Maintenance Contracts and Warranties

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.

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

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.