The Auto Body Association of Connecticut (ABAC) recently went before the State Tax Panel to express its opinion that collision repairers in its state have been unfairly penalized by a recent Depart of Revenue Services interpretation that paint and materials used in auto repair should be taxed twice: once at wholesale purchase and once at retail sale.
“In addition to being inequitable from a tax policy perspective, [the interpretation] was inconsistent with reasonable regulatory interpretations to the contrary and years of industry practice to the contrary,” the ABAC said.
The ABAC expressed to the panel that it would like to ensure that when paint is purchased from a wholesaler, that purchase would be considered a “sale for resale,” as it always had in the past. Also, the ABAC aimed to clarify a section under the Regulations of Connecticut State Agencies, Department of Revenue Services, saying that “Taxability of items used in rendering motor vehicle repair services” does not pertain to paints purchased in bulk by repair shops and subsequently used in auto repair on customer vehicles.
In support of revision or clarification of this regulation, the ABAC offered some history to the tax panel, stating that the auto body repair industry has “dramatically” evolved and modernized since the regulation was last updated in 1999.
“Years ago, auto body shops would order paint from a supplier (wholesaler) specifically for use on a certain vehicle. That purchase was considered a sale for resale and nontaxable to the shop; the sales tax would be charged to and collected from the end user customer. The paint used in today’s repair process is purchased differently than it was over 15 years ago. Most, if not all, auto body repair facilities purchase paint-related materials in bulk form. The product is computer mixed as needed for each individual repair job. The totals are recorded and billed to each specific repair job. The sales tax is then to be charged to the end user customer.
“This modern system of purchasing paint and related materials and mixing only what is needed not only saves the consumer money but also saves the environment from hazardous waste storage.”