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Maintenance Contracts and Warranties
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Off-road vehicles repair parts and labor usually require sales tax.
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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.
| 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. |
