Are Optional Maintenance Contracts subject to sales tax?
While South Carolina's sales tax generally applies to most transactions, certain items have special treatment in many states when it comes to sales taxes. This page describes the taxability of optional maintenance contracts in South Carolina, including parts purchased for use in performing service under optional maintenance contracts. To learn more, see a full list of taxable and tax-exempt items in South Carolina.
General Optional Maintenance Contracts
In the state of South Carolina, it is exempt so long as the property covered by the contract is considered to be exempt. Motor vehicle extended service and warranty contracts are also considered to be exempt. However, the sale of a warranty, service, or maintenance contract is not considered to be taxable if it was purchased after the purchase of the tangible personal property.
Parts Purchased for Use in Performing Service Under Optional Maintenance Contracts
In the state of South Carolina, parts are considered to be exempt if the maintenance contract was given without charge, at the time of original purchase of the defective property, the tax was paid on the sale of the defective part or on the sale of the property of which the defective part was a component, and the warrantee is not charged for any labor or materials. The sale of a warranty, service, or maintenance contract is not considered to be taxable if they were purchased after the purchase of the tangible personal property.
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