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Tax on Repair Labor in Georgia: Sales Tax Savings Possible!

author photo of Lauren Stinson

In general, the taxable sales price for an item of tangible personal property in Georgia includes the cost of materials used and the labor. However, there is an opportunity for some potentially big sales tax savings if these charges are listed separately by your vendors on invoices. Here are some basic tips:

1) First, it is important to know that the GA DOR separates labor into different categories. The most common types of labor are repair, installation, and fabrication labor, defined as follows:

  • Repair labor is labor to repair or restore an item to its original form
  • Installation labor is labor to affix, connect, or make an item ready for use
  • Fabrication labor is labor to make a new item or change an existing item into a new item

2) Next, check to see if the type of labor is clearly defined by the vendor. In Georgia, repair and installation labor for tangible personal property is exempt from sales tax; however, it must be separately stated from the material charges on an invoice. This is an opportunity for significant tax savings!

3) Unfortunately, if fabrication labor is being provided, the entire charge will be taxable regardless of whether or not the labor charges are separately stated.

Example: If a vendor is charging you $3,000 to repair tangible personal property and bills you in a lump sum, you could pay as much as $240 in tax (8% x $3000). If the labor is $2500 and the material is $500, AND these charges are separated on the invoice, the tax charge will only be $40 (8% x $500). That is a $200 savings, and these sales tax savings will only increase with larger dollar invoices.

So what should you do if you have a repair or installation invoice for tangible personal property from a vendor that is just a lump sum? You can easily request a material/labor breakdown from the vendor; thus, making only the material charge taxable. As illustrated above, this can lead to big sales tax savings since labor is usually a much larger portion of an invoice.

Do your vendors typically lump materials and labor together on your repair invoices?
Has anyone had trouble getting a vendor to separate the charges?
Any examples of how much money you have saved by not paying sales tax on repair labor charges?

Use our “Comment” feature (below) to send your feedback or questions!

About the Author: Lauren Stinson, CMI, is Owner and President of Windward Tax, a sales and use tax consulting firm. She has more than 20 years of experience working with manufacturers on sales and use tax issues. Lauren is pleased to share her expertise with SalesTaxSupport readers. She is the Manufacturing contributor for SalesTaxSupport’s Industry blog and she is the Georgia Sales Tax contributor for SalesTaxSupport’s State blog.

Comments or questions may be submitted by using the on-page "Comment" feature, subject to disclaimer at bottom of page. More specific questions or requests may be sent to Lauren directly using the orange "REQUEST" link on Lauren's Firm Profile page.

Other recent “Georgia (GA)” posts by Lauren Stinson, CMI:

NOTE: All blog content, comments, and participation subject to disclaimer at bottom of page.

Comments

18 Responses to Tax on Repair Labor in Georgia: Sales Tax Savings Possible!

  • Posted by Awilda on July 7, 2016 2:26pm:

    Our main office is located in Illinois. When providing a customer with a Preventative Maintenance on their Optical Equipment, is tax to be charged on the labor?

    The equipment is used to manufacture eye wear.

    Thank you!

    • Posted by Author photo of Lauren Stinsonlaurenstinson on July 13, 2016 9:07am:

      Assuming that the repair work is done in Georgia, repair labor is not taxable. However, you may need to collect sales tax or pay use tax on all materials and supplies used – or collect an exemption certificate from your customer. There are a lot of variables to consider, so there isn’t a one-size-fits-all answer. If you would like to schedule a consultation, please feel free to contact us.

  • Posted by Nancy on June 16, 2016 1:41pm:

    If a vendor in an antique mall is hired to paint furniture for a customer can she charge for materials and labor separately and only charge tax on the materials?

    • Posted by Author photo of Lauren Stinsonlaurenstinson on June 30, 2016 9:35am:

      Painting furniture would be considered to be a service, as opposed to a sale of tangible personal property and repair labor. The vendor should pay tax on the cost of the paint at the time of purchase and collect no tax at the time of service. This method would be significantly easier for administrative purposes as well.

  • Posted by David on June 14, 2016 2:19pm:

    I sell maintenance contracts on Tangible property, I was invoicing in a lump sum amount, from my understanding, if I can reasonably estimate the materials costs that will be used and separately state that from the labor in my billing, then I will only have to charge tax on the material portion - is my understanding correct?

    • Posted by Author photo of Lauren Stinsonlaurenstinson on June 30, 2016 12:03pm:

      For sales and use tax purposes, maintenance contracts are different from repair services. Maintenance contracts are not taxable. All the materials and supplies used to fulfill the contract should not be purchased for resale by the repair person. Tax should be paid upfront and then no tax should be charged on the sales of the maintenance contract.

