The restoration of used property to its original condition or usefulness is repair, which is not taxable. The creation or completion of a new or different item is fabrication, which is taxable. Charges for parts installed on repaired items are taxable if repair labor and parts charges are separately stated. Parts sold over-the-counter are taxed. The sales and use tax applies to automobile repairs the same way it applies to repairs to other kinds of property such as appliances, home electronics and office equipment. You must pay tax on parts if you are making lump-sum repairs for a governmental or other exempt organization. The exemption of these organizations does not extend to the purchases of parts for lump-sum repairs on property other than realty.
Contractors making repairs of realty must pay the tax on all purchases of materials used. The only exception is that contractors for private nonprofit charitable, educational or religious organizations may use the organization's Maryland sales and use tax exemption certificate to avoid the tax on purchases of materials that will be installed in real property.
When you purchase parts and supplies for resale over-the-counter or which you will install and bill for separately, you may claim the resale exclusion by giving your supplier a resale certificate bearing your Maryland sales and use tax registration number. Suppliers must exercise reasonable judgment in accepting or acting on resale certificates. They must charge the tax on sales to repairers of goods that are obviously not for resale, including tools, stationery, soap, masking tape and sandpaper, even if repairers have provided a resale certificate.