Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2016
Sales and Use Tax Annotations
315.0000 INSTALLING, REPAIRING, RECONDITIONING IN GENERAL—Regulation 1546
(a) IN GENERAL
315.0297 Repairs Under Warranty. A taxpayer provides a warranty to its customers as part of its sale of equipment. When the equipment is returned for repair under warranty, the taxpayer contracts with a subsidiary or with independent service centers for the repair. In some cases, the taxpayer provides parts from its resale inventory to the subsidiary or to the independent service center to accomplish the repair. The warranty work is generally performed at the site of the user of the equipment.
When the taxpayer furnishes the parts, the charge by the subsidiary or service center for labor is not taxable. If the warranty is optional, the taxpayer is liable for tax on the cost of parts removed from its resale inventory unless the parts are installed outside California. If the warranty is mandatory, the parts are regarded as having been sold with the original sale of the equipment.
When the taxpayer does not furnish parts, the subsidiary or the service center is regarded as selling the parts to the taxpayer if the parts are separately invoiced to the taxpayer or if the retail value of parts and materials exceeds 10% of the total charge. Otherwise, the subsidiary or the service center is the consumer of the parts. If the taxpayer is regarded as purchasing the parts, tax will not apply to parts installed outside California or to parts provided under mandatory maintenance contracts. 11/10/94.