Indiana – Updated Guidance on Warranties and Maintenance Contracts

SALT Report 1218 – The Indiana Department of Revenue has issued an information bulletin regarding warranties and maintenance contracts.  The bulletin has been updated to reflect the taxability of any subsequent payments made in regards to warranties or contracts, such as deductibles.

Summary of Changes

Original manufacturer warranties or dealer warranties that guarantee the condition of a product and provide maintenance or replacement parts for no charge or a flat fee are subject to sales tax.

Any parts transferred to a buyer under the terms of an original manufacturer warranty or dealer warranty are not subject to sales tax because the parts, or property are considered to have been sold with the product as a part of the original transaction.

In the case of software maintenance agreements or optional warranties, the presumption is that tangible personal property in the form of updates or patches will be transferred. Software maintenance agreements and optional warranties are presumed to be subject to sales and use tax. The amount subject to tax includes any subsequent payments made by the purchaser, such as deductibles or other fees.

For Further Information:

Indiana Department of Revenue – Information Bulletin #2