LSN-95
Revised Special Notice Regarding Taxation of
Maintenance and Repair Services to Motor Vehicles
Used In a Trade or Business
Maintenance and Repair Services to Motor Vehicles
Used In a Trade or Business
This Revised Special Notice regarding taxation of maintenance and repair services to motor vehicles used in a trade or business is to restate the Department's position concerning maintenance and repair services to motor vehicles used in a trade or business. Recognizing that the Department's policy in regard to the taxability of rustproofing, paint sealant, and fabric protection may not have been circulated throughout the entire automotive and automotive repair industry, the Department expects all providers of these maintenance services to be in compliance with this policy on or before September 1, 1990.
II. Definitions
A. Motor Carrier Road Tax Identification Marker - the identification described in section 12-487 of the Connecticut General Statutes which is required to be displayed by motor carriers defined in Section 12-478.
B. Repair - to mend or bring back as near as possible to its original working order and item of tangible personal property that was broken, damaged, malfunctioning or defective. (Where used in this notice, the word "repair" shall include repair and/or maintenance services.) Such repairs include painting or replacement related to the body or any operating parts of the motor vehicle. Not included are towing and storage charges.
C. Maintenance - to keep in good working order by preventing the decline, failure, lapse or deterioration of tangible personal property. Such maintenance includes changing engine oil, replacing vehicle fluids, lubricating chassis, replacing spark plugs, filters, rotating tires, recharging air conditioning, rustproofing, applying fabric protection or paint sealant.
D. Rendered - the realization of the benefit of repair or maintenance services which were performed on tangible personal property. This realization occurs in the place where the tangible personal property is used after being repaired.
E. Business Situs - the place where a business is considered to be located; where it engages in its business functions and where its (repaired) property is generally kept, garaged or used.
III. General Rules
As of July 1, 1989, repair and maintenance services to vehicles used in trade or business are subject to the sales tax. Evidence of repairs to such vehicles includes invoices billed to a business, repairs to vehicles bearing commercial registration plates, and repair to vehicles bearing passenger or combination plates where the purchaser indicates on the invoice that any portion of such repair costs shall be treated as a deductible business expense for federal tax purposes. The invoice to repaired vehicles bearing passenger or combination plates must indicate how the purchaser intends to treat such expense for federal income tax purposes. See illustration B.
The taxation of repairs to the vehicles must be divided into two components: the sale of the tangible personal property (parts) and the sale of the services (labor). The sales tax on the services occurs where the benefit of the repairs is realized, i.e., in the place where the repaired vehicle is used. Such use is presumed to occur in this state, and the retailer is, therefore, required to collect the sales tax on the cost of such repair services unless the purchaser produces evidence that the business situs of the vehicle is located outside the state. In such case, it will be presumed that the benefit or use of the services will occur outside the state unless the purchaser engages in significant intervening use of the vehicle in Connecticut. Absent such intervening use, the retailer will not be required to collect the sales tax on the amount received for such services.
Where a vehicle displays a Motor Carrier Road Tax Identification Marker, such marker shall be an indication that the benefit or use of any motor vehicle repair services will be realized in this state. The retailer must, therefore, collect the sales tax.
No apportionment of the amount received for services shall be made even though a Connecticut purchaser may intend to make substantial use of such services outside the state. Nor shall there be any apportionment made even though a non-Connecticut purchaser whose vehicle does not display a Motor Carrier Road Tax Identification Marker engages in temporary and brief use of such services in this state. Temporary and brief use shall mean use that is incidental to the removal of such vehicle from the state. In such case, no part of the amount received for such services shall be subject to tax.
Where a non-Connecticut retailer repairs a trade or business vehicle with a business situs in Connecticut, the Connecticut purchaser is required to pay the Connecticut use tax on the amount paid to such non-Connecticut retailer for the repairs performed outside this state.
IV. Illustrations
A. A Connecticut retailer repairs a trade or business vehicle which has a business situs in the state. In such case, the amount received for such services is subject to tax.
B. A Connecticut retailer repairs a vehicle which bears passenger or combination plates. In such case, the following statement must be printed or stamped on the invoice and signed by the purchaser.
The amount (or any portion thereof) charged for the repairs indicated on this invoice (or mileage for the vehicle) will be claimed as a business expense for federal income tax purposes.
| Yes [ ] | No [ ] |
|
Signature of purchaser or purchaser's agent
If the purchaser indicates "yes", then the retailer shall be required to collect the sales tax on the amount received for the services. If the purchaser indicates "no", a sales tax shall not be collected.
C. A Connecticut retailer repairs a trade or business vehicle which has a business situs located outside the state and the vehicle does not bear the Motor Carrier Road Tax Identification Marker.
In such case, the amount received for the repairs is not subject to the sales tax so long as the purchaser restricts the use in Connecticut of such repaired vehicle to that which is incidental to the removal of such vehicle from the state. If the purchaser uses the repaired vehicle in business activities in this state, such activity shall represent a significant intervening use and the amount received for such services shall be subject to tax.
D. An out-of-state retailer performs repair services on a vehicle with a business situs in Connecticut.
The Connecticut purchaser shall be required to pay the use tax on the amount paid to the out-of-state retailer for such repair services.
LSN-95
Rev. 6/90