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Are sales of maintenance agreements or warranty contracts taxable?

Answer #146 -- ( Published 08/08/2005 03:05 PM | Updated 07/12/2017 10:39 AM )

Are sales of maintenance agreements or warranty contracts taxable?

The taxability of maintenance agreements or warranty contracts is dependent upon whether the charges for those agreements are included in the selling price of tangible personal property.

  • Charges for maintenance agreements or warranty contracts are taxable if they are included in the selling price. 
  • Charges for maintenance agreements or warranty contracts are not taxable if they are sold separately.

The seller of maintenance agreements and warranty contracts does incur a use tax liability on its cost price of any tangible personal property transferred in honor of a maintenance agreement. See Illinois Administrative Code, Title 86, Section 140.301.

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