Does an Illinois auto body shop owe sales/use tax on shop supplies like sandpaper and masking tape, or can it charge customers tax-free for them as a resale?

Plain-English summary

An Illinois auto body shop owner had been audited and told that certain "material, paint" line-item supplies — sandpaper, paint reducers, masking tape and paper — were taxable to the shop because they don't physically leave with the customer's car, while items that do leave with the car are not taxed the same way. The owner wrote in because insurance companies kept insisting these consumable supplies were just part of the "material, paint" charge and shouldn't be billed separately, and asked the Department to confirm the rule in writing.

The Department's answer confirms the audit's distinction. Auto repairmen and body shops incur Illinois Use Tax when they buy consumable supplies that are used up in the shop and never transferred to the customer — things like paint thinners and reducers, masking tape, paintbrushes, sandpaper, towels, abrasives, paint guns, wrenches, and other shop tools. Those items are purchased for the shop's own use or consumption, not for resale, so no resale exemption applies and the shop must pay Use Tax to its supplier.

By contrast, when a shop physically incorporates or transfers supplies and parts into the repaired vehicle itself, that transfer is part of a taxable service, governed by the Service Occupation Tax (and the customer's corresponding Service Use Tax) rather than ordinary sales/use tax on a retail purchase.

The Department also stressed the paperwork side: to buy anything tax-free "for resale," a shop must give its supplier a valid Certificate of Resale. Just listing an item on a repair ticket or invoice isn't enough — the Department can still presume the item wasn't actually transferred to the customer, and if it determines a purchase wasn't really for resale, the shop can be on the hook for Use Tax plus penalty and interest.

What this means for you

Auto repair and body shop owners

Sort your supply purchases by what actually happens to the item. If it leaves the shop attached to or as part of the customer's vehicle (a fender, a part, paint actually applied to the car), it can potentially be purchased tax-free for resale with a proper Certificate of Resale on file. If it's consumed in the process and never leaves with the car — sandpaper, masking tape, paint reducers/thinners, rags, abrasives, paint guns, shop tools — you owe Use Tax on that purchase, and you can't shift that tax burden onto the customer as a "resale" item.

Billing and invoicing practices

The GIL specifically warns that simply itemizing consumable supplies on a repair invoice does not turn them into a resale. If you separately state a selling price for the tangible personal property genuinely transferred to the customer as part of a repair, that separately stated price becomes your Service Occupation/Service Use Tax base; if you don't separately state it, the default tax base is 50% of the entire bill (with cost price as a floor either way).

Handling insurance company pushback

This ruling is useful ammunition for exactly the dispute the requester described: insurance adjusters may want to lump consumable "material and paint" supply charges into a single line item and refuse to pay a separately stated tax/charge for them. The Department's answer draws a clear technical line (transferred to the car vs. consumed in the shop) that shops can point to when justifying why certain supplies are billed and taxed the way they are.

De minimis servicemen

If your shop's annual transferred-property cost is under 35% of total service gross receipts, you may qualify as a "de minimis serviceman," which changes how you account for tax — either through registered Service Occupation Tax on cost price, or (if not required to register) by simply paying Use Tax to your suppliers as an end user, with no ability to collect a separate "tax" from customers.

Common questions

Q: Do I owe tax on sandpaper, masking tape, and paint thinner I buy for my body shop?
A: Yes. The Department treats these as consumed by the shop rather than transferred to the customer, so they're taxable purchases (Use Tax to your supplier) — not resale items, even if you separately list them on the customer's bill.

Q: My insurance company says these supplies are already covered under "material, paint" and won't pay tax on them separately. Is that right?
A: This GIL confirms the Department's own audit position: items that don't physically leave with the car (sandpaper, tape, reducers, etc.) are taxable to the shop as consumables, distinct from parts and materials that are actually transferred to the vehicle. The letter cites 86 Ill. Adm. Code 130.1401 and 140.105 as the basis for that distinction.

Q: Can I just buy everything tax-free and give my supplier a resale certificate?
A: No. A resale certificate is only valid for items that will be physically incorporated into a product resold to your customer. Items used or consumed in performing the service are not for resale, and giving a certificate for them (or just listing them on a repair ticket) doesn't make the purchase tax-exempt — the Department can still assess Use Tax, penalty, and interest.

Q: How is tax calculated on parts and materials that genuinely are transferred to the customer's car?
A: A serviceman can separately state the selling price of the transferred property (taxed on that stated price) or, if not separately stated, use 50% of the entire bill as the tax base — with the serviceman's cost price as a floor in either case. Registered de minimis servicemen (under 35% of gross receipts, 75% for pharmacists/graphic arts) may instead pay Service Occupation Tax on cost price.

