Spare or repair parts are not taxable if they are covered by a manufacturer`s warranty or recall. To calculate the taxable portion of the deductible, use this formula: you charge the customer the $50 deductible and you charge the manufacturer the balance owed for parts, work and revenue tax: $151.55 (total charge of $201.55 – deductible of $50). If you had issued the guarantee yourself, you would tax the taxable portion of the deductible (see Step 3 above). 5. Extended warranty plans. With the exception of extensive warranty plans issued by licensed insurance companies, the tax applies to payment fees for extensive warranty plans providing repair and work parts. The application of the tax on extended warranty plans is calculated in this subsection, such as maintenance contracts. Extended warranty plans issued by an insurance company regulated by the Bureau of Insurance of the State Corporation Commission are insurance transactions and are not subject to tax. For repairs in general, see 23VAC10-210-3050. You must include the amounts you receive from warranty sales in total (gross) sales on your sales and usage tax return. List tax-free amounts for optional warranty sales in other deductions. For example, your electronics store sells a new computer to a consumer for $1,500. The price includes a one-year warranty for parts and work, guaranteed by the manufacturer.
All of your expenses, amounting to $1,500, are taxable. “maintenance contract,” a contract in which a person imposes the maintenance or repair of an object of material personal property for a specified period of time, for a fee set at the conclusion of the contract. A maintenance contract can only provide for work, parts or parts and parts. Please note: In this example, the guarantee does not require the customer to pre-pay VAT on the taxable portion of the deductible. If you wished, you would charge the customer $51.55 and the manufacturer $150. Extended warranties to cover unforeseen repair costs are not taxable. However, the revenue or usage tax applies to parts used for order contract repairs. In the table below, you will find details on when taxes are due and who pays them.