In Georgia, repair labor is not taxable if it is separately stated on the invoice. However, the parts sold in conjunction with the repair are subject to sales tax. But what about fabrication labor? What in the world is that? And why is it taxable?
What is Fabrication Labor?
Fabrication labor is the manpower needed to make a new item or change an existing item into a new item. Fabrication is a process that changes the form or state of tangible personal property.
Georgia’s Approach to Fabrication Labor:
In Georgia Tax Code, the definition of "sale" includes the fabrication of tangible personal property for consumers who directly or indirectly furnish the materials used. Consequently, the taxable sales price includes fabrication labor, even if separately stated. Tax is imposed on the total charge for the fabrication or production of tangible personal property on a special order.
If a company orders a custom-made table for their conference room, tax should be collected on the total cost of the table, including labor, even though charges for labor may be segregated from the cost of the materials. Another example is that tax would apply to charges made by a tailor who makes an article of wearable apparel from material furnished by the customer.
When Fabrication Labor Applies:
Fabrication labor applies to many types of businesses in Georgia. Persons regularly engaged in the fabrication or production of tangible personal property for sale at retail must remit the tax on the sales price of such property.
Georgia’s sales tax laws do not treat repair labor and fabrication labor the same, and that often results in some confusion. Repair labor is exempt from sales tax while fabrication labor is taxable. For more information about the taxability of repair labor in Georgia, read my blog, Tax on Repair Labor in Georgia: Sales Tax Savings Possible!
If you’ve encountered any problems with the taxability of fabrication labor, share your story. Do you have questions about Georgia’s tax code regarding this type of labor?
Other recent “Georgia (GA)” posts by Lauren Stinson, CMI:
- Sales Tax on Labor: In Georgia, Not All is Created Equal
- A Review of Georgia's Sales Tax Exemption Certificates
- Georgia's New Rule for Itemization of Sales and Use Tax
- Georgia FBA Sellers: Your Sales Tax Registration Obligations
- Georgia DOR Is Making Big Changes to Direct Pay Permit Rules