SALT Report 2895 – The Minnesota Department of Revenue updated its sales tax fact sheet to provide guidance regarding the taxability of repair and maintenance services for individuals.
Generally, repair and maintenance labor for individuals is not taxable so long as the labor charges are separately stated on the customer’s bill or invoice. Non-taxable services includes:
- Repair labor charges to restore an item so that it can be used for its original purpose, and
- Maintenance labor charges to keep an item in good working order or to ensure it keeps operating safely and efficiently
However, if sales tax is charged for parts or materials, and is not listed separately from the labor charges on the bill or invoice, the entire bill may be taxable. The taxability will depend on the how the cost for parts compares to the total service charge. For example:
- If the cost for parts is insignificant compared to the total charge, the service is not taxable. In this case, the repairer must pay sales or use tax on the cost of taxable parts used to complete the repair.
- If the parts cost is a significant part of the total charge, then the entire amount is taxable. In this case, the repairer would charge sales tax based on the total amount charged for parts and labor.
The fact sheet provides examples of nontaxable repair and maintenance labor and how tax applies to travel and trip charges. Lastly, the fact sheet reflects that effective July 1, 2013 sales and use tax is imposed on the repair and maintenance of certain equipment and machinery for businesses. This was previously discussed in SALT Report 2752.
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