Proper Reimbursements on Paint Material Caps
I once saw a chart showing which states have paint materials caps legislation. I was surprised some states didn’t have any. Don’t the states know how much money they’re losing in sales tax revenue?
There is a great deal of frustration with paint material caps and proper reimbursements. You should review this with your accountant sooner rather than later, in case incorrect assumptions were made about your tax obligation.
The burden of applicable sales tax in most states is on the repairer regardless of consumer or insurer reimbursement. The fact that a repair facility may be “capped” on reimbursement does not release_notes your potential tax liability.
The process of properly calculating paint material has long been difficult. It’s based on reimbursement rates from carriers, state sales tax, actual cost of paint material with a small percentage of markup, and lost sales that may be unrecoverable.
Whether the math is based on a paint materials calculator or on refinish hours, the problem lies with those in the industry who imply that true costs are excessive or who subject facilities to additional administrative work to prove need for reimbursement. It’s a shame that, for decades, the industry was able to grasp a formula deemed acceptable, which then disappeared without explanation or documentation, seemingly overnight without a proven and accepted replacement.
You’ll want to be sure that you are professionally guided in accordance with applicable tax law—especially around the often contentious area of write-offs—no matter what state you live in. The other concern that needs to be addressed with your accountant is properly adjusting lost sales.
I hope 2010 will prove better.
Ray Fisher is the president of ASA-Michigan. This article represents his opinion and does not reflect the views of ASA-Michigan.