In the given example, tax is applied to which portion of the total?

In the given example, tax is applied to which portion of the total?

• A. Parts
• B. Labor
• C. Neither
• D. Both parts and labor

Answer: (A)

Tax is applied to the parts portion of the total. In auto body billing, sales tax is typically charged on the cost of tangible parts, while labor is treated as a service and often isn’t taxed. So the tax calculation uses only the parts amount, not the labor. For example, if parts cost $500 and labor costs $200, with an 8% tax rate, the tax would be 0.08 × 500 = $40, and the total would be $500 + $40 + $200 = $740. The example’s result shows tax applied to the parts portion, which is why the correct choice reflects tax on parts.

Tax is applied to the parts portion of the total. In auto body billing, sales tax is typically charged on the cost of tangible parts, while labor is treated as a service and often isn’t taxed. So the tax calculation uses only the parts amount, not the labor. For example, if parts cost $500 and labor costs $200, with an 8% tax rate, the tax would be 0.08 × 500 = $40, and the total would be $500 + $40 + $200 = $740. The example’s result shows tax applied to the parts portion, which is why the correct choice reflects tax on parts.