Tax Guide for Auto Repair Garages
Specialty Repairs or Services

Smog Checks and Certification

The smog check fee and the smog certificate fee are both nontaxable charges. However, if you are a DMV licensed vehicle dealer performing a smog check on a vehicle you plan to sell, then the charge is taxable.

The certificate fee amount is regulated by the Department of Consumer Affairs. Certificate fees must be separately stated on your invoices.

You cannot perform smog checks unless you meet all of the following conditions:

• You are a licensed smog check station
• You or one of your employees is a licensed smog inspector, and
• You have a licensed smog mechanic on your premises, unless you are a "test only" facility.

The Bureau of Automotive Repair (BAR) issues the above licenses. For more information, contact BAR.

Insurance Work

The taxable amount of an insurance bid will be equal to the estimated parts cost of the bid. You should keep all bids with your records to support the cost of the parts.

If the actual price is less than the bid, you owe the full tax on the bid price amount. If the actual price is more than the bid, you owe full tax on the actual cost. The tax liability is based upon the bid estimate unless both of the following apply:

• You inform the insurance company or customer by providing an amended invoice or other written notification.
• The estimated sales price on the bid is less than your cost for the parts.

Auto Painting and Body Work

For auto painting and body work, you are the consumer of the materials used in these jobs if you bill your customer a single or lump-sum amount. You are the consumer of the materials and repair parts if the value of the materials and parts provided in the repair job is ten percent or less of the total charge, and you bill a lump-sum amount. When you are the consumer, your lump sum charge to your customers for repainting or refinishing used items is not taxable. Because you are the consumer of the materials and parts, you should pay tax to the supplier for the purchases of materials. Therefore, if you purchased these items without tax, either by purchasing the materials from a vendor located outside California that did not charge you use tax or if you purchased the materials using a resale certificate, you must report the cost of the materials used on your sales and use tax returns and pay the applicable use tax.

However, regarding auto painting and refinishing, if you make a separate charge for the fair retail selling price of those items rather than charge a lump sum, you are the retailer or paints or similar finishing material used in the performance of a job.

In regard to body work, you are the retailer, not the consumer, of the parts and any materials that remain on the vehicle being repaired, when the fair retail selling price of the parts and materials used in the repair work is greater than ten percent of the total amount charged to the customer. When you are the retailer, you must separately state the charges for these items on your customer’s invoice, and your charges for these items to your customers are taxable. Examples of materials remaining on the vehicle include items such as putty, primer, sealer, acrylic lacquer, and fisheye eliminator. Because you are the retailer of these items, you may purchase these items and similar products for resale.

Although you may be the retailer of the parts and materials used in your repair work, you are the consumer of the supplies and tools that do not remain on the vehicle being repaired. These supplies and tools may include items such as sandpaper, steel wool, masking tape, paint thinner, and bodywork tools. Because you are the consumer of these items, you may not use a resale certificate to purchase these items because these items are taxable when you purchase them for use. For information on charging for supplies, see Invoicing Your Customer in Industry Topics. For more information, see Regulation 1546, Installing, Repairing, Reconditioning in General.

Painting, fabricating, and reconditioning parts

Tax does not apply to labor charges for painting used parts or a new part after installing it on a used vehicle. However, if you separately charge for the paint for the used or installed part, the charge for paint is taxable. Labor charges for painting new parts prior to installation are considered fabrication labor and are taxable.

For more information, see Regulation 1551, Repainting and Refinishing .

Auto Glass Replacement

When installing auto glass, the charge for the glass is taxable. The installation labor is not taxable unless you are installing custom glass on a new vehicle.

Work to cut and grind glass to size and charges for measuring, cutting, and grinding are fabrication labor and are taxable.

Lead-Acid Battery Fees and Refundable Deposits

California Battery Fee

Retail sales of new replacement lead-acid batteries are subject to the California battery fee. A replacement lead-acid battery is a new lead-acid battery sold at retail in California which replaces the original battery that came with the vehicle, watercraft, aircraft, or equipment. Replacement lead-acid batteries do not include spent, discarded, refurbished, reconditioned, rebuilt, or reused lead-acid batteries. As the retailer, you must collect the $2.00 California battery fee from your customer at the time of purchase. You must also register for a California battery fee account, file, and pay the fees collected to us, even if you have a seller's permit or Certificate of Registration – Use Tax account. The California battery fee is imposed on the consumer and is not subject to sales or use tax.

You may retain 1.5 percent of the fee collected as reimbursement for any costs associated with the collection of the fee. The remainder of the fee shall be paid to us when the fee is due.

Please refer to our Tax and Fee Rates webpage for current rates.

