Vermont Sales and Use Tax Guide for the
Automove Repairs Industry
1
OCTOBER 2023
Please note: This document provides sales and use tax guidance for auto supply dealers and auto repair shops.
2
VERMONT SALES AND USE TAX GUIDE FOR THE AUTOMOTIVE REPAIRS INDUSTRY- GB-1161
Contents
Introducon � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 3
Denions Used in This Guide ..............................................................3
Repair Parts and Supplies � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 3
Not Taxable: Repair Parts Sold to A Shop That Taxes Them When They Are Resold To The Customer .....3
Not Always Taxable: Parts And Supplies Not Always Resold to The Customer ........................3
Parts and Supplies Typically Resold to Customers � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 4
Itemizing the Bill So That Tax Does Not Apply to The Enre Charge ................................4
Supplies Used by Repair Shops � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 4
Non-Exhausve List of Shop Supplies That are Taxable When Sold to a Shop ........................5
Other Types of Sales or Service � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 6
Shop Supply Line Items on Repair Shop Invoices ...............................................6
Towing and Transportaon Charges ..........................................................6
Storage Charges .........................................................................6
Vermont State Inspecons .................................................................6
Maintenance, Service Agreements, and Warranes .............................................6
Insurance Claims and Repairs ...............................................................6
Sublets and Subcontract Work ..............................................................6
Core Charges ............................................................................7
Free “Loaner” Vehicles ....................................................................7
Vehicles Leased or Rented ..................................................................7
Recondioning Vehicles for Resale ...........................................................7
Contact � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � � 7
3
VERMONT SALES AND USE TAX GUIDE FOR THE AUTOMOTIVE REPAIRS INDUSTRY- GB-1161
Introducon
Both dealers and repair shops must register with the Vermont Department of Taxes to collect and remit
Vermont Sales and Use Tax on retail sales of auto parts and supplies. If you need further assistance with any
topics covered below, please get in touch with us at tax.business@vermont.gov.
Vermont’s 6% sales tax applies to retail sales of tangible personal property. Sales made for resale are not
subject to tax because they are not retail sales. A retail sale occurs when there is a “bargained-for” exchange,
and the price paid corresponds to the item being sold.
Denions Used in This Guide
• Auto Supply Dealer or Supplier: A business that sells auto parts and supplies.
• Auto Repair Shop: Includes any business that provides auto repair or auto body work or services.
• Auto Repair Work: This could include work on any vehicle or vessel, including cars, trucks, RVs,
motorcycles, mopeds, snowmobiles, all-terrain vehicles, and others.
Repair Parts and Supplies
Not Taxable: Repair Parts Sold to A Shop That Taxes Them When They Are Resold
To The Customer
An auto repair shop may purchase parts without paying sales tax if the parts will be resold to its customer as
part of a repair job. When it resells the parts, the auto repair shop must charge the customer directly for the
part and itemize the bill to idenfy the charges subject to tax. If a shop does not itemize the bill, the enre
charge is subject to tax. An auto repair shop must provide Form S-3, Resale Exempon Cercate (hps://tax.
vermont.gov/sites/tax/les/documents/S-3.pdf), to the supplier when using the resale exempon to purchase
items that would otherwise be taxable.
Not Always Taxable: Parts And Supplies Not Always Resold to The Customer
An auto repair shop has a choice when it comes to some supplies that are not always directly charged to the
customer as part of a retail sale. This comes up with items such as oil, anfreeze, transmission uid, brake
uid, and power steering uid. These items are somemes used in repair work but not always directly charged
to the customer, such as when an auto repair shop tops o these types of uids.
The law requires an auto repair shop to follow one of these three approaches:
1. The shop may pay sales tax on these items when purchasing them from a supplier. In this case, the
customer cannot be charged tax—the shop is using the items in its business.
2. If the item is conveyed to the customer the shop may itemize it on its bill to its customer, and collect and
remit sales tax from the customer. In this case, the shop may use a resale exempon cercate when
buying from the supplier.
3. If the shop neither pays sales tax when it purchases the item from a supplier nor charges tax to its
customer, it must pay 6% sales or use tax on the item.
Please contact the Department of Taxes if unique or extraordinary circumstances require you to deviate from
this guidance.
4
VERMONT SALES AND USE TAX GUIDE FOR THE AUTOMOTIVE REPAIRS INDUSTRY- GB-1161
Parts and Supplies Typically Resold to Customers
Below is a non-exhausve list of items that can be purchased tax-free by a shop using a resale exempon
cercate. These parts are then subject to sales and use tax when purchased by a retail customer.
