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Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16547
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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Sales tax on labor - Tennessee

Customer Question

We are a car wash repair company in Tennessee. We go to locations and repair broken equipment or install needed equipment. We charge sales tax on any products used for the repair or any equipment sold. Is it appropriate to charge sales tax on labor? I have been told with much uncertainty by my local clerk's office that they "thought" we had to, but other businesses have told us that they don't charge sales tax on labor for our line of work. Any guidance on this issue would be most appreciated! Thanks for your help!!

Submitted: 4 years ago.
Category: Tax
Expert:  Megan C replied 4 years ago.
Thanks for asking your question! I'm sorry to hear about your tax issue and I'm going to try my best to help you understand or resolve it.

Thanks - yes, you owe sales tax on labor. From the TN website:

Is labor (on real property or tangible property) taxable?
All labor inherent to the creation, installation, or repair of tangible personal property, as well as the parts or materials are subject to the tax. Labor to install or repair real property is not subject to the sales tax.

CLICK HERE

Cars are tangible personal property, therefore your labor is taxable. Real property is real estate, such as houses.

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Customer: replied 4 years ago.
The statement "cars are tangible property" is confusing to me. We do not repair cars. We repair the building, and grounds. Is that considered "tangible" personal property? Sorry for the confusion.
Expert:  Megan C replied 4 years ago.
Okay - I saw "car wash" and immediately assumed you were doing something with the vehicles.

If you are repairing the building and grounds, that's real property and no sales tax is due.

** Please take a moment to rate my response as "Excellent" so that I may be compensated for assisting you today. Please let me know if my assistance was anything less than "OK Service", as I am compensated based on whether or not I have assisted you with your issue. If you need further clarifications, PLEASE WAIT TO RATE MY ANSWER UNTIL AFTER RECEIVING FOLLOW UP FROM ME. If I receive anything less than OK Service, I do not get paid, but the Web site will still collect your payment. Thank you for your kind understanding in this matter. If you have difficulties rating, then simply respond stating that you are having difficulties rating and thank me for my excellent, good, or ok service and we can get the rating applied by the site**