BIR Form 2307 for Auto Repair Shops and Dealership Service Centers: Parts vs Labor
A company that sends its fleet vehicles to an auto repair shop or a dealership service center generally withholds 2% expanded withholding tax (EWT) on the entire parts-and-labor invoice — treated the same way a construction contractor’s combined materials-and-labor billing is withheld in full, rather than splitting out the cost of parts. A Top Withholding Agent with an itemized invoice is the one exception where parts and labor can be withheld at two different rates.
This guide is part of the BIR Form 2307 series. It covers who withholds on an auto repair payment, why a combined bill is treated as one contractor-style service rather than split into goods and labor, when a Top Withholding Agent can split the rate, and a worked fleet-maintenance example.
Generate Your Auto Shop's BIR Form 2307 FREE →Who withholds on an auto repair or dealership service bill? #
A company maintaining a fleet, or any business paying for a company vehicle’s repair, is a withholding agent on that payment; a private individual paying for their own car’s repair generally is not. RR No. 2-98 sets the test this way:
“(A) In general, any juridical person, whether or not engaged in trade or business; (B) An individual, with respect to payments made in connection with his trade or business…”
— RR No. 2-98, Section 2.57.3(A)–(B)
A logistics company paying a dealership service center for scheduled maintenance on its delivery vans, or a corporation paying an independent auto shop to fix a company car, withholds under clause (A) or (B). An employee who personally owns and pays to repair their private car, with no business connection to the expense, falls outside the rule entirely.
Why a combined repair bill is withheld in full, not split #
A repair shop’s invoice typically bundles two things — the cost of parts installed and the labor to install them — but for an ordinary business client, the whole bill is generally withheld at the flat 2% rate as one service, the same way this series treats a construction contractor’s combined materials-and-labor billing in BIR Form 2307 for Contractors and Subcontractors. A repair job — diagnosing a problem, sourcing and installing parts, and returning a working vehicle — is a single service deliverable, not a separate sale of parts followed by a separate labor charge, for a client that isn’t otherwise required to unbundle the invoice.
| Payee | ATC | Rate | Base |
|---|---|---|---|
| Auto repair shop / service center, individually owned | WI120 | 2% | Full parts-and-labor invoice |
| Auto repair shop / service center, organized as a corporation | WC120 | 2% | Full parts-and-labor invoice |
When a Top Withholding Agent can split parts from labor #
A client classified as a BIR Top Withholding Agent (TWA) — reached once gross sales/receipts, gross purchases, or claimed deductible itemized expenses hit ₱12,000,000 in the preceding year under RR No. 7-2019, RR No. 11-2018, and RR No. 24-2025 — can apply the 1% goods rate to the parts portion of an itemized repair invoice, and the 2% services rate to the labor portion, the same goods-vs-services distinction this series covers generally in BIR Form 2307 for Purchases of Goods: Top Withholding Agent 1% Rate Explained.
| Invoice component | Condition | ATC | Rate |
|---|---|---|---|
| Auto parts, separately itemized | Payor is a classified TWA | WC158 / WI158 | 1% |
| Labor/service charge, separately itemized | Payor is a classified TWA | WC120 / WI120 | 2% |
| Combined, non-itemized invoice | Payor is a classified TWA | Higher applicable rate on full invoice | 2% |
Without a genuine itemized breakdown from the shop separating parts cost from labor, a TWA should default to withholding the full billing at 2% as a service, rather than assuming a split that the invoice itself doesn’t support.
Worked example: fleet maintenance for a delivery company #
Swift Logistics Corp., a non-TWA delivery company, sends five delivery vans for scheduled maintenance at AutoCare Service Center, a corporation, billed as one ₱85,000 invoice covering parts and labor together.
| Item | Amount |
|---|---|
| Combined parts-and-labor repair invoice (VAT-exclusive) | ₱85,000.00 |
| EWT withheld (2%, ATC WC120, full invoice) | ₱1,700.00 |
| VAT (12% on ₱85,000) | ₱10,200.00 |
| Net cash to AutoCare Service Center (invoice + VAT − EWT) | ₱93,500.00 |
Swift Logistics withholds ₱1,700 on the full invoice and remits it through BIR Form 0619-E monthly and BIR Form 1601-EQ quarterly, listing AutoCare Service Center on its Quarterly Alphalist of Payees. Had Swift Logistics instead been a classified Top Withholding Agent receiving an invoice that separately itemized ₱60,000 in parts and ₱25,000 in labor, it could instead withhold ₱600 (1% of ₱60,000, ATC WC158) on the parts and ₱500 (2% of ₱25,000, ATC WC120) on the labor — ₱1,100 total, a different figure than withholding the combined bill at a flat 2%.
Frequently asked questions #
Does a company have to withhold tax when paying an auto repair shop or dealership service center? #
Yes, if the payor is a corporation or a business-registered individual. A company paying an auto repair shop, dealership service center, or car care center to maintain or repair its fleet vehicles is a withholding agent under RR No. 2-98, Section 2.57.3(A)-(B), and must withhold expanded withholding tax and issue BIR Form 2307.
Do you withhold separately on the parts and the labor on a car repair bill? #
Only if the payor is a classified Top Withholding Agent and the shop’s invoice separately itemizes parts from labor. Otherwise, a combined parts-and-labor repair bill is treated like a contractor’s job order — withheld at a flat 2% on the entire invoice — the same way a construction contractor’s materials-plus-labor billing isn’t split for withholding purposes.
What ATC code applies to an auto repair shop’s combined invoice? #
A combined parts-and-labor repair bill from an ordinary (non-Top Withholding Agent-only) client relationship generally uses the general contractor/business-services codes — ATC WI120 for an individually owned shop or WC120 for a corporate one — at 2% on the full invoice.
How does the split work if the payor is a Top Withholding Agent? #
A Top Withholding Agent that receives an itemized invoice can apply the 1% goods rate (ATC WC158/WI158) to the parts portion and the 2% services rate (ATC WC120/WI120) to the labor portion, consistent with how TWAs generally separate goods from services purchases under RR No. 24-2025. Without an itemized breakdown, the TWA defaults to withholding the full invoice at the higher applicable rate for the transaction as billed.
Does a private car owner paying for a personal vehicle repair need to withhold tax? #
No. Under RR No. 2-98, Section 2.57.3(B), withholding applies only to a payment connected to the payor’s trade or business. An individual paying an auto shop to repair their own personal car is not a withholding agent and the shop does not receive a BIR Form 2307 for that payment.
Summary #
An auto repair shop or dealership service center’s combined parts-and-labor invoice is generally withheld at a flat 2% in full (ATC WI120/WC120), treated as one contractor-style service rather than split between goods and labor — the same rule this series applies to construction contractors. Only a client classified as a Top Withholding Agent, working from a genuinely itemized invoice, can split the bill into a 1% goods rate on parts and a 2% services rate on labor. See BIR Form 2307 for Contractors and Subcontractors for the combined-billing rule this draws from, and BIR Form 2307 for Purchases of Goods: Top Withholding Agent 1% Rate Explained for the TWA goods split.