Subject: Clarification on Tax for Reselling Parts in My Repair Shop
I own a small engine repair shop and typically purchase parts for my customers at full retail price, including tax, without marking them up. My earnings primarily come from labor.
For example, if I purchase a part for a customer’s machine and the total cost (including tax) is $10.69, am I required to charge the customer an additional tax on top of that amount? Since I’ve already paid tax on the part when I bought it, should I just charge them the $10.69 and indicate on the invoice that the tax was collected during my initial purchase?
I’m located in Minnesota, so any specific state guidelines would be helpful. Thank you!
One response
In Minnesota, when you sell parts to customers, you are generally required to charge sales tax on those parts, even if you have already paid sales tax when purchasing them. This is because the sale from your shop to the customer is a separate transaction, and sales tax is applicable on the final retail sale to the customer.
So, in your case, if your cost for the part (including tax) is $10.69, you would need to charge your customer the cost of the part plus any applicable sales tax on that amount. For example, if the sales tax rate is 6.875%, you would calculate the sales tax on the $10.69 and add that to the invoice total.
To be clear, just list the part price separately and then include the sales tax in the invoice so the customer is aware of the charges. It may also be beneficial to consult with a tax professional or the Minnesota Department of Revenue for specific guidance tailored to your situation.