TR 36: Repair Work

To repair means to put back in good condition after damage or decay, to mend, to renew or restore. This differs from fabrication in that fabrication/manufacturing creates an original product, while repair work fixes the product when damaged or in the need of repair. The labor involved in repair is not subject to sales/use tax, but fabrication/manufacturing labor is taxable. (See TR20: "Fabrication/Manufacturing Labor" for more details.)

A person performing repair services must collect sales tax on any tangible personal property that they sell. If the repair includes material parts, they must be separately stated on the invoice and tax must be collected; if not separately stated, the entire cost of the repair is subject to sales/use tax. If the repair is primarily labor and any materials used are insignificant to the repair and are not separately stated on the invoice, then the materials are taxable to the repair person and not to the customer.

Examples:

1. A Boulder bar contracts with a craftsperson to custom build a bar. The total amount charged for the bar would be subject to sales/use tax, even if the labor is separately stated, because the labor is fabrication labor.
   
   
2. A Boulder appliance store repairs appliances and has a customer bring in a vacuum for repair. The repair consisted of a new beater brush for $15.00, labor $25.00 and nuts, bolts and clips that are not itemized on the bill. The store must collect sales tax on the $15.00 for the beater brush because it is significant to the repair, but the miscellaneous parts and the labor are not subject to sales tax.  The store did not sell the miscellaneous parts at retail, so the store must pay sales or use tax on these parts at the time they were purchased.

Last Updated on Wednesday, 11 July 2012 12:24