Extended Warranties Are Taxable When They Are Not Separate From Repairs

Tuesday, December 16th, 2014

 
 
Yellow mining trucks.
Share
Link
Wyoming
General

The Wyoming State Board of Equalization ruled that warranty contracts are taxable when the costs of the services provided under the contract are not separate and distinct from the cost of the contract.

The taxpayer was a mining company that contracted with a maintenance company to repair and maintain a fleet of mining trucks. The taxpayer made monthly payments based on the number of hours each truck was used each month. Any repairs or replacements not covered by the contract were paid for separately by the taxpayer. The taxpayer applied for a refund of tax paid on the costs of the contract, but the Department of Revenue denied the refund.

In Wyoming, repair labor and materials are taxable. A warranty is an agreement that states that the product provided is free of defects or will be repaired or replaced free of charge if the product fails. An extended warranty is an additional warranty that covers repair costs or a period not covered by the standard warranty. The sale of an extended warranty, service, and maintenance contract ("extended warranty") is not taxable only if (1) the contract is sold separately from the property it covers and (2) the cost of the contract is separate and distinguishable from the cost of repairs to the property.

The contract in this case failed the second part of the extended warranty test. The taxpayer paid for the contract based on the cost of the repair services provided. The taxpayer did not buy the contract and then receive free repairs. Because the costs were not separate and distinguishable, the contract was taxable.

http://taxappeals.state.wy.us/images/docket_no_201287.PDF


About TTR

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 www.ttrus.com or call 866.578.8193.

Washington Penalty Reduction Program

Monday, May 21st, 2018 -Businesses that apply to register with Washington's Marketplace Fairness Penalty Reduction Program by June 30,...

Cloud Software No Longer Taxable in Indiana

Thursday, May 17th, 2018 -Effective July 1, 2018, cloud software will no longer be taxable in Indiana. Indiana taxes the sale, lease,...

Sales Tax Increase in the Historic Triangle Region of...

Monday, May 14th, 2018 -Effective July 1, 2018, there will be an additional one percent (1%) regional sales and use tax imposed in the...

Sales by Charitable Organizations Generally Exempt in...

Friday, May 11th, 2018 -The Arkansas Department of Finance and Administration recently addressed the taxability of sales made by a non...

Credit Card Convenience Fees Taxable in New York

Wednesday, May 9th, 2018 -The New York Department of Taxation and Finance recently ruled that convenience fees for credit card purchases...

Farming Exemption Does Not Apply to Residential Gardening...

Monday, May 7th, 2018 -The Arkansas Department of Finance and Administration ruled that a utility vehicle used for residential garden...