COVID-19 Penalty Relief: You may ask us to cancel or reduce filing or payment penalties if you have a reasonable cause or are negatively affected by the COVID-19 pandemic. For more information, updates, and resources, see Our Response to COVID-19.
Optional maintenance contracts provide prepaid coverage for scheduled oil changes, tire rotation, etc. Optional maintenance contracts are taxable if they include any taxable items, unless the cost of those items is insignificant. The sales tax is due when the contract is sold, not when the maintenance is performed.
Used car dealers in Minnesota must provide a warranty with the sale of certain used cars. If you sell such a vehicle and later make repairs under the warranty, no tax applies to the parts used in the repair.
Extended warranties to cover unexpected repair costs are not taxable. However, sales or use tax does apply to the parts used for contracted repairs. See the table below for details about when tax is due and who pays it.
If the warranty states
Then you must
No cost to customer for parts
Pay sales or use tax on your cost of the parts
Customer is responsible for a percentage of parts and labor
Charge the customer sales tax on the amount for parts only
Customer pays a deductible for parts or labor
Pay sales or use tax on your cost of the parts. The deductible payment is not taxable.