SALT Report 2752 – The Minnesota Department of Revenue updated its sales tax fact sheet regarding labor charges for repair and maintenance services. The fact sheet reflects that, as of July 1, 2013, charges for the repair and maintenance of the following equipment and machinery used by businesses are subject to sales and use tax.
Electronic Equipment and Precision Equipment
Sales and use tax applies to labor charges to repair or maintain electronic and precision equipment if the purchaser can deduct the service as a business expense. For example:
- Electronic devices, computers and computer peripherals, monitors, computer terminals, storage devices, and CD-ROM drives,
- Other office equipment such as photocopying machines, printers, and facsimile machines,
- Televisions, stereos, sound systems, video or digital recorders and players,
- Two-way radios and other communications equipment, and
- Radar and sonar equipment such as, scientific instruments, microscopes, and medical equipment
Commercial and Industrial Machinery and Equipment
Charges for labor to repair or maintain commercial and industrial machinery and equipment are taxable, even when the equipment is installed into real property. For example:
- Commercial refrigerators and freezers
- Farm machinery used in agricultural production
- Logging equipment
- Manufacturing and production equipment
- Mechanical cleaning equipment such as, floor sweepers, washers, and scrubbers
- Mining equipment
- Other heavy machinery such as, front end loaders, cranes, bulldozers, back hoes, skid steers, and forklifts, and
- Restaurant equipment
- Truck scales – portable and real property
The sales tax exemption available for capital equipment extends to repair parts and replacement parts. However, the labor to repair or maintain capital equipment is subject to sales and use tax. Additionally, all charges for repair parts and labor must be separately stated on the invoice. Otherwise, the repair parts will not be eligible for the capital equipment refund.
The fact sheet provides additional guidance regarding sourcing of repair labor, maintenance and warranty contracts, travel or trip charges, and record keeping requirements.
For Further Information