Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2013
 

Sales and Use Tax Annotations


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R

490.0000 RETURNS, DEFECTS AND REPLACEMENTS—Regulation 1655

Annotation 490.0510.350

(c) WARRANTIES

(1) In General

490.0510.350 Buyer's Warranty. A California resident purchased from an Arizona dealer a boat manufactured by a company in Wisconsin. After the purchase, the buyer discovered a crack in the boat. The Wisconsin company agreed to have the crack repaired under a buyer's warranty (i.e., mandatory warranty included in the selling price). The boat was taken to a boat repair shop in California.

Since the crack was repaired under a mandatory warranty, there is no tax owing on the purchase of parts either by the repairer or the manufacturer. The furnishing of parts by the repairer would be a nontaxable sale for resale. The purchaser paid use tax on the purchase price of the boat, including the mandatory warranty, at the time it was registered with DMV. 3/10/92.