Q: Is this letter binding on the Department?
A: No. It's a General Information Letter (GIL), which only directs the taxpayer to relevant regulations and isn't a statement of Department policy or binding in the way a Private Letter Ruling (PLR) would be for the specific requester.

Citations and references

Statutes and regulations:

• 86 Ill. Adm. Code 130.1401 (sale for resale — taxability of sales to auto repairmen/body shops depends on use of the item)
• 86 Ill. Adm. Code 130.101 (Retailers' Occupation Tax imposition)
• 86 Ill. Adm. Code 130.1405 (seller's responsibility to obtain Certificates of Resale)
• 86 Ill. Adm. Code 140.101-140.109 (Service Occupation Tax Act, general)
• 86 Ill. Adm. Code 140.105 (serviceman's tax liability, cited directly alongside 130.1401 in the ruling's summary)
• 86 Ill. Adm. Code 140.106 (serviceman's tax base — separately stated price or 50% of bill, cost price floor)
• 86 Ill. Adm. Code 140.108 (de minimis serviceman not otherwise required to register — pays Use Tax as end user)
• 86 Ill. Adm. Code 150.101 (Use Tax imposition)
• 86 Ill. Adm. Code 160.101 (Service Use Tax)
• 35 ILCS 120/1 (Retailers' Occupation Tax Act)
• 2 Ill. Adm. Code 1200.110 (Private Letter Ruling procedure)
• 2 Ill. Adm. Code 1200.120 (General Information Letter procedure)

Source

• Landing page: Illinois sales tax letter rulings, 2025
• Original PDF: ST 25-0040-GIL

Original ruling text

ST 25-0040-GIL

7/24/2025

SALE FOR RESALE

Auto repairmen and body shops incur Illinois Use Tax liability when purchasing
consumable supplies not transferred to customers, but incur Illinois Service
Occupation Tax liability when transferring or incorporating supplies and parts into
repair services. See 86 Ill. Adm. Code 130.1401, 140.105. (This is a GIL.)
July 24, 2025
NAME
COMPANY
EMAIL
Dear NAME:
This letter is in response to your email dated June 11, 2025, in which you requested
information. The Department issues two types of letter rulings. Private Letter Rulings
(“PLRs”) are issued by the Department in response to specific taxpayer inquiries concerning
the application of a tax statute or rule to a particular fact situation. A PLR is binding on the
Department, but only as to the taxpayer who is the subject of the request for ruling and only
to the extent the facts recited in the PLR are correct and complete. Persons seeking PLRs
must comply with the procedures for PLRs found in the Department’s regulations at 2 Ill.
Adm. Code 1200.110. The purpose of a General Information Letter (“GIL”) is to direct
taxpayers to Department regulations or other sources of information regarding the topic
about which they have inquired. A GIL is not a statement of Department policy and is not
binding on the Department. See 2 Ill. Adm. Code 1200.120. You may access our website at
https://tax.illinois.gov/ to review regulations, letter rulings and other types of information
relevant to your inquiry.
The nature of your inquiry and the information you have provided require that we
respond with a GIL. In your letter you have stated and made inquiry as follows:
Question, I run an auto body shop in COUNTY Illinois, years ago we were
audited In which they found regarding our sales of the “material, paint” line of
our bill was for the items that physically left with the car, meaning sand paper,
reducers due to it evaporating, masking tape and paper, etc. as those items
that do not leave with the car we are to pay tax on those items from our
distributor’s. So, my question is due to arguing this matter with some
insurance companies when I want to charge for these items, they want to say
that it is included in the “material, paint” which by the way I take it from being
audited it is not. I would like you to answer that question and most important
provide me which documentation that says this as I would love to provide this
information to those companies that claim it is. I would appreciate it. Thank
you

