Connecticut State Department of Revenue Services

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Ruling 93-18, Sales and Use Taxes / Repairs to Motor Vehicles / Fabrication or Processing of Customer's Property

FACTS:

The Company provides engine and body enhancements to its customers' motor vehicles. Such enhancements (or "customization"), provided in a process that takes approximately three weeks, materially increase the value of the motor vehicles by improving their performance through improvements made to the engines and exhaust systems and body enhancements.

ISSUE:

Whether the customization of motor vehicles is taxable as a motor vehicle repair service under Conn. Gen. Stat. § 12-407(2)(i)(M).

Whether the customization of motor vehicles is taxable as the fabrication or processing of property belonging to a customer under Conn. Gen. Stat. § 12-407(2)(c).

DISCUSSION:

Conn. Gen. Stat. § 12-407(2)(i)(M) includes in the definition of "sale" and "selling" "motor vehicle repair services, including any type of repair, painting or replacement related to the body or any of the operating parts of a motor vehicle." Policy Statement 92(8) defines "motor vehicle repair services" as:

... all maintenance services that keep a motor vehicle in good working order by preventing its decline, failure, lapse or deterioration, including but not limited to replacing vehicle fluids (e.g., oil), lubricating the chassis, replacing spark plugs and filters, rotating tires, recharging the air conditioning system, rust proofing, and applying fabric protection or paint sealant. Motor vehicle repair services also mean all repair services that mend or bring back as near as possible to original working order a motor vehicle that was damaged, malfunctioning or defective, including any painting or replacements related to the body or any of the operating parts of a motor vehicle.

Policy Statement 92(8) limits the interpretation of the activities taxed as "motor vehicle repair services" to the replacement of parts in a vehicle that was "damaged, malfunctioning or defective," thus excluding the replacement of parts in connection with customizing a motor vehicle. As a matter of statutory construction, when an imposition statute such as Conn. Gen. Stat. § 12-407 is involved, any ambiguity must be resolved by construing the statute against the taxing authority and in favor of the taxpayer. See, e.g., Plasticrete Corporation v. Commissioner, 216 Conn. 17, 25, 579 A.2d 20 (1990). Therefore, the Company's motor vehicle enhancements are not taxable as motor vehicle repair services enumerated in Conn. Gen. Stat. § 12-407(2)(i)(M).

Conn. Gen. Stat. § 12-407(2)(c) includes in the definition of "sale" and "selling" "the producing, fabricating, processing, printing or imprinting of tangible personal property for a consideration for consumers who furnish either directly or indirectly the materials used in the producing, fabricating, processing, printing or imprinting ..." Charges for labor that are taxable under Conn. Gen. Stat. § 12-407(2)(c) include, among other processes, the customization of tangible personal property belonging to the customer. Thus, the motor vehicle enhancements provided by the Company constitute taxable fabrication or processing. The activities described in Conn. Gen. Stat. § 12-407(2)(c) are taxable only when delivered in Connecticut. Therefore, the Company must collect Connecticut sales and use taxes on its charges for providing motor vehicle enhancements when the vehicle is picked up by the customer in Connecticut or is delivered or shipped to a Connecticut location. If the vehicle is delivered or shipped by the Company to a location outside Connecticut, no Connecticut sales tax is due (although Connecticut use tax may be due if the motor vehicle returns to Connecticut).

RULING:

The customization of motor vehicles is not taxable as a motor vehicle repair service under Conn. Gen. Stat. § 12-407(2)(i)(M). However, such customization is taxable under Conn. Gen. Stat. § 12-407(2)(c) as the fabrication or processing of tangible personal property belonging to a customer, when the vehicle is picked up by the customer in Connecticut or is delivered or shipped to a location within Connecticut.

LEGAL DIVISION

Issued: October 7, 1993