Does a Florida vehicle-restoration shop owe tax on consumables that do not become part of the restored vehicle?

Plain-English summary

The Florida Department of Revenue ruled that a vehicle-restoration shop owed sales or use tax when buying consumable overhead items that did not become part of the restored vehicle. Examples included cutting wheels, gloves, masks, towels, drill bits, tapes, polishing pads, mixing cups, and sanding belts.

Materials incorporated into and becoming part of the vehicle could be purchased without tax for resale as part of the repair. Consumables used up by the shop could not be resold merely by listing or marking them up on the customer invoice.

Taxing the shop's consumable purchase and the customer's restoration transaction was not impermissible double taxation because they were separate taxable privileges.

What this means for you

Repair and restoration shops

Separate incorporated parts from shop supplies. Charging customers for consumables does not change the shop's status as their end user.

Accountants and tax professionals

Use inventory and job-cost records to distinguish component materials from overhead consumed during performance.

Common questions

Q: Which purchases can be tax-free?
A: Materials that become component parts of the restored vehicle.

Q: Are shop consumables resold to the customer?
A: No. The shop consumes them while performing the restoration.

Citations and references

• Fla. Stat. §§ 212.02, 212.05, 212.06, and 213.22
• Fla. Admin. Code r. 12A-1.006

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 18A-007

Original ruling text

April 17, 2018

Executive
Director
Leon Biegalski

Question: Whether overhead items purchased and used in the restoration of vehicles, but that are
not incorporated into the vehicles, are taxable when purchased by the restoration facility.
Answer – Based on Submitted Facts: Rule 12A-1.006(1)(c), F.A.C., explicitly states that any
material that becomes part of a vehicle being restored or repaired is not subject to sales or use tax
at the time the material is purchased by the repair/restoration facility. All other materials,
supplies, tools, and the like, that are used by the facility to restore the vehicle are subject to sales
or use tax at the time they are purchased by the restoration facility.
The Department’s position on this matter is clear, only those materials that are incorporated into
and become a part of the motor vehicle being restored are not taxable when purchased by
Taxpayer; but Taxpayer owes use tax on overhead items/consumables that do not become a
component part of the restored vehicle.
XXXX
XXXX
XXXX
XXXX
Subject: Technical Assistance Advisement (“TAA”)
TAA 18A - 007
Sales and Use Tax—Motor Vehicle Restorations
Sections 212.02, 212.05 and 212.06, Florida Statutes (F.S.)
Rule 12A-1.006, Florida Administrative Code (F.A.C.)
XXXX (“Taxpayer”)
Business Partner Number: XXXX
FEIN: XXXX
Dear XXXX:
This letter is a response to your petition dated January 15, 2018 and February 26, 2018, for the
Department’s issuance of a Technical Assistance Advisement (“TAA”) to Petitioner, regarding
motor vehicle restorations. Your petition has been carefully examined, and the Department finds
it to be in compliance with the requisite criteria set forth in Rule Chapter 12-11, F.A.C. This
Child Support – Ann Coffin, Director  General Tax Administration – Maria Johnson, Director
Property Tax Oversight – Dr. Maurice Gogarty, Director  Information Services – Damu Kuttikrishnan, Director

www.floridarevenue.com
Florida Department of Revenue
Tallahassee, Florida 32399-0100

Page 2 of 4
Technical Assistance Advisement
response to your request constitutes a TAA and is issued to you under the authority of section
213.22, F.S.
Requested Advisement
Taxpayer is seeking a determination of whether overhead items purchased and used in the
restoration of vehicles, but that are not incorporated into the vehicles, are taxable when purchased
by the restoration facility.
Facts and Taxpayer Position
Taxpayer is engaged in the business of restoring motor vehicles. These restorations are extensive,
and require replacement of parts and material, in addition to, labor. Vehicle restorations also
require the use of various overhead items, such as: cut-off wheels, gloves, coveralls, strip discs,
weld-busters, wax and grease removers, dust masks, nozzles, towels, air saw blades, drill bits,
tapes of every kind and size, plastic wrap, paper, seem seal tips, polishing pads, finishing polish,
rubbing compound, scotch bright pads, mixing cups and pitchers, tack rags, paint brushes, sanding
belts, and razor blades. These items do not become part of the restored vehicle, but are
consumables being used to carry out the restoration. Taxpayer pays sales tax on the wholesale
price of these items, charges the client the “list price” and marks that price up by fifteen percent
(15%). Taxpayer charges sales tax to their customers on the entire restoration, to include the parts,
labor, and all consumables.
Taxpayer’s request enclosed a copy of a standard signed contract for the full restoration of a vehicle
and an excel spreadsheet with a breakdown of all parts and overhead items invoiced to their
customer. Taxpayer believes they should not be paying tax for the overhead items/consumables,
but should only charge the ultimate consumer, their client, sales tax on the marked-up price of the
overhead items/consumables included in the final price of the restoration. Taxpayer believes
consumable costs, which included tax, are “excessive1” when incorporated into the overall cost of
the restoration.

