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Last Updated: 8/7/2017

Maintenance Contracts and Warranties

Optional maintenance contracts

Optional maintenance contracts provide prepaid coverage for things like scheduled oil changes and tire rotations. These contracts are taxable if they include any taxable items, unless the cost of those items is insignificant (less than 10 percent of the total price of the contract).

Note: The sales tax is due when the contract is sold, not when the maintenance is performed.

Manufacturer’s warranty or recall

Repair or replacement parts are not taxable when they are covered by a manufacturer’s warranty or recall.

Extended warranty contracts

Extended warranties cover unexpected repair costs and are not taxable. However, sales or use tax applies to the parts used for contracted repairs as outlined below.

If the warranty states

Then you must

There is no cost to customer for parts

Pay sales or use tax on your cost of the parts.

The customer is responsible for a percentage of parts and labor

Charge the customer sales tax on the amounts for parts only

The customer pays a deductible for parts and labor

Pay sales or use tax on your cost of the parts. The deductible payment is not taxable.

< Upgrades, Enhancements, Repair Services, and Parts ​ ​Personal, Brokered, and Miscellaneous Sales >
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