Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2014
Sales and Use Tax Annotations
490.0000 RETURNS, DEFECTS AND REPLACEMENTS—Regulation 1655
(2) Warranty Charges—When Includable In Tax Measure
490.0630 Performance Bonds. A taxpayer manufactures and sells fire trucks. Some buyers require the taxpayer to obtain performance bonds in order to assure that the trucks perform to specification. The bond is in the taxpayer's name. The cost of the bond is passed on the buyers as a separate charge on the invoice. Since the bond is not required by the taxpayer as a condition of the sale, the charge is regarded as a charge for an optional warranty. The charge passed on to the buyers is not subject to tax. 2/23/95.