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July 24, 2025
DEPARTMENT’S RESPONSE:
The Illinois Retailers’ Occupation Tax Act imposes a tax upon persons engaged in this
State in the business of selling tangible personal property to purchasers for use or
consumption. See 86 Ill. Adm. Code 130.101. In Illinois, Use Tax is imposed on the privilege
of using, in this State, any kind of tangible personal property that is purchased anywhere at
retail from a retailer. See 86 Ill. Adm. Code 150.101. These taxes comprise what is commonly
known as “sales” tax in Illinois. If the purchases occur in Illinois, the purchasers must pay
Use Tax to the retailer at the time of purchase. The retailers are then allowed to retain the
amount of Use Tax paid to reimburse themselves for the Retailers’ Occupation Tax liability
incurred on those sales.
Retailers’ Occupation and Use Taxes do not apply to sales of service. The Service
Occupation Tax Act and Service Use Tax are imposed on the transfer of tangible personal
property incident to sales of service. See 86 Ill. Adm. Code 140.101 and 160.101. If
transactions do not involve the transfer of any tangible personal property, then they
generally would not be subject to Service Occupation Tax or Service Use Tax. For general
information, see 86 Ill. Code 140.101 through 140.109 regarding sales of service and Service
Occupation Tax.
A serviceman’s liability may be calculated in one of four ways: 1) separately stated
selling price of tangible personal property transferred incident to service; 2) 50% of the
serviceman’s entire bill; 3) Service Occupation Tax on the serviceman’s cost price if he is a
registered de minimis serviceman; or, 4) Use Tax on the serviceman’s cost price if he is a de
minimis serviceman not otherwise required to be registered under Section 2a of the
Retailers’ Occupation Tax Act.
Using the first method, servicemen may separately state the selling price of each
item transferred incident to the sale of service. The tax is then calculated on the separately
stated selling price of the tangible personal property transferred. If the servicemen do not
separately state the selling price of the tangible personal property transferred, they must
use 50% of the entire bill to the service customer as the tax base. Both of the above methods
provide that in no event may the tax base be less than the serviceman’s cost price of the
tangible personal property transferred. See 86 Ill. Adm. Code 140.106. These methods result
in the customer incurring a Service Use Tax liability, which must be collected by the
serviceman and remitted to the Department. See 86 Ill. Adm. Code 160.101.
The third way servicemen may account for their tax liability only applies to de minimis
servicemen who have either chosen to be registered or are required to be registered because
they incur Retailers’ Occupation Tax liability with respect to a portion of their business. See
86 Ill. Adm. Code 140.109. Servicemen may qualify as de minimis if they determine that the
annual aggregate cost price of tangible personal property transferred incident to the sale of

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July 24, 2025
service is less than 35% of the total annual gross receipts from service transactions (75% in
the case of pharmacists and persons engaged in graphics arts production). Servicemen do
not have the option of determining whether they are de minimis on a transaction-bytransaction basis. Registered de minimis servicemen are authorized to pay Service
Occupation Tax (which includes local taxes) based upon their cost price of tangible personal
property transferred incident to the sale of service. Such servicemen should give suppliers
resale certificates and remit Service Occupation Tax using the Service Occupation Tax rates
for their locations. Servicemen that incur Service Occupation Tax based upon their cost
price must collect the Service Use Tax from their customers.
The final method of determining tax liability may be used by de minimis servicemen
that are not otherwise required to be registered under Section 2a of the Retailers’
Occupation Tax Act. Such de minimis servicemen handle their tax liability by paying Use Tax
to their suppliers. If their suppliers are not registered to collect and remit tax, the servicemen
must register, self-assess and remit Use Tax to the Department. Such servicemen are
considered to be the end users of the tangible personal property transferred incident to
service. Consequently, they are not authorized to collect a “tax” from their service
customers. See 86 Ill. Adm. Code 140.108.
Sales for resale do not incur sales tax. Purchases for use or consumption may not be
made tax free for resale. To document that a sale to a purchaser is a sale for resale, a
company must obtain a valid Certificate of Resale from a purchaser. For general information
regarding resale certificates, the Department’s regulation for resale certificates, “Seller’s
Responsibility to Obtain Certificates of Resale and Requirements for Certificates of Resale,”
is found at 86 Ill. Adm. Code 130.1405.
The taxability of sales of tangible personal property to automobile repairmen and
body shops will depend upon the use of the items being sold. See 86 Ill. Adm. Code
130.1401(a); 35 ILCS 120/1. An item of tangible personal property can be purchased tax free
by an automobile repairmen or body shop on the basis of a sale for resale when it will be
physically incorporated (transferred) into a product that will be sold to their customer.
Purchases of tangible personal property that are not transferred to customers, but instead
are used by the automobile repairmen or body shops for their services, are not purchases
for resale. These purchases are taxable because the items are used or consumed by the
purchasing business. Examples of such automobile repairmen items are paint thinners and
paint reducers, masking tape, paintbrushes, sandpaper, towels, abrasives, paint guns,
wrenches, shop tools, and other items used or consumed during repair jobs.
Purchasers, such as automobile repairmen or body shops, must provide proper
Certificates of Resale to their suppliers if they are purchasing tangible personal property to
be resold to their customers. Simply identifying the items on repair tickets or invoices for
repair services will be insufficient to rebut a presumption that such items were not

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July 24, 2025
transferred to their customer. For more information, see 86 Ill. Adm. Code 130.1405(a) and
130.1405(d). Purchasers should not be cavalier in making such certifications solely through
invoice and receipt line items. If the Department determines that purchases were not for
resale, the automobile repairmen or body shops will be liable not only for Use Tax, but
penalty and interest as well.
I hope this information is helpful. If you require additional information, please visit
our website at https://tax.illinois.gov/ or contact the Department’s Taxpayer Information
Division at 800-732-8866.
Very truly yours,
George L. Encarnacion, Jr.
Associate Counsel
GLE:sce