May 24, 2013—Minnesota Governor Mark Dayton this week signed the state’s 2013 tax bill into law, which changes the point of imposition of sales tax on auto repair paint and materials from the wholesale to retail level, according to the Alliance of Automotive Service Providers of Minnesota (AASP-MN).
AASP-MN said Minnesota repair shops have historically paid sales tax when they purchase paint and materials at the wholesale level. But shops have been unable to recoup that expense on the final invoice.
“Due to the industry-wide practice of using a ‘dollars-times-hours’ formula to calculate the retail charge for these items, the Minnesota Department of Revenue had ruled that the sales tax could not be applied to the final retail amount—even though the overwhelming majority of the value of automotive repair paint and materials left the shop on the repaired vehicle,” AASP-MN said.
The new tax legislation, which will take effect July 1, allows collision repair shops to purchase paint and materials exempt from sales tax and then collect the sales tax at the time of retail based on the “dollars-times-hours” formula that is standard in the industry.
“Minnesota shops will no longer have to absorb the cost of sales tax on the purchase of paint and materials that are consumed during the repair process or transferred to the vehicle. The tax will now, rightfully, be borne by the end user who receives the benefit of these products,” said Judell Anderson, executive director of AASP-MN. “This is a win for all shops in Minnesota and a prime example of how the work of the association positively impacts the livelihood of not only its members, but the entire repair industry throughout the state.”
