Yes. Retail sales tax applies to a service contract or warranty sold to a consumer (WAC 458-20-257). Note: If a car dealership sells a warranty, extended warranty, or service contract, the sale is generally taxable at the rate at which the customer resides. See Publication 838, A Guide to Sales Tax for Automobile Dealers. Optional service contracts offer prepaid coverage for planned oil changes, tire rotation, and more. Optional maintenance contracts are taxable if they include taxable items, unless the cost of these items is insignificant. VAT is due when the contract is sold, not during maintenance. Many retailers sell service contracts at checkout at the time of sale of the goods. These sales are subject to VAT, even if the dealer himself: Extended warranties to cover unexpected repair costs are not taxable. However, sales or use tax applies to parts used for contractually agreed repairs.

The following table provides details on when taxes are due and who pays them. This Q&A explains how VAT applies to service contracts and warranties. Service providers registered as sellers in New York State may purchase repair services from third-party repair shops without paying New York sales tax by submitting Form ST-120, Certificate of Resale, to the repair shop. However, non-registered service contract providers cannot use Form ST-120 and must pay sales tax on fees for the work performed. Many car dealerships sell maintenance contracts (service contracts) and warranties with a sale and lease of vehicles. If a customer rents a vehicle and also purchases a service contract or warranty, the customer may pay the contract or warranty in advance or finance these costs. Service, repair and maintenance are words that describe the work done to keep the property in a state of fitness, readiness or safety or to generally put the property in good condition. Service, repair and maintenance services are subject to VAT. A service contract is an agreement between the contractual supplier and a customer in which the supplier agrees to repair or replace a product that has failed after the original manufacturer`s warranty expires. Service contracts may also cover loss or damage not covered by the original manufacturer`s warranty.

Sales of service contracts in New York are considered taxable sales of repair and maintenance services. New York State-based businesses that sell service contracts must be registered as New York State sales tax sellers. See New York State Tax Bulletin on How to Register for New York State Sales Tax (TB-ST-360). Service contracts can also be sold by third parties directly to consumers after the purchase of an item. Third-party service contracts are often purchased by consumers at the time the original manufacturer`s warranty for an item is about to expire. These sales are also subject to sales tax, and the applicable tax rate is the combined state and local rate applicable to the location of the property covered by the service agreement, not the rate applicable to the seller`s location. No, as long as the agreement (on which the monthly payment is based) specifies the service contract or the amount of the warranty separately from the amount of the vehicle rental, this documentation is sufficient so that the amount of the monthly payment related to the warranty or service contract cannot be imposed in the monthly payment. It is the responsibility of the lessor/finance company to keep the documents proving the distinction between the lease of the vehicle and the financed sale of the service contract or guarantee. This Bulletin contains information on how sales tax is applied to service contracts and extended warranties (collectively referred to as service contracts in this Bulletin), including: If the service contract provider is located outside of New York State and has customers in New York State, the supplier may be required to register as a seller for New York State Sales Tax purposes.

In most cases, an out-of-state contract supplier has retailers or repair centers in New York State where customers bring or ship items covered by a service contract to be repaired or replaced. These New York-based retailers and repair centers are considered agents or service providers of the non-state contract supplier. Therefore, the contract seller must register as a sales tax seller and collect and remit sales tax on its contracts for the sale of services in the State of New York. See tax slips Do I have to register for VAT? (TB-ST-175) and How to Register for New York State Sales Tax (TB-ST-360) and TSB-M-09(3)S, The definition of a sales tax supplier is extended to include out-of-state sellers with related businesses in New York State for more information. Otherwise, retail sales tax and motor vehicle sales and leasing tax apply to the total monthly payment. The service contract and warranty sales are delivered to the place where the buyer receives the documents, usually at the dealership (RCW 82.04.050). Consumers do not pay for repair work that is the subject of a service contract. However, consumers must pay VAT on additional costs for repairs that are not covered by the service contract. VAT is based on the rate applicable to the place where the customer takes possession of the repaired item, which may be located at the location of the repair shop or at the customer`s home or business when the repaired item is delivered there.

Example: A customer buys a laptop in Store A and also buys a service contract that is offered at the checkout. The cost of the service contract will be added to the cost of the laptop, and the total amount will be subject to VAT at the rate applicable in store A. Example: Mr. S buys a washing machine in workshop X in district A and has it delivered to his home in district B. Three months after the initial purchase, Mr. S takes out a 12-month extended warranty with service provider Z. Sales tax is due on the purchase of the extended warranty at the rate applicable in County B where the washing machine is located which is void. Repairs or spare parts covered by a warranty or warranty are not taxable if they are included in the purchase price of a converted engine, transmission, etc. Used car dealers in Minnesota are required to provide a warranty when selling certain used cars. If you sell such a vehicle and later make warranty repairs, there is no tax on the parts used in the repair. Tax Law: Section 1105(c)(3) Regulations: Sections 527.5 and 527.7Modifications: TSB-M-09(3) S, Definition of an Expanded Sales Tax Vendor to Include Out-of-State with Related Businesses in New York StatePublications: Publication 838, A Guide to Sales Tax for Automobile DealersBulletins: Auto Repair and Body Shops (TB-ST-40) Do I have to register for sales tax? (TB-ST-175) How to register for New York State Sales Tax (TB-ST-360) Repairs or spare parts are not taxable if they are covered by a manufacturer`s warranty or recall.

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