Georgia Sales Tax Audit on Warranty Services

By February 18, 2019 Georgia Sales Tax

Georgia Sales Tax Audit on Warranty Services

If you are in the business of providing services under a warranty contract, then, you do not have an obligation of collecting and remitting sales tax. Most car dealers and other sellers of machinery run into this question when they are providing repairs under a warranty contract. If you are undergoing a sales tax audit, you will want to make sure that your invoices clearly separate the item sold (if any – parts), from things like labor and other services that encompass the warranty.

For example, if you machine brake rotors, you want to separate that from the sale of the rotors, and the labor. First off, machining the rotors under the warranty is fully non taxable; secondly, the rotor itself is a tangible item that is taxable; third, the labor associated with this transaction is non-taxable.

Here is a breakdown of what is subject to sales tax and what is not subject to sales tax:

Parts – ARE subject to sales tax
Labor – NOT subject to sales tax
Warranty services – NOT subject to sales tax

Parts can work in one of two ways. Either the sales tax can be paid at the time of the purchase by the dealer or the sales tax can be collected at the point of sale.

Georgia Sales Tax Audit on Warranty Services

Ansari Law Firm

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