Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2017
Sales and Use Tax Annotations
545.0000 "TAX-PAID PURCHASES RESOLD"—Regulation 1701
545.0019.550 Mandatory Warranty. A taxpayer who repairs customers' tape drives under mandatory warranties purchases spare parts tax-paid. When the taxpayer receives a defective tape drive from a customer, it may repair and return the identical drive to the customer or may send the customer a replacement drive. When a replacement drive is sent, the taxpayer will repair the defective drive and place it in its inventory for future use.
While the taxpayer may take a tax-paid purchases resold deduction with respect to the property purchased tax-paid and incorporated during a mandatory warranty repair, it may only do so with respect to the property incorporated during the current repair. With respect to items returned to the taxpayer and repaired more than once, the taxpayer may take a tax-paid purchases resold deduction only with respect to the purchase price of tax-paid property incorporated during the current repair session. 11/19/97. (M99–1).