  • Posted by Daniel on April 8, 2016 10:45am:

    I recently had services done to my car where the invoice was broken down in Labor, parts, and disposal fees and I was charged sales tax for all of it. Is it not true that the labor is not to be charged sales tax?

    • Posted by Author photo of Lauren Stinsonlaurenstinson on April 27, 2016 10:50am:

      In this case, you are correct. If the work is done in Georgia, the repair labor should not be taxed IF it is separately itemized on your bill. However, if the labor is charged as part of one lump sum, the entire invoice would be taxable.

      • Posted by Mrs. on June 30, 2016 6:36am:

        Ms. Lauren, where can I find this in the GA Sales tax code? I need to show a vendor proof that "If the labor is charged as part of one lump sum, the entire invoice would be taxable". Thank you.

        • Posted by Author photo of Lauren Stinsonlaurenstinson on July 13, 2016 6:42am:

          Charges for repair labor are exempt from sales tax, if they are stated separately on the invoice. This can be found in O.C.G.A. Sec. 48-8-3(23), Reg. Sec. 560-12-2-.88, Reg. Sec.560-12-2-78(1)(a), and Reg. Sec. 560-12-2-.78(1)(b).

          “The sales and use taxes levied or imposed by this article shall not apply to:
          48-8-3(23) Fees or charges for services rendered by repairmen for which a separate charge is made”
          “Reg. Sec. 560-12-2-.88 Charges for labor in installing, applying, remodeling or repairing tangible personal property sold, when billed separately to the consumer, are not considered a part of the sales price of the article sold. Unless such labor is separately stated on the consumer's invoice, the total charge shall be subject to the tax.”
          “560-12-2-.78(1)(a) If the dealer performing the repair work does not state separately, itemize or segregate at a fixed or retail price the materials and supplies so used or consumed, the tax will apply to the total charge for such materials and labor.
          560-12-2-.78(1)(b) If the dealer performing the repair work does separate, itemize, and invoice at a retail selling price the parts, materials and supplies used, stating separately the amount for labor, the tax will apply to the retail selling price of the materials and supplies listed and itemized.”

          I hope this helps!

  • Posted by Kev on April 6, 2016 12:32pm:

    If you own a diesel repair shop, would I tax 8% of the labor cost ?

    • Posted by Author photo of Lauren Stinsonlaurenstinson on April 27, 2016 10:52am:

      Kev, Please see my above response to Daniel. In Georgia, labor should not be taxed IF the labor is stated separately on the invoice.

  • Posted by Tonia on February 21, 2016 9:36am:

    If a customer orders a product and pays a rush order fee is that fee taxable?

    • Posted by Author photo of Lauren Stinsonlaurenstinson on March 8, 2016 1:36pm:

      Tonia,
      Freight, delivery, and transportation charges, along with handling charges, are generally not deductible from the "sales price" or "purchase price" in determining the sales or use tax base. As such those charges would be included in the taxable price. Although Georgia code doesn’t specifically address “rush fees” I would liken them to handling charges and include them in the taxable base.

  • Posted by John on February 18, 2016 7:02pm:

    If you are a printing company in Georgia and some clients have jobs that they want you to mail throughout the state and in other states ( or drop ship be fed ex or ups ) how do you tax the job. Sometimes when you drop ship it might be on our account or their account for the fed ex or ups .
    Would you have to tax each location in GA or is the are "release of responsibility" ruling that would allow us to tax at the zip code for "Bulk Mail Center for the mail jobs and our plant zip code for fed ex and ups drop shipments

    • Posted by Author photo of Lauren Stinsonlaurenstinson on February 25, 2016 7:30am:

      John,

      This is an interesting issue that I have dealt with before. Depending on the particular facts, the taxability could vary. What it boils down to is where does the sale take place or where is title and possession of the product transferred? If you are printing and shipping out of state,Georgia tax would only be due for sales made to Georgia customers? But, what happens if you are printing and storing for your customer, and shipping out as needed? I have seen this scenario often and it can change the tax implications. Also, if you are acting as a printer and mail house, the tax implications can vary as well. As you can see, this is a great example of how complex sales tax can be. Unfortunately, without more specific information, I can’t give you a general answer. I would be happy to consult with you for answers to your specific set of circumstances.

  • Posted by dennis on December 1, 2015 1:47pm:

    Can sales tax be charged for a "delivery fee"?

    • Posted by Author photo of Lauren Stinsonlaurenstinson on December 7, 2015 7:58am:

      Dennis,

      In general, delivery charges are taxable in Georgia. For example, if you were to purchase shoes on-line and have them delivered to you, the total charge for the shoes and the delivery fee would be subject to tax. There are some business-to-business scenarios where delivery could be excluded from the tax if the seller handles the shipping transaction as an agent for the purchaser and meets various criteria.

      If you need additional information about the business-to-business scenario, please contact us for further guidance.

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