Fixing damaged motor vehicle structures such as frames, body panels, and trim pieces. Businesses that provide these services include:

• Automotive dealers
• Body shops
• Independent installers
• Paint shops

Fixing the mechanical systems of motor vehicles such as engines, transmissions, electrical, and braking systems. Businesses that provide these services include:

• Automotive dealers
• Garages
• Independent installers
• Service stations

A self-propelled vehicle that must be licensed for road use. Example include:

• Cars, pickups, trucks, and vans
• Motorcycles
• Motor homes
• Semi-tractors
• Trailers

Auto body and automotive repair labor is not taxable when it is separately stated from repair parts on the invoice. Repair labor restores an item to its original condition so it can be used for its original purpose.

Parts used to repair or service a vehicle are taxable to the customer. Parts are easily assigned to a repair or service and have a fixed price. Examples are listed in the table below.

Do not pay sales or use tax when you purchase these parts to use in your business. Give your supplier a completed Form ST3, Certificate of Exemption. Specify the Resale exemption.

A core charge is a deposit charged at the time of purchase. The core charge is part of the taxable sales price when the part is subject to sales tax.

When the old part is returned, the core charge and the sales tax collected on the charge, is refunded back to the customer.

Prepaid oil changes are taxable at the time they are purchased, not when they are redeemed.

When a customer trades in an old tire for a recapped tire the entire charge is taxable, less an allowance for the trade-in.

Tire siping is taxable. The federal excise tax on tires is subject to sales tax.

Labor to add or install something new or different to a vehicle is taxable. The parts being installed are also taxable to the customer. Examples include:

• Adding customized vehicle accessories (dual exhaust, larger carburetor)
• Adding power locks, power windows, cruise control, or window defrosters
• Installing bug deflectors, lighting graphics, and running boards
• Installing remote starters, navigation systems, sunroofs, or theft alarms
• Spraying bed liners
• Tinting windows
• Upgrading a sound system

Charges to apply vinyl decals are taxable. If the customer brings a decal for you to apply, the charge to apply the decal is taxable. If you order or make a decal and apply it to a vehicle, the charges for the decal and the labor are both taxable.

The following services are taxable:

• Applying fabric protector
• Motor vehicle washing, waxing, and cleaning services, including coin-operated facilities
• Rustproofing and undercoating of vehicles

For more information, see  Motor Vehicle.

The total price charged for towing a motor vehicle is taxable, including administrative fees relating to the service. Sales tax is charged on the towing fees based on where the towing service began. However, other services are not taxable.

Example

• A towing company in Maple Grove sends a tow truck to pick up a car in Minneapolis. The tow truck delivers the car to a body shop in Maple Grove. The towing service is subject to the tax rate in Minneapolis where the towing service began.

For more information, see Towing, Cleaning, and Rustproofing Services.

Treat the Repair Paint and Repair Materials as Taxable Parts

Separately state the price and quantity of the repair paint and repair materials on the invoice and charge sales tax on that amount. Examples are shown below.

Use an Industry-standard Formula to Calculate the Price of Taxable Repair Paint and Materials

Multiply the number of labor hours by a rate based on standard practices in your industry. The sales price of the repair paint and repair materials must equal or exceed the price you paid for them. State the repair paint and repair materials as a single line item on the invoice and charge sales tax on that amount. Examples are shown below.

Pay Tax on all Purchases of Materials (Does not Apply to Parts)

Pay sales or use tax on your purchase of repair paint and repair materials. State the paint and materials as a single line item on the invoice and do not charge tax on that amount.

Parts and repairs on employee vehicles are taxed the same as repairs for other customers. See the table below for details.

Sales tax may apply if you sell or lease equipment or other items used in your business. For more information, see Isolated and Occasional Sales.

Sales to federal agencies or other federal entities are exempt from tax. The federal agency must give you a purchase order, payment voucher, work order, or a completed Form ST3, Certificate of Exemption.

For more information, see the Government – Federal and Foreign Diplomats Industry Guide.

The state of Minnesota uses a Direct Pay Authorization. State agencies pay the Department of Revenue directly on most purchases. Purchase orders issued by Minnesota state agencies include the necessary direct pay information. Minnesota state agencies do not need to provide a completed Form ST3, Certificate of Exemption.

For more information, see the Government – State Agencies Industry Guide.

Sales to certain local governments may be taxable. To claim exemption on qualifying purchases, the local government must give you a completed Form ST3, Certificate of Exemption.

For more information, see Government -  Local Governments Industry Guide.

Certain purchases by nonprofit organizations are exempt from tax. To claim exemption, the nonprofit must give you a completed Form ST3, Certificate of Exemption.

For more information, see the Nonprofit Organizations Industry Guide.

Repair or replacement parts are not taxable when they are covered by a manufacturer’s warranty or recall.

Optional maintenance contracts provide prepaid coverage for scheduled oil changes, tire rotation, etc. Optional maintenance contracts are taxable if they include any taxable items, unless the cost of those items is insignificant. The sales tax is due when the contract is sold, not when the maintenance is performed.

Used car dealers in Minnesota must provide a warranty with the sale of certain used cars. If you sell such a vehicle and later make repairs under the warranty, no tax applies to the parts used in the repair.

Repair or replacement parts covered by a warranty or guarantee are not taxable when included in the purchase price of a rebuilt engine, transmission, etc.

Extended warranties to cover unexpected repair costs are not taxable. However, sales or use tax does apply to the parts used for contracted repairs. See the table below for details about when tax is due and who pays it.

Items you use to operate your business are taxable unless an exemption applies. Several services are also taxable. If you do not pay sales tax on a taxable purchase, then use tax is due. See the table below for specific examples.

If you donate or give away taxable items, you owe sales or use tax on your cost of the items, no matter who receives it. For example, if you change the oil in a church van at no charge, you owe use tax on your cost of the filter and the oil used.

Subcontracted Repairs and Services

If you subcontract with another business for repair work or services, do not pay sales or use tax on your purchase. Instead, give the subcontractor a completed Form ST3, Certificate of Exemption. Specify the resale exemption.

But you must charge sales tax to your customer for any taxable subcontracted labor, parts, or materials. Charges for repair labor are not taxable.

Clothing

General clothing items are not taxable. Examples include:

• cloth or latex gloves
• coveralls and uniforms
• disposable clothing
• steel-toe shoes or boots

For more information, see Clothing.

• 297A, 61 Definition
  • subd. 3, Sale and purchase        
  • subd. 4, Retail sale
  • subd. 49, Motor vehicle repair paint and motor vehicle repair materials

• 8130.0700 Producing, fabricating, printing, or processing of property furnished by consumer

• 16-03, Optional Warranty and Maintenance Contracts on Equipment

• Clothing
• Computer Software
• Detective and Security Services
• Isolated and Occasional Sales
• Laundry and Cleaning Services
• Lawn and Garden Maintenance, Tree and Shrub Services
• Use Tax for Businesses

• Building Cleaning and Maintenance
• Government – Federal and Foreign Diplomats
• Government – Local Governments
• Government – State Agencies
• Local Sales and Use Tax
• Motor Vehicle