Manufacturer Battery Fee

California manufacturers or importers of lead-acid batteries must pay a $2.00 manufacturer battery fee on the sale of the battery. A retailer is considered an importer if they purchase and import lead-acid batteries from a manufacturer who is not subject to the jurisdiction of California, and is required to pay the manufacturer battery fee for each battery purchased and imported from the manufacturer. If you are making the first sale of lead-acid batteries inside California, you are responsible for both the California battery fee and manufacturer battery fee. You must register, file, and pay both fees to us. Importers who are responsible for the manufacturer battery fee may agree, in writing that the manufacturer not subject to California jurisdiction will pay the manufacturer battery fee on behalf of the importer.

Please refer to our Tax and Fee Rates webpage for current rates.

For more information regarding collecting and reporting lead-acid battery fees, see the Dealers/Retailers section of the Lead-Acid Battery Fees Guide.

Lead-Acid Battery Refundable Deposit

You must charge a refundable deposit (amount not specified) each time a consumer purchases a new lead-acid battery, regardless of the consumer giving you a used lead-acid battery at the same time. You must refund the deposit if a used lead-acid battery of the same type and size is returned within 45 days from the date of the sale of the new lead-acid battery (HSC section 25215.2). You must separately state the refundable fee and deposit on the customer's invoice. The refundable deposit is only charged on new lead-acid batteries and does not apply to refurbished or reconditioned batteries.

This refundable deposit is subject to sales tax. However, when you refund the deposit, you should not refund the sales tax because the refundable deposit is a trade-in allowance, which is part of the payment for the sale.

Tire Sales and Recapping

Sales of new and used tires, including recapped or retreaded tires, are taxable. Tax is due on the selling price less any discounts allowed before you deduct any trade-in allowances.

Sellers of new tires must register for and pay the California Tire Fee. See Getting Started.

The fee of $1.75 per tire is not taxable. If you charge a higher amount, you owe tax on the excess charge.

When recapping tires, if you return the original tire to the customer, 75 percent of the charge is taxable. If you return a similar tire and not the original, the entire charge is taxable.

For more information about recapping, see Regulation 1548, Retreading and Recapping Tires.

Spray-on Bedliners

Charges to install a spray-on bedliner are taxable depending on whether the vehicle is new or used and how you charge for the materials.

If you are installing a spray-on bedliner on a new pickup truck, then the entire charge to perform the service is taxable. This charge includes the labor charge as well as the material charge. You may issue a resale certificate to your suppliers for the purchase of the materials you apply to the beds of new pickup trucks. You must also pay tax to your suppliers for purchases of tools used to install the spray-on bedliner.

If you are installing a spray-on bedliner on the bed of a used pickup truck, the labor you charge to install the spray-on the bedliner is nontaxable repair labor. If the retail value of the materials is 10 percent or less of the total charge, you are the consumer of the materials and the charge to your customer is not taxable. In this case, you must pay sales or use tax to your suppliers or report use tax on the purchase of materials you used to install spray-on bedliners to the beds of used pickup trucks. However, if you make a separate charge for materials you apply to the bed of a used pickup truck when you install a spray-on bedliner, there is a sale of the materials and the charge to the customer is taxable. In this case, you may issue a resale certificate to your suppliers for the purchase of the materials you apply to the beds of used pickup trucks.

Wrapping Vehicles

Charges to install vehicle wrapping are taxable depending on whether the vehicle is new or used and how you charge for the materials.

If you are installing vehicle wrapping on a new vehicle, then the entire charge to perform the service is taxable. This charge includes the labor charge as well as the material charge. You may issue a resale certificate to your suppliers for the purchase of the vehicle wrapping you apply to new vehicles.

If you are installing vehicle wrapping on a used vehicle, the labor you charge to install the vehicle wrapping is nontaxable repair labor. If the retail value of the materials is 10 percent or less of the total charge, you are the consumer of the materials and your charge to your customer is not taxable. In this case, you must pay sales or use tax to your suppliers or report use tax on the purchase of materials you used to install vehicle wrapping to used vehicles. However, if you make a separate charge for materials you apply to the used vehicle when you install vehicle wrapping, there is a sale of the materials and the charge to the customer is taxable. In this case, you may issue a resale certificate to your suppliers for the purchase of the materials you apply to used vehicles.

Warranty Work

Whether tax applies to parts for warranties depends on whether the warranty is mandatory or optional at the time the vehicle is purchased and whether the customer pays a deductible. The tables below demonstrate when tax applies to warranty repair charges.

Note:

1. None of the warranty types described in this table include a provision requiring the customer to pay an amount for tax on the portion of the deductible related to the sale of parts. For more information and calculation examples, see publication 25, Auto Repair Garages and Service Stations.

To calculate the taxable portion of the deductible, use this formula:

(Charges for parts ÷ total charges) × deductible = taxable portion of deductible