The Idaho State Tax Commission has determined that a taxpayer's application of spray-on bedliner was a non-taxable repair rather than a taxable fabrication.
The taxpayer's business consisted of applying spray-on bedliners to its customers' trucks. The bedliner served to protect the truck body from damage. Some of the bedliners also created non-slip surfaces. Customers brought their trucks to the taxpayer for new bedliners. The taxpayer applied the spray-on bedliner. The taxpayer itemized its invoices, separately stating the charges for materials and for labor. The taxpayer collected tax on the charges for materials but not the charges for labor. The taxpayer argued that the labor was a non-taxable repair service. The Idaho Sales Tax Audit Bureau argued that the labor was a taxable fabrication service.
Idaho taxes sales of fabrication services. It does not tax repair services. Fabrication is an operation or a step in a series of operations that results in the creation or production of tangible personal property. Fabrication does not include the mere repair or reconditioning of property to refit it for its originally intended use.
The Commission held that the application of spray-on bedliner was a repair rather than a fabrication. Like a coat of paint, the bedliner became a component part of the truck. It did not create a separate item of tangible personal property. Although it may have improved the truck, it did not give the truck any use beyond its originally intended use. It was therefore a mere repair. The taxpayer did not have to collect tax on its labor charges.