As an initial matter, there is no duplication of tax, or “double taxation” for these types of transactions. Sales and use
tax are different taxes. Use tax is a tax on the enjoyment of that which was purchased. On the other hand, sales tax
is a tax on the receipt of that which was purchased. See ss. 212.05(1)(a)1.a., F.S. and 212.06(1)(a), F.S. The Florida
Supreme Court has held that it is appropriate, in the instance of different transactions, to tax each activity. Ryder Truck
Rental, Inc. v. Bryant, 173 So.2d 822, 825 (Fla. 1964) (“Clearly there is no ‘pyramiding’ or duplication of tax since
each is on a separate and distinct taxable privilege.”). See also Florida Hotel and Motel Association, Inc. v. Department
of Revenue, 635 So.2d 1044 (Fla. 1st DCA 1994) (When tax is imposed on two separate transactions, there is no
forbidden double taxation, even though the same property may be involved in both transactions.). Here, consumables
are used by the restoration facility, and cannot be “resold” to their customer.
1

Page 3 of 4
Technical Assistance Advisement
Applicable Law and Response
Florida law provides for the imposition of sales tax upon retail sales2 of tangible personal property3
in this state. The tax is imposed on the sales price of each item of tangible personal property sold
at retail, unless specifically exempt. See ss. 212.05(l)(a)l.a and 212.21(2), F.S. The tax is due and
payable at the rate of six percent (6%), plus any applicable surtaxes imposed under s. 212.055,
F.S. Sales tax applies to the “sales price,” and includes “the total amount paid for tangible personal
property, including any services that are a part of the sale.” See s. 212.02(16), F.S.
Rule 12A-1.006, F.A.C, addresses the taxability of dealers that “adjust, apply, alter, install,
maintain, remodel, or repair tangible personal property.” The rule provides that when a repairer
furnishes the parts, the entire charge to the customer for “installing, maintaining, remodeling or
repairing tangible personal property is taxable.” See Rule 12A-1.006(1)(a), F.A.C. Materials and
supplies incorporated into and becoming a part of the tangible personal property being repaired,
remodeled, or maintained, are not taxable when purchased by the repairer.4 However, materials
and supplies used by the repairer, but that do not become a part of the property repaired, are taxable
to the repairer as overhead items. See Rule 12A-1.006(1)(c), F.A.C.
In John B. Mott d/b/a Sunshine City Body Shop v. Florida Department of Revenue, Circuit Court
of the Second Judicial Circuit, Leon County, Florida, Case No. 74-107, June 19, 1974, the taxpayer
did not pay tax on the purchases of various items from wholesalers that he used in the refurbishing
of motor vehicles. These purchases included items such as sandpaper, masking tape and paper,
steel wool, detergents, nuts, bolts, etc. In the invoices presented to his customers, the taxpayer
included a charge for “body and paint materials,” and collected sales tax on the entire amount of
the invoice. The Department assessed the taxpayer use tax on the items he classified as “body and
paint materials” on the bill to his customers.
The Court found:

1. The sandpaper, masking tape, steel wool, masking paper, detergents, rubbing
   compound, buffing pads and rags in question are not becoming a physical part
   of the motor vehicles being worked on except in a de minimis way. Said items
   are being consumed in the refurbishing of the vehicles. The purchase of them
   by Plaintiff from a wholesaler is a taxable event within the meaning of F.S.
   212.05. The Plaintiff is not reselling these items to his customers. There cannot
   be a “retail sale” as defined in F.S. 212.02(3)(a) because the items have already
   The term “sale” is defined to include any “transfer of title or possession, or both, exchange, barter, license, lease, or
   rental, conditional or otherwise, in any manner or by any means whatsoever, of tangible personal property for a
   consideration.” See s. 212.02(15)(a), F.S. The terms “retail sales,” “sale at retail,” “use,” “storage,” and consumption”
   do not include “the sale of materials to a registered repair facility for use in repairing a motor vehicle, airplane, or
   boat, when such materials are incorporated into and sold as part of the repair.” See s. 212.02(14)(c), F.S.
   3
   Tangible personal property includes property which may be seen, weighed, measured or touched or is in any manner
   perceptible to the senses, s. 212.02(19), F.S.
   4
   Under Rule 12A-1.006(5), F.A.C., “labor, parts, and materials used and actually incorporated into and becoming a
   component part of tangible personal property in rebuilding, repairing, or reconditioning same for resale or exclusively
   for leasing are exempt.”
   2

Page 4 of 4
Technical Assistance Advisement
been consumed by Plaintiff and have not sufficiently become part of the
tangible personal property repaired.

2. Rule 12A-1.06 which has been promulgated by the Florida Department of
   Revenue was an appropriate exercise of that agency’s responsibilities and does
   not go beyond the authority of Florida Statutes, Chapter 212 . . . .
   The language in Rule 12A-1.006(1)(c), F.A.C., explicitly states that any material that becomes
   part of a vehicle being restored or repaired is not subject to sales or use tax at the time the material
   is purchased by the repair/restoration facility. All other materials, supplies, tools, and the like,
   that are used by the facility to restore the vehicle are subject to sales or use tax at the time they
   are purchased by the restoration facility.
   The Department’s position on this matter is clear, only those materials that are incorporated into
   and become a part of the motor vehicle being restored are not taxable when purchased by
   Taxpayer; but Taxpayer owes use tax on overhead items/consumables that do not become a
   component part of the restored vehicle.

Concluding Statement
This response constitutes a Technical Assistance Advisement under section 213.22, F.S., which
is binding on the Department only under the facts and circumstances described in the request for
this advice, as specified in section 213.22, F.S. Our response is predicated on those facts and the
specific situation summarized above. You are advised that subsequent statutory or administrative
rule changes, or judicial interpretations of the statutes or rules, upon which this advice is based,
may subject similar future transactions to a different treatment than expressed in this response.
You are further advised that this response, your request and related backup documents are public
records under Chapter 119, F.S., and are subject to disclosure to the public under the conditions of
section 213.22, F.S. Confidential information must be deleted before public disclosure. In an
effort to protect confidentiality, we request you provide the undersigned with an edited copy of
your request for Technical Assistance Advisement, the backup material and this response, deleting
names, addresses and any other details which might lead to identification of the taxpayer. Your
response should be received by the Department within 15 days of the date of this letter.
Best Regards,

Erica Roberts
Erica Roberts, Esq.
Technical Assistance & Dispute Resolution
(850) 717-6326
AMS ID: 7000044261