California Sales Tax Audit Board of Equalization (BOE)- Gas Station

Sales Tax Attorney

California Sales Tax Problem BOE Sales Tax audit levels have been increasing in recent years as California budget problems creates additional need for enforcement and collection of existing sales taxes.

One the most common targets for California Sales Tax Audits in recent years has been owners of gas and service stations. Under the Sales and Use Tax Law, the sale or use of merchandise, including fuel, is taxable. For an auto repair business or service station, tax generally applies to sales or use of all of the following:

• New, used, or rebuilt automobile parts. This includes both general repair or maintenance parts such as spark plugs, belts, tires, batteries, PCV valves, and brake shoes or pads; and replacement parts such as engines, transmissions, alternators, water pumps, fenders or bumpers.

• Parts you manufacture. The taxable selling price of the part should include the cost of the labor required to manufacture it.

• Lubricating products such as oil and grease.

• Automotive fluids such as brake or transmission fluid and window washer solution.

• Fuel.

Your sale is taxable unless it qualifies for an exemption or exclusion It is important to remember that the taxable selling price of an item may include not only the charge for the item itself, but also charges for mandatory warranty contracts.

For fuel sales, the taxable selling price can also include charges for certain state and federal excise taxes.

As a retailer, you owe the sales tax to the state. But you may collect from your customer an amount equal to the tax you will owe. This is usually itemized on sales invoices as “sales tax.”

Labor and services
Generally your charges for labor and services are not taxable (two exceptions are noted below). You must list labor and service charges separately on your customer invoices. This includes your charges for:

• Installation labor on used vehicles such as replacing spark plugs, replacing brake shoes or pads, removing and installing engines, or installing sound systems.

• Repair labor to bring a vehicle back to its original condition. Examples of repair labor include rebuilding carburetors or heads, replacing parts in engines or transmissions, and performing body and fender work.

• Maintenance services such as tune-ups, oil changes, or radiator flushes.

• Services such as charging a battery or towing a vehicle.

While sales and use tax generally does not apply to labor charges, there are two exceptions. Labor charges for making a part (“fabrication labor”) are usually taxable, as are labor charges for installing parts on new vehicles.

If you have further questions about California Sales Tax Audits please contact us.

Content Source: California BOE

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