and use tax, particularly on parts used in vehicle repairs. Although most vehicle sales and leases are now subject to TAVT, not sales tax, the “old” sales tax rules still apply to many dealership transactions, particularly in the service department. Hopefully this article will help when questions arise. THE BASICS Parts Purchased for Resale (Not Taxable). Sales tax does not apply to a dealer’s purchase of motor vehicles, parts, and other resale items sold by a motor vehicle dealer when a properly executed Certificate of Exemption (Form ST-5) is provided to the supplier or manufacturer. Rule 560-12-2-.09 (2)(c). Parts and Labor Itemized Separately. When parts or accessories are installed in a motor vehicle owned by the customer, and the charge for installation or repair labor is itemized on the dealer’s invoice separately from the charge(s) for the parts or accessories, the charge(s) for labor are not subject to sales and use tax. The charge for parts and tangible accessories in a non-warranty repair are taxed to the customer. If the charges for labor and parts or accessories are not itemized on the dealer’s invoice, the entire amount charged to the customer is taxable. Rule 560-12-2-.09 (6)(a). THE GENERATOR 14
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