In most states, fabricators provide a taxable service. Fabrication broadly means taking stuff, then doing work on it and adding value to it (as opposed to repairing it).
A more limited description of fabrication services is: receiving the customer's property, working on it, and then returning it to the customer. The problem in this case is that, from a sales tax perspective, there is no sale of tangible personal property, other than some insignificant material like ink, solder, etc. So in states that typically do not tax sales of services, this presents a problem.
Here is a short list of examples of fabrication services:
keymaking and locksmithing
tailoring (usually more than letting out the hem)
meat cutting and butchering
taxidermy
custom welding
custom assembly
Similar businesses, but that aren't quite the same are:
imprinting and silkscreening
engraving
What's the difference between these two types of businesses? In fabrication services, something new is created. To use a common manufacturing definition: "taking something in one form with one name and turning it into something else, with a different form and a different name." Taking ten pieces of metal and welding them together per the customer's drawing is a fabrication service - something new has been created.
But a silkscreened t-shirt is still a t-shirt, even if it now has a cool Harley-Davidson logo. Nothing new has been created.
Many states will impose sales and use taxes on fabrication services, including imprinting and engraving.
But others will tax just fabrication services, excluding imprinting and engraving.
And still others won't tax either service.
It's up to you to check in the states that apply to you (where you perform the work or where the customer receives the work).
The Sales Tax Guy
http://salestaxguy.blogspot.com
See the disclaimer - this is for education only. Research these issues thoroughly before making decisions. Remember: there are details that haven't been discussed, and every state is different. Here's more information
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