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Run the Payroll Fee Auditor →Blog · Payroll Management · Auto Dealership
Auto Dealerships: Payroll Compliance Guide (2026)
Payroll compliance for auto dealerships rests on the federal rules that reach this industry specifically, 4 of which are cited on this page, plus the deposit and filing duties every employer carries. BEG runs auto dealership payroll for $45 per employee per month inside the payroll software you already use, all-inclusive, live in 3 to 5 business days.
The rules that reach auto dealerships specifically
Section 13(b)(10)(A) of the FLSA exempts salesmen, partsmen and mechanics who are primarily engaged in selling or servicing automobiles, trucks or farm implements at a nonmanufacturing dealership from overtime pay, but not from minimum wage. The exemption applies regardless of the dealership's annual dollar volume of sales.
The FLSA does not require weekly pay, but the dealer must set a regular pay period, and a commission settlement period is presumed to be that pay period. Draws against commission paid within the pay or settlement period may be less than the minimum wage, and the employer may credit those draws against its minimum wage obligation when settling the amount due at the end of the period.
A commissioned employee of a retail or service establishment is exempt from overtime under section 7(i) only if the regular rate of pay is more than one and one-half times the applicable minimum wage and more than half of compensation for a representative period of not less than one month is commissions on goods or services.
No dealership employee under 18 may drive or serve as an outside helper on a motor vehicle on a public road, except that 17-year-olds who meet specific requirements may drive vehicles that do not exceed 6,000 pounds gross vehicle weight for limited amounts of time. Minors under 16 may work only during particular times and limited hours, and minors under 14 may not be employed.
The duties every employer carries
Federal income tax withholding, Social Security and Medicare, FUTA, deposits on the monthly or semiweekly schedule the lookback period sets, quarterly Form 941, annual W-2s and, for auto dealerships paying contractors, 1099-NEC at the $2,000 threshold in force for tax years after 2025. A late deposit starts at a 2 percent failure-to-deposit penalty and climbs to 15 percent.
For each employee treated as exempt under section 7(i), the employer must keep a symbol or notation on payroll records identifying the employee, a copy or written summary of the commission agreement including the representative period and its dates, and total compensation for each pay period showing commissions separately from noncommission straight-time earnings.
The rules behind this page, with sources
General information, not legal advice. Every rule below was read on the agency page linked next to it.
- Section 13(b)(10)(A) of the FLSA exempts salesmen, partsmen and mechanics who are primarily engaged in selling or servicing automobiles, trucks or farm implements at a nonmanufacturing dealership from overtime pay, but not from minimum wage. The exemption applies regardless of the dealership's annual dollar volume of sales. [29 CFR 779.372]
- The FLSA does not require weekly pay, but the dealer must set a regular pay period, and a commission settlement period is presumed to be that pay period. Draws against commission paid within the pay or settlement period may be less than the minimum wage, and the employer may credit those draws against its minimum wage obligation when settling the amount due at the end of the period. [DOL Fact Sheet #11]
- A commissioned employee of a retail or service establishment is exempt from overtime under section 7(i) only if the regular rate of pay is more than one and one-half times the applicable minimum wage and more than half of compensation for a representative period of not less than one month is commissions on goods or services. [29 CFR 779.412]
- No dealership employee under 18 may drive or serve as an outside helper on a motor vehicle on a public road, except that 17-year-olds who meet specific requirements may drive vehicles that do not exceed 6,000 pounds gross vehicle weight for limited amounts of time. Minors under 16 may work only during particular times and limited hours, and minors under 14 may not be employed. [DOL Fact Sheet #11]
- For each employee treated as exempt under section 7(i), the employer must keep a symbol or notation on payroll records identifying the employee, a copy or written summary of the commission agreement including the representative period and its dates, and total compensation for each pay period showing commissions separately from noncommission straight-time earnings. [29 CFR 516.16]
Read the full guide to the payroll compliance library, and the rest of the auto dealership payroll library.
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Frequently Asked Questions
Auto dealership compliance: 29 CFR 779.372
Section 13(b)(10)(A) of the FLSA exempts salesmen, partsmen and mechanics who are primarily engaged in selling or servicing automobiles, trucks or farm implements at a nonmanufacturing dealership from overtime pay, but not from minimum wage. The exemption applies regardless of the dealership's annual dollar volume of sales.
Auto dealership compliance: DOL Fact Sheet #11
The FLSA does not require weekly pay, but the dealer must set a regular pay period, and a commission settlement period is presumed to be that pay period. Draws against commission paid within the pay or settlement period may be less than the minimum wage, and the employer may credit those draws against its minimum wage obligation when settling the amount due at the end of the period.
Auto dealership compliance: 29 CFR 779.412
A commissioned employee of a retail or service establishment is exempt from overtime under section 7(i) only if the regular rate of pay is more than one and one-half times the applicable minimum wage and more than half of compensation for a representative period of not less than one month is commissions on goods or services.
What does managed payroll cost for an auto dealership?
$45 per employee per month, all-inclusive, inside the payroll software you already use, with no monthly minimum. Front-end and back-end commission structures, flat-rate tech pay and F&I chargebacks are configured at setup, not billed as add-ons.
Related Resources
Anthony leads payroll solutions at Business Executive Group, a national managed payroll firm serving businesses across industries including Auto Dealerships. BEG manages payroll at $45 PEPM, all-inclusive, with deep expertise in compliance, multi-state filing, and industry-specific payroll requirements. Get instant pricing at beghr.com.
Authoritative source: U.S. Department of Labor: Wage and Hour Division
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