Tire and Wheel/Dent and Ding/Road Hazard: These products are taxed like service contracts.
Sales tax is not due on the sale of the contract, but parts used to perform the repairs are
taxable. Labor costs that are separately stated are not taxable.
Window Etching: Window etching is a service and is not subject to sales tax.
Dealer Fees (§ 40-23-2(4), Code of Ala. 1975): Dealer fees (also known as clerical fees, doc
fees, dealer prep charge, processing fees, etc.) are taxable at the automotive rate. If clearly
labeled and separately stated, the title fee is not subject to sales tax. If not separately stated,
it is taxable.
Debt Waiver/GAP Insurance: These items are not subject to sales tax.
Key Replacement Programs: Key replacement programs are taxed similar to service
contracts. The key replacement contract is not taxable, but parts used to perform repairs or
replacement are taxable.
Maintenance Agreements (Administrative Rule 810-6-1-.186.05): If a maintenance
agreement is required and mandatory as a condition of a sale, sales or use tax is due on the
purchase of or withdrawal from inventory of parts used in performing repairs or services
pursuant to the maintenance agreements. Tax is to be computed on the cost of the parts to
the dealer. In Warrior Tractor & Equipment Company, Inc. v. State of Alabama, the ALJ
determined, “Because the Taxpayer factored the cost of the filters into the cost of the
equipment, the Taxpayer was selling the filters to its customers with the equipment per the
Logan’s Roadhouse rationale.” Based on this case, the oil filters used in the free oil change
services will not be subject to tax if the service is part of the sale, and the cost is figured into
the selling price of the vehicle.
Service/Parts/Body Shop Transactions
Automobile Repair Shops: The retail sales to a consumer of parts, batteries, tires, etc., are
taxable. Labor is not taxable if separately stated. Supplies consumed by the repair shop such
as paint and solder, as well as tools and machinery used, are taxable at the time of the sale to
the repair shop and collected by the supplier or paid to ALDOR as use tax if the supplier is
not licensed to collect sales tax.
Automotive Supply Jobbers (Administrative Rule 810-6-1-.08.01): Automotive supply
jobbers (anyone who makes retail sales of auto parts and supplies) must collect sales or use
tax on sales to all customers who do not have a valid sales tax number or certificate of
exemption. Invoices that do not show the purchaser’s name but are made out to “cash” are
always taxable. Sales to purchasers with sales tax numbers are only tax free if the items are
being purchased for resale. It is the responsibility of the jobber to know the nature of the
customer’s business, so that the jobber will know when to collect sales tax on items
purchased for use.
The automotive jobber must collect sales or use tax on sales of supplies unless the customer
is purchasing the supplies for resale. Supplies include but are not limited to cleaning
compounds, chamois, rags, drill bits, shop files, welding gases and supplies, metal bars and
rods, masking tape, fire extinguisher fluid, hydraulic jack oil, friction tape, signs, white sidewall
cleaner, brooms, mops, window cleaner, rivets, tacks, cotter pins, repair parts for shop
equipment, degreaser, bolts, nuts, washers, screws, oil measures, wiping cloths, drop light
cords, auto body soap, hand soap, vixen files, light bulbs, rubbing compound, floor oil