ALABAMA DEPARTMENT OF REVENUE
SALES, USE & BUSINESS TAX DIVISION
SALES & USE TAX RULE
810-6-1-.90. Machine Shops.
(1) Sales of property manufactured or fabricated by machine shops and custom foundries
are subject to sales or use tax, except when the sale is for resale or otherwise
specifically exempted.
(2) In doing repair work, the machine shop operator consumes materials such as paint,
solder, babbitt, and lumber which lose their identity in the repairing process. The machine
shop operator is also considered to be the consumer of items such as cotter keys, nails,
washers, stove bolts and nuts, bits of metal, and sheets of metal used in patching, mending,
or reinforcing weakened parts. The machine shop operator shall not collect sales or use tax
from the customer on amounts billed to the customer for the cost of these materials which the
operator consumes in performing repair work; instead, the operator shall remit sales or use
tax to the supplier at the time of the operator's purchase of the materials.
(3) Where in making repairs the machine shop operator fabricates or manufactures
a recognizable part or attachment for the article being repaired (as contrasted
to patching, mending, or reinforcing weakened parts), the operator shall bill
the parts or attachments separately and collect sales or use tax only on the
sales price of the part or attachment. If the machine shop operator fails to
separately state the charges for parts and attachments and the charges for services,
the operator shall collect sales or use tax on the total amount of the charges
billed to the customer. Under no circumstances, however, shall the machine shop
operator deduct labor or other costs which go into the fabrication or manufacture
of a recognizable part or attachment from the selling price of the part or attachment.
(Sections 40-23-1(a)(6) and 40-23-60(10), Code of Alabama 1975) (Readopted
through APA effective October 1, 1982, amended July 30, 1998)
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