This does not discuss the special rules that apply when you perform work on houses, buildings, and other real property.

Charges for work done in creating, producing, or assembling a product as part of a sale are generally taxable, whether you itemize your labor charges or include them in the price of the product. This applies whether you supply the materials for the job or your customer supplies them.

Examples of fabrication labor include:

 Manufacturing a new piece of machinery

 Sizing and engraving a ring for sale to a customer

 Cutting metal or lumber provided by a customer

 Altering new clothing

 Assembling a customer’s barbecue or other merchandise

Fabrication labor charges are not taxable if your sale is a nontaxable transaction such as a sale for resale.

Your charges for services related to a taxable sale are generally taxable. For example, if a taxable sale of a computer program includes training, and the customer cannot buy the program without the training services, the training is taxable as part of the sale.

Nontaxable types of labor include repair labor but tax usually applies to charges for parts used in a repair job if the retail value of the parts is more than 10 percent of your total charges or if you charge separately for the parts.

Sales tax generally does not apply to charges for installation labor, such as installing a car stereo in a used car.

You must include all of your labor and service charges for the reporting period in the "total sales" line of your sales and use tax return. If you have charged amounts for nontaxable labor, you should take a deduction for those amounts before you calculate the tax due. List them on the line for “Nontaxable labor.” If you don’t take the deduction, you’ll pay more tax than you owe.

To help you learn how tax applies to your own charges for labor, you may wish to obtain one of the publications listed below from the BOE site at www.boe.ca.gov (this link opens in a new window).