Which automobile machine-shop services were taxable repair, remodeling, processing, or parts sales?

Plain-English summary

This internal Tax Policy memo classified 22 automobile machine-shop activities. It said the word “TAXABLE” identified taxable transactions.

Ordinary repair or maintenance work—such as welding or boring blocks, surfacing or milling heads, valve jobs, cleaning components, rebuilding heads, and pressing pistons—was not marked taxable. By contrast, performance modifications such as porting heads, enlarging valves, modifying blocks, changing combustion-chamber cubic centimeters, and flow-testing heads were classified as taxable remodeling or processing. Selling reconditioned parts was also taxable as a sale of tangible personal property.

The memo added an important bundling rule: when normal repair, restoration, or maintenance was performed together with taxable engine remodeling, the total charge was taxable.

Common questions

Were ordinary engine-repair labor charges marked taxable? No. The memo reserved the “TAXABLE” label for the identified remodeling, processing, and parts transactions.

Were performance modifications taxable? Yes. The memo marked porting, valve enlargement, block modification, combustion-chamber changes, and related flow testing taxable.

What if repair and remodeling were performed together? The total charge was taxable.

Were reconditioned parts taxable? Yes, as tangible personal property.

Citations and references

• 34 Tex. Admin. Code Rule 3.290 — automobile repair and maintenance shops.
• 34 Tex. Admin. Code Rule 3.300 — manufacturing, custom manufacturing, fabrication, and processing.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8604L0711G11

Original ruling text

DATE: April 8, 1986

TO: Pam Gibson, 2I32

FROM: Dot Burchard, Tax Policy

SUBJECT: Taxable Processing Services and Repair/Maintenance Services in an
Automobile Machine Shop
Rule 3.290 - Automobile Repair and Maintenance Shops
Rule 3.300 -Manufacturing, Custom Manufacturing; Fabrication Processing

Situation: Taxpayer maintains a shop equipped with the following items: bench
grinders, surface grinder, air compressor, welder, die grinder, valve grinder,
honing machine, boring machine, vertical mill, porting table, high capacity
flow bench. Please indicate taxability of taxpayer's services as follows.

Response: The word TAXABLE indicates a taxable transaction.

1) lines and welds blocks
repair - labor

2) pushes rods
repair - press wrist pins between piston and rod

3) surfaces heads
repair - labor

4) bores and hones blocks
repair - bore to put new pistons

5) ports heads, exhausts, chambers, and manifolds; head porting includes
performance and street ports
remodeling - modification to increase engine performance - hot rod - not done
on engine for everyday use - TAXABLE

6) valve jobs
repair of cylinder head

7) decks blocks
repair - same thing as surfacing head, just different terminology

8) matches headers, exhaust plates and manifolds installs and replaces guides,
seats and bearings
repair

9) mills heads
repair - milling and surfacing are the same procedure - see item 3

10) boils heads
maintenance/repair - cleaning before valve job

11) cuts for studs, springs, valve intakes and bridge guides
repair

12) JB welds
repair - welding crack in cylinder

13) checks and cleans valves, heads, shafts, springs, guides and manifolds
maintenance - labor only

14) rebuilds heads
repair - valve job and surfacing

15) reconditions and sells various parts
taxable tangible personal property - TAXABLE

16) enlarges valves
remodeling - modification of engine to increase
performance - porting - TAXABLE

17) flow-tests heads
remodeling - checking to see if porting was properly done or if additional
porting is necessary - TAXABLE

18) presses pistons
repair - same as item 2 - just different terminology

19) cuts exhausts
repair - labor - cuts stem to check intake and exhaust ratio

20) machines retainers
repair - if keepers/retainers are actually machined. Keepers/retainers are
normally undamaged when removed and are re-usable. If damaged they are
replaced, however, I question them being machined.

21) modifies engine blocks
remodeling - same as porting - to increase engine performance - TAXABLE

22) "cc's" chambers
remodeling - when "cubic centimeters" are changed an engine is being modified
like porting. - TAXABLE

In the event a normal repair, restoration, or maintenance function, (i.e., line
and weld blocks, boil head, mill head, valve jobs, etc.) is being done in
conjunction with remodeling an engine, the total charge is taxable.

If you have any questions or need more information, please call me at
1-800-252-5555 toll free from anywhere in Texas. The regular number is
512/463-4600. You may write me at the Tax Administration Division.