Indiana – Taxability of Optional Maintenance Contracts

1/24/2013

SALT Report 2080 – The Indiana Department of Revenue updated a sales and use tax bulletin to reflect that sales of optional maintenance contracts that meet the definition of bundled transactions are subject to sales tax at the time of sale.  The bulletin also states that parts or products transferred under an optional warranty contract are subject to use tax at the time of delivery.

The bulletin also addresses the following:

  • Original manufacturer’s warranties or dealer’s warranties not offered as an option when the product is sold will be considered part of the selling price of the product,
  • Sales of optional warranty contracts where delivery of tangible personal property is unclear are not subject to sales tax, and
  • Sales of computer software maintenance contracts are treated separately from contracts addressed in the bulletin and are subject to sales tax pursuant to IC 6-2.5-4-17

Sales of Optional Maintenance Contracts Made Prior to January 1, 2013

If a retail merchant collected and remitted sales tax on the sale of an optional maintenance contract prior to January 1, 2013, the merchant will not be required to self-assess use tax on any parts used to fulfill the terms of the contract. Also, any claims for refund based for transactions that were subject to tax prior to January 1, 2013, will be denied.

For Further Information

Indiana Department of Revenue – Information Bulletin #2