Supplies Used by Repair Shops
Some items are never sold for resale because there is no bargained for exchange that makes the transacon a
retail sale. This occurs when the items’ costs are so insignicant that a customer does not bargain for them. For
• Anfreeze
• Automac transmission uid
• Brake uid
• Brake pads, rotors, shocks,
struts
• Doors
• Electronic sensors
• Fan belts
• Fenders
• Filters
• Headlights, brake lights
• Motor oil
• Rear-view mirrors
• Starters, alternators
• Tires
• Windshields
Itemizing the Bill So That Tax Does Not Apply to The Enre Charge
Repair parts and accessories are subject to tax when sold to a retail customer, but installaon and labor are not
subject to tax. Be aware that if labor and materials are not separately stated, the enre amount charged to the
customer becomes taxable. For example, when the charge for an oil change is a at rate, the enre charge is
subject to tax. If the oil, lter, and labor are instead separately stated, then only the oil and lter are subject to
sales tax.
• Air compressors
• Alignment equipment
• Bodywork tools
• Brushes and rollers
• Bung pads
• Clamps
• Compound pads
• Computers and soware
• Diagnosc equipment
• Engine analyzers
• Filters and strainers
• Grinding wheels
• Hammers
• Impact tools
• Jumper cables
• Lis
• Mechanics’ tools
• Nut drivers
• Paint booths
• Painters’ tools
• Pipe benders
• Pliers
• Respirators and goggles
• Screwdrivers
• Spray guns
• Stencils
• Torches
• Welding equipment
• Wheel balancers
• Wrenches and sockets
What about res? The total selling price of res, including the excise tax, is
subject to sales tax�
Taxable: Tools and Equipment Sold to Auto Repair Shops
The purchase, lease, or rental of tools or equipment for an auto repair shop is taxable. Tools and equipment
are used to perform repair services but are not transferred to the customer as part of the job. An auto repair
shop must pay sales tax when purchasing, renng, or leasing the following non-exhausve list of tools and
equipment.
5
VERMONT SALES AND USE TAX GUIDE FOR THE AUTOMOTIVE REPAIRS INDUSTRY- GB-1161
• Abrasives
• Acetylene metal condioners
• Acrylic nishes
• Applicators
• Body Fillers
• Body puy sealants
• Bondo
• Brake cleaner
• Car wash
• Choke cleaner
• Cleaners, removers, both
liquid and paste
• Disposable gloves
• Drill bits
• Drop cloths
• Enamels
• Engine degreaser or cleaner
• Face masks
• Fiberglass cloth
• Fiberglass mang
• Flux shellacs
• Gases, oxygen
• Gasket maker or adhesive
• General cleaning products
• Glass cleaner
• Grease
• Hand cleaner
• Hardware; screws, rivets
• Key tags
• Lacquers, thinners, and
solvents
• Lead stain
• Liquid and paste
• Lubricants
• Molding
• Mounng paste
• Nuts, bolts, screws, hose,
clamps, thread lock
• Paint
• Paper mats; oor and seat
• Paper towels
• Petroleum spirits
• Plasc ller
• Polyester waxes
• Primer reducers
• Primers
• Rags
• Razor blades
• Resin or epoxy
• Rubbing compound
• Rustproong liquid
• Sanding disks
• Side molding kit
• Solder
• Solvent naphtha
• Speedy Dry
example, paper mats placed on the oor and le in the vehicle upon return are taxed when sold to the shop
rather than the customer because the customer has not bargained for the price.
On page 3 is a list of items that are presumed to never be purchased for resale because they are not typically
bargained-for by the end customer. Auto repair shops should pay sales tax on these items when purchased
from auto supply dealers. Accordingly, dealers should not accept resale exempon cercates from auto repair
shops that are purchasing these items.
Although there is a presumpon that supplies are not purchased for resale and, therefore, taxable, it is
possible that in some extraordinary circumstances, a shop may charge the customer directly and collect tax
because a large volume is used for a repair. In that case, the shop should itemize these materials on the invoice
and collect and remit tax for the price charged to the customer. On its next sales and use tax return, the shop
should credit itself for the amount of tax previously paid to the supplier, provided the resulng use tax balance
is not less than zero. If the balance is less than zero, a shop may:
Apply the use tax credit to a period with enough use tax due to oset the credit, or Request a refund of sales
tax using Form REF-620, Applicaon for Refund of Vermont Sales and Use Tax, Meals and Rooms Tax, or Local
Opon Tax (hps://tax.vermont.gov/sites/tax/les/documents/REF-620.pdf). In either case, the shop should
keep a log of all use tax due and credits and the reason for applying them.
Non-Exhausve List of Shop Supplies That are Taxable When Sold to a Shop
6
VERMONT SALES AND USE TAX GUIDE FOR THE AUTOMOTIVE REPAIRS INDUSTRY- GB-1161
• Super glue
• Tape
• Tie wraps
• Tire lube
• Undercoang
• Valve stems
• Varnish
• Wash mis
• Waxes
• Welding rods
• Wheel weights
• Windshield wash condioners
Other Types of Sales or Service
Shop Supply Line Items on Repair Shop Invoices
Some auto repair shops choose to charge a shop supply fee. This fee is not subject to sales tax because it is
not a resale of supplies itemized and directly charged to the customer. As explained above, tax is paid on shop
supplies when they are purchased from a supplier.
