Are warranties taxable?
Effective for sales or renewals on or after October 1, 2005, Code Sections 12-36-910(B) and 12-36-1310(B) impose the sales and use tax on the: gross proceeds accruing or proceeding from the sale or renewal of warranty, maintenance, or similar service contracts for tangible personal property, whether or not such contracts are purchased in conjunction with the sale of tangible personal property. As such, charges for sales or renewals of warranty, maintenance, or similar service contracts (whether optional or mandatory) for tangible personal property are subject to the sales and use tax effective October 1, 2005. However, charges for motor vehicle extended service contracts and motor vehicle extended warranty contracts are exempt from the sales and use tax under Code section 12-36-2120(53). Note: The tax does not apply to the withdrawal from inventory of tangible personal property for use in replacing defective part under a warranty contract if: 1) tax was paid on the sale or the renewal
