Navigating Divergent State Sales Tax Treatment of Product and Service Warranties and Software Maintenance Contracts

Recording of a 110-minute CPE webinar with Q&A

Conducted on Tuesday, February 21, 2017

Recorded event now available

or call 1-800-926-7926
Course Materials

This course will provide tax professionals with a detailed update on the latest state tax developments and trends for multi-state companies buying or selling warranties. The panelist will offer compliance approaches to adjust to multi-state developments.

Description

Whether a company acts as buyer or seller, sales of warranties or maintenance contracts covering various products (along with associated labor and parts) are an area of state sales tax policy with considerable variation and confusion for multi-state corporations.

In many states, a service agreement that must be bought with a product is taxed, while an optional warranty is exempt. However, optional software maintenance agreements often are handled differently. Sales tax on parts and labor may depend on whether the warranty is mandatory or optional and who backs it.

Depending on the state, buyers and sellers may need to consider whether the “true object” of a warranty contract sale was a product or service; whether the deductible for warranted repairs is taxable; and whether withdrawal of repair parts from inventory constitutes a taxable sale.

Listen as our experienced state tax adviser provides a practical guide to the latest developments in state sales tax treatment of warranties to effectively manage this complex aspect of multi-state sales tax compliance.

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Outline

  1. General state tax issues with warranties
    1. Treatment of mandatory vs. optional warranties
    2. Handling of contracts covering physical products vs. software
    3. Special issues with extended warranties
    4. Taxability or exemption parts and labor
  2. More complex issues with warranties
    1. States that impose “true object” tests
    2. When and where using third-party warranty administrator can trigger sales tax nexus
    3. Handling of inventory withdrawals of repair parts
    4. Taxability of deductibles
  3. Specific large state examples
  4. Options for adjusting a multi-state tax compliance strategy

Benefits

The panelist will bring you current on these and other critical areas:

  • Variations among states’ sales tax policies covering mandatory vs. optional or extended warranties
  • Software maintenance agreements: which states opt to treat service contracts differently when they cover software vs. a tangible product
  • Potential nexus traps: when using a third-party warranty administrator can create sales tax duties for your company in a state
  • Current hot topics: impact of state court and administrative rulings; issues such as extended warranties purchased online

Faculty

Sean Evans
Sean Evans
Director, Tax Advisory Services
DuCharme McMillen & Associates

Mr. Evans provides a variety of nationwide tax advisory services including sales/use tax process reviews, nexus...  |  Read More

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