Tax Type
Retail Sales and Use Tax
Description
Services; repair and installation; Extended service warranty not taxable
Topic
Taxability of Persons and Transactions
Date Issued
05-18-1998
May 18, 1998
Dear*********:
This is in response to your letter of April 29, 1998, regarding the application of the retail sales and use tax to an extended warranty offered by ***** (``Taxpayer').
FACTS
The Taxpayer is a retailer of computer hardware, software, peripheral equipment and related items. The Taxpayer's products generally come with a three-year warranty for repair parts. This warranty for repair and replacement parts is part of the sale of the Taxpayer's products and is provided to customers at no additional cost.
For an additional charge, the Taxpayer offers an extended service warranty. This extended service warranty entitles the customer to toll-free priority technical support and three-year on-site repair labor.
The Taxpayer requests a ruling on the application of the tax to this extended service warranty.
RULING
The taxation of maintenance contracts and warranty plans is addressed in Title 23 of the Virginia Administrative Code 10-210-910. This regulation states that:
There are two final points. First, while not specifically at issue in this case, the taxation of maintenance contracts which provide both parts and labor was amended effective January 1, 1996. This change in the law is set out in the enclosed Tax Bulletin 95-8. Also, l remind the Taxpayer that pursuant to Code of Virginia Sec. 58.1-625, any erroneously collected taxes must be remitted to the department unless the Taxpayer can show that the tax has been refunded to the customer or credited to the customer's account.
I trust that this information addresses your concerns. Please contact ***** in the department's Office of Tax Policy at ***** if you have additional questions.
Dear*********:
This is in response to your letter of April 29, 1998, regarding the application of the retail sales and use tax to an extended warranty offered by ***** (``Taxpayer').
FACTS
The Taxpayer is a retailer of computer hardware, software, peripheral equipment and related items. The Taxpayer's products generally come with a three-year warranty for repair parts. This warranty for repair and replacement parts is part of the sale of the Taxpayer's products and is provided to customers at no additional cost.
For an additional charge, the Taxpayer offers an extended service warranty. This extended service warranty entitles the customer to toll-free priority technical support and three-year on-site repair labor.
The Taxpayer requests a ruling on the application of the tax to this extended service warranty.
RULING
The taxation of maintenance contracts and warranty plans is addressed in Title 23 of the Virginia Administrative Code 10-210-910. This regulation states that:
-
- Maintenance contracts which provide only the furnishing of repair labor are contracts for the provision of a service only and charges for such contracts are not subject to the tax. Persons providing repair services under such contracts are liable for the tax on all items purchased for use in making repairs.
- Maintenance contracts which provide only the furnishing of repair labor are contracts for the provision of a service only and charges for such contracts are not subject to the tax. Persons providing repair services under such contracts are liable for the tax on all items purchased for use in making repairs.
There are two final points. First, while not specifically at issue in this case, the taxation of maintenance contracts which provide both parts and labor was amended effective January 1, 1996. This change in the law is set out in the enclosed Tax Bulletin 95-8. Also, l remind the Taxpayer that pursuant to Code of Virginia Sec. 58.1-625, any erroneously collected taxes must be remitted to the department unless the Taxpayer can show that the tax has been refunded to the customer or credited to the customer's account.
I trust that this information addresses your concerns. Please contact ***** in the department's Office of Tax Policy at ***** if you have additional questions.
Rulings of the Tax Commissioner