Which supplies could Kansas auto body and repair shops buy tax-free, and which remained taxable?

Plain-English summary

Kansas Notice 93-04 divides auto-shop purchases into three practical groups.

Consumed in a taxable service

Under K.S.A. 79-3606(n), a shop could generally buy items tax-free when they were consumed in providing a taxable service. Examples included sandpaper, masking tape and paper, rubbing compound, emery cloth, thinners, soaps, degreasers, windshield cleaner, steel wool, and tack rags.

Components or resale items

Under K.S.A. 79-3606(m) or the resale exemption, a shop could generally buy items tax-free when they became part of the repaired vehicle or were resold. Examples included spark plugs, lubricants, wiring, bulbs, antifreeze, body filler, paint, polish or wax, upholstery cleaner, sealants, factory and aftermarket parts, dyes, and air fresheners.

The dealer or shop had to collect sales tax when it billed the customer for the item or included it in a taxable service charge.

If the shop removed inventory to repair its own vehicles that were not held for resale, it had to accrue Kansas sales tax on the cost of those materials.

Shop operating items

The shop was the final consumer of tools and general operating supplies, so it paid sales or use tax when purchasing them. The notice lists examples such as cleaning supplies, car-wash machines, air filters for equipment, hoses, brooms, mops, masks, gloves, buckets, towels, work clothes, polishers, drill bits, paint cans, and drop cloths.

A shop could still buy a normally taxable item without tax if it truly bought that item for resale, but it then collected tax from the retail customer.

What this means for you

Classification depended on the item's role. Track consumables used in taxable customer work, parts transferred to customers, operating supplies used by the shop, and inventory withdrawn for the shop's own vehicles separately.

Common questions

Q: Could a body shop buy paint tax-free?
A: Generally yes when the paint became a component of the customer vehicle, but the shop collected tax when billing the customer.

Q: Were shop rags and cleaning supplies exempt consumables?
A: Not automatically. The notice lists general shop cleaning supplies and many towels or rags among items taxable to the shop, while specified materials consumed in taxable repair work could qualify.

Q: What happened when the shop repaired its own vehicle with inventory parts?
A: It accrued and remitted tax on the cost of the materials.

Q: Could a shop buy tools tax-free for resale?
A: Yes if genuinely purchased for resale, followed by collection of tax from the customer; tools used by the shop were taxable to it.

Citations and references

• K.S.A. 79-3606(n) — property consumed in producing taxable services.
• K.S.A. 79-3606(m) — ingredient or component parts.

Subject

Body and Repair Shops

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: Notice 93-04

Original ruling text

Notice
Notice Number: 93-04
Tax Type: Kansas Retailers’ Sales Tax
Brief Description: Body and Repair Shops
Keywords:
Effective Date: 11/15/1993

Body:

NOTICE 93-4

TO: Automotive Wholesalers, Jobbers, Automobile Dealerships, Paint, Body & Repair Shops

FROM: Kansas Department of Revenue

RE: Consumables v. Non-consumables

DATE: November 15, 1993

 The Kansas Department of Revenue has been asked to identify when charges for sales of tangible personal property to
 automobile dealerships, paint, body, and repair shops are exempt from sales tax.

 K. S. A. 79-3606(n) exempts from sales tax: "all sales of tangible personal property which is consumed in the production,
 manufacture, processing, mining, drilling, refining or compounding of tangible personal property, the providing of services or
 the irrigation of crops for ultimate sale at retail within or without the state of Kansas."

 The following purchases of tangible personal property are generally exempt under K.S.A. 79-3606(n) when the purchases are
 consumed in the providing of a taxable service:

 + sand paper + masking tape
 + masking paper/plastic + rubbing compound
 + emery cloth + thinners
 + soaps and degreasers + windshield cleaner
 + steel wool + tac rags

 K.S.A. 79-3606(m) exempts from sales tax: "all sales of tangible personal property which become an ingredient or component
 part of tangible personal property or services produced, manufactured or compounded for ultimate sale at retail within or
 without the state of Kansas."

 The following purchases of tangible personal property by automobile dealerships, paint, body, and repair shops are generally
 exempt under K.S.A. 79-3606(m) or as purchases for resale:

 + spark plugs + sealant
 + automobile lubricants + gasket seal
 + electrical wire for automobile repair + anti-freeze for automobile repair
 + light bulbs for automobiles + body fillers
 + paints + automobile polish/wax
 + upholstery cleaner + mastics
 + factory and/or aftermarket parts + air fresheners for automobiles
 + dressings and dyes

 The automobile dealerships, paint, body, and repair shops should collect sales tax on these items when they invoice their
 customer for the sale of the item or when the item is included as part of a service charge.

 The lists provided contain only examples of sales of tangible personal property to automobile dealerships, paint, body, and
 repair shops that are generally exempt from sales tax. These examples are not all-inclusive but should be merely used as a
 guide. Additionally, when automobile dealerships, paint, body, and repair shops remove material from inventory for use in

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 repairing their own vehicles which are not held for resale, the appropriate Kansas sales tax(es) shall be accrued and remitted to
 the state of Kansas on the cost of the materials.

 The Kansas sales tax is due on all retail sales of tangible personal property taxable under the Kansas Retailers' Sales Tax Act,
 (hereinafter referred to as the Act). For the privilege of engaging in the business of selling tangible personal property at retail
 in the state of Kansas, each and every retailer shall have the duty to collect from the final consumer or user, the full amount of
 the tax imposed by the Act, unless the purchaser is specifically exempt from taxation under the Act.

 Firms engaged in the repair, rebuilding or repainting of automobiles are the final consumer or user of the following:


 + floor sweep                     + shop cleaning supplies         + tools
 + car wash machines               + air filters for equipment      + hoses
 + pad washers                     + electric extension cords       + brooms
 + mops                            + disposable masks               + gloves
 + buckets                         + paper/plastic seat covers      + ropes
 + paint strainers                 + cloth/paper towels and rags + chamois
 + building materials              + sales and/or bid sheets        + work clothes
 + razor blades                    + pens, pencils, stationery      + brushes
 + electric polishers              + polishing pads                 + metal disks
 + vacuums                         + metal files                    + drill bits
 + chains                          + paint cans                     + drop cloths
 + wheel covers
 Therefore, they must pay the appropriate Kansas sales/use tax at the time of purchase. The list
 provided contains only examples of sales of tangible personal property to automobile
 dealerships, paint, body, and repair shops that are generally subject to sales tax. These examples
 are not all-inclusive but should be merely used as a guide.

 Automobile dealerships, paint, body, and repair shops that buy items such as tools, work clothes
 and work shoes that are purchased for resale to the ultimate consumer may purchase the items of
 tangible personal property exempt from sales tax. However, the automobile dealerships, paint,
 body, and repair shops are obligated to collect and remit the appropriate amount of Kansas sales
 tax(es) on the gross receipts from these respective items.

 This Revenue Notice supersedes all previous Department of Revenue rulings and opinions on this subject, and shall become
 effective upon its publication in the Kansas Register.

 Should you have further questions in this area, you may contact the Kansas Department of Revenue, Taxpayer Assistance
 Bureau, Topeka, Kansas, 66625 or call (913) 296-0222.

Date Composed: 10/02/1997 Date Modified: 10/10/2001

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