Use Tax on Loaner Vehicles During a Warranty or Recall Repair of a Vehicle

Wednesday, January 2nd, 2019


The Michigan Department of Treasury recently ruled that use tax applies to rental vehicles provided by a third-party lessor to a dealership or its customers. The taxpayer was a third-party lessor that provided rental vehicles while a customer's vehicle was being repaired under warranty or recall at the dealership. The dealership would pay for the vehicle rental, but the customer would be liable if the dealership failed to pay.

The Department advised the taxpayer that use tax is due on the vehicle rentals. Use tax applies because the third-party rental company elects to pay use tax on the rental stream (payments) instead of paying sales tax when it purchases a vehicle to use as a rental. The ruling notes that parts or labor furnished by a manufacturer under a warranty program are not taxable, but determined that vehicle rentals are not "parts or labor" so tax applies.

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Transaction (buying or selling things), Tax (the tax on this activity), Resources (our people, our website, our support services) - TTR, Inc.

TTR has a website that companies subscribe to and use daily. This website provides a list of everything that can be bought or sold in the U.S. It provides simple answers to whether buying or selling these items is taxable (subject to a sales tax or other tax), and it provides all the legal authority to support these tax answers.

TTR likes to keep things simple and fun, which is why it has great people who provide help to clients on any support questions they have about transaction tax issues.

Please visit TTR on the web at or call 866.578.8193.

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