Washington – Proposed Amendments to the Warranty and Service Contracts Rule

SALT Report 1971 – The Washington Department of Revenue has proposed to amend its sales and use tax and B&O tax rule for warranties and service contracts.   The proposed rule provides guidance regarding the tax reporting responsibilities of anyone selling or performing services covered by warranties, service contracts, and mixed agreements of tangible personal property.

The proposed amendments include the following:

  • The sale of an extended warranty will be taxed as a retail sale
  • The sale of a mixed agreement will be considered a bundled transaction
  • The sale of an agreement will not be exempt simply because the sale of the property to which it applies is exempt, and
  • The definition of “warranty” will be amended to include agreements to replace or repair tangible personal property at a reduced charge

The rule is expected to be adopted on January 10, 2013.

For Further Information:

Washington Department of Revenue – Draft Rule WAC 458-20-257