Towing and Transportaon Charges
Towing services and charges for transporng vehicles are not taxable. This includes towing the vehicle to any
repair shop or other locaon.
Storage Charges
Charges for storing a vehicle are not taxable. These include charges to store a repaired vehicle that is not
picked up by its owner by a specic date.
Vermont State Inspecons
The charge for a Vermont motor vehicle inspecon is not taxable. However, any charges for parts related to
repair work resulng from an inspecon are taxable.
Maintenance, Service Agreements, and Warranes
Maintenance, protecon, or service plans may be taxed at the me they are sold to customers. If tax is
collected when the plan is sold to the retail customer, tangible personal property purchased using the plan is
not subject to tax when work is performed. Similarly, parts are not subject to tax when purchased for repairs
that are paid for by a warranty that was taxed as part of the purchase price of a vehicle. This is because those
parts were taxed as part of the motor vehicle purchase.
If tax is not collected when a plan is sold, tax is instead due when tangible personal property is transferred
under the plan. The taxable sales price is based on the retail value of the taxable part or supply. Towing,
storage, and other nontaxable services performed under a plan remain nontaxable.
Insurance Claims and Repairs
When a shop performs repair work that is covered by insurance, it must bill the insurance company the same
way it would bill a retail customer. The tax treatment does not change.
Sublets and Subcontract Work
Retail sales are the only transacons subject to tax. A transacon between one auto repair shop and a dierent
shop conducng sublet work is not at retail. The repair shop should provide an exempon cercate, and
tax should not be collected for that transacon. The taxable transacon is between the repair shop and its
retail customer. The sublet line on an invoice should be split between taxable parts and non-taxable labor. As
explained above, if parts and labor are combined, the enre charge becomes taxable.
7
VERMONT SALES AND USE TAX GUIDE FOR THE AUTOMOTIVE REPAIRS INDUSTRY- GB-1161
Core Charges
A core charge is an amount added to the purchase price of some auto parts, such as automove baeries. The
core charge amount is discounted from the sales price at the me of inial purchase if a customer exchanges a
“core” part that can be recondioned and resold. Core charges are not subject to tax when they are discounted
for a trade-in at the me of purchase. Somemes, the core is not provided at inial purchase, but a core is
later returned to have the core charge refunded. In that case, tax must be collected on the core charge at the
inial purchase, but the tax aributable to the core charge may be refunded later when the core charge is
refunded.
Free “Loaner” Vehicles
Repair parts for a vehicle loaned at no charge to a customer are subject to sales tax. A loan is not considered a
rental or lease because no money is exchanged. The purchase of a vehicle intended for free loan is subject to
6% use tax administered by the Department of Motor Vehicles (DMV).
Vehicles Leased or Rented
Repair parts may be purchased by a shop tax-free if they are for a vehicle that is primarily intended for lease or
short-term rental. That is because of the following:
• Property sold for sublease and sub rent is not subject to sales tax.
• Short-term rentals are subject to a 9% use tax administered by the DMV.
Note, however, that tax should be paid for the repair parts if the vehicle is used for a purpose other than lease
or rental more than 4% of the me. For example, if a shop owns a vehicle that is used as a short-term rental for
customers 80% of the me but is used by shop sta to run errands 20% of the me, parts to repair that vehicle
are subject to sales tax because it is being used for a non-rental purpose more than 4% of the me.
Recondioning Vehicles for Resale
Motor vehicle parts are exempt from sales tax when:
• purchased by a dealer of motor vehicles and
• used to recondion a used vehicle in the dealer’s inventory for resale.
To use this exempon, a dealer must be registered with the Department of Motor Vehicles (hps://dmv.
vermont.gov/registraons) under 23 V.S.A. §§ 451-468. The dealer must also provide the form S-3, Vermont
Resale Exempon Cercate For Purchases For Resale, By Exempt Organizaons, And By Direct Pay Permit
(hps://tax.vermont.gov/sites/tax/les/documents/S-3.pdf) to the supplier when using this exempon to
purchase parts for refurbishment. Please note that the exempon for motor vehicle parts does not apply to
supplies. See page 2 for treatment of supplies.
All parts are taxable unless sold to a dealer for refurbishment. Sales tax on taxable parts must be paid to the
supplier.
Note that this treatment applies only to recondioned vehicles, not new vehicles. Parts used to modify a new
vehicle may be purchased with a resale exempon cercate as long as the parts are itemized on the bill to the
customer and tax is collected from that customer.
Contact
If you have quesons, please feel free to contact us at tax.business@vermont.gov or (802) 828-2551. We’re
here to help.
