Recent Sales and Use Tax Developments
Warranties.
Sales Tax on Warranty Deductibles. Customer-paid deductibles under manufacturer
warranty contracts are subject to sales tax up to the price of parts that
are sold to the customer. For example, if the consumer has a $100
deductible and the warranty work includes parts of $200 and labor of $200,
the entire $100 deductible payment made by the consumer is treated as a
payment for parts, so the entire $100 will be subject to sales tax. If the
warranty work is $50 for parts and $200 for labor, only $50 of the $100
deductible is subject to sales tax and sales tax should only be collected on
$50 not on the $100 deductible.
Sales Tax on Warranty Sales.
- Sales of after market warranties (customer purchased warranty) are not subject to sales
or use tax if separately stated:
- Charges for parts installed and paid by the warranty company are subject to sales tax.
- If a deductible is charged, sales tax is due on the amount of the parts up to the deductible paid by the customer as described in paragraph z. (1) above.
- Parts installed at no charge as a Policy Adjustment are subject to sales tax. - Sale of manufacturer's warranty (warranty included in purchase price):
- Charges for parts installed and paid by a manufacturer are not subject to sales tax.
- If a deductible is charged, sales tax is due on the amount of the parts up to the deductible total paid by the customer as described in paragraph z. (1) above.
Recent Sales and Use Tax Developments