Maine – Warranties, Service Contracts and Maintenance Agreements

SALT Report 3013 – Maine Revenue Services has revised a sales and use tax bulletin that addresses warranties, service contracts, and maintenance agreements to reflect recent legislative changes.  Specifically, the publication notes that the sale of an automobile extended service contract that entitles the purchaser to certain service benefits for a specific time period is a taxable service.  Additionally, as of October 9, 2013 tax will also apply to sales of extended service contracts for trucks.

However, any parts associated with repairs made pursuant to a warranty are not taxable to either the dealer or the customer, this is because the parts are considered to be included in the original price of the extended warranty. If a warranty requires that the customer pay a deductible for repairs or maintenance, the amount paid by the customer should be applied to the non-taxable labor first. If the deductible exceeds the amount charged for labor, the balance should be applied to any parts on which the customer would have to pay sales tax.

Additionally, the publication was updated to include definitions for automobiles and trucks and discusses the taxability of goodwill repairs, repairs of maintenance outside of a covered warranty, returned items, manufacturer’s warranties, maintenance agreements, and computer software service contracts.

For Further Information

Maine Revenue Services – Sales and Use Tax Instructional Bulletin No. 53