Florida Administrative Code
12 - DEPARTMENT OF REVENUE
12A - Sales and Use Tax
Chapter 12A-1 - SALES AND USE TAX
Section 12A-1.105 - Service Warranties
Universal Citation: FL Admin Code R 12A-1.105
Current through Reg. 51, No. 058, March 25, 2025
(1)
(a) Every person who solicits, offers,
provides, enters into, issues, or delivers any service warranty, or who
receives, on behalf of another person, any consideration from a service
warranty holder is exercising a taxable privilege and shall register as a
dealer with the Department of Revenue before such person may engage in or
conduct business in this state. See rule
12A-1.060, F.A.C.
(b)
1. The
term "service warranty" means any contract or agreement which indemnifies the
holder of the contract or agreement for the cost of maintaining, repairing, or
replacing tangible personal property, whether or not the contract provides for
the furnishing of parts. The term "service warranty" includes motor vehicle
warranties issued under part I of chapter 634, F.S., and service warranties
issued under part III of chapter 634, F.S.
a.
Example: A service contract covering an appliance, such as a refrigerator, is a
service warranty.
b. Example: A
service contract (motor vehicle service agreement) covering the repair of a
component part of a motor vehicle is a service warranty.
c. Example: A warranty agreement which
indemnifies the agreement holder for the cost of repair or replacement of a
television is a service warranty.
d. Example: A maintenance contract covering
the cost of labor only to repair or maintain computer hardware is a service
warranty.
e. Example: A service
agreement covering the cost of labor, and which provides for the furnishing of
parts at an additional charge, to repair a washing machine is a service
warranty.
2. The term
"service warranty" does not include contracts or agreements to repair,
maintain, or replace tangible personal property if such property when sold at
retail in this state would not be subject to sales tax or if the parts and
labor to repair tangible personal property qualify for an exemption under
chapter 212, F.S.
a. Example: The sale of a
wheelchair in Florida is not taxable. A service contract covering the cost of
maintaining, repairing, or replacing a wheelchair is not a service
warranty.
b. Example: The purchase
of a hearing aid in Florida is not taxable. The purchase of a service agreement
covering the cost of repairing or replacing a hearing aid is not a service
warranty.
c. Example: A maintenance
contract covering the cost of parts and labor that are exempt when used to
repair industrial machinery and equipment, as provided in section
212.08(7)(xx),
F.S., is not considered a service warranty contract.
3. The term "service warranty" does not
include contracts or agreements covering tangible personal property which
becomes a part of real property.
a. Example:
A central air conditioning system is considered to be part of real property. A
service contract covering the cost of repairing a central air conditioning
system is not a service warranty.
b. Example: An elevator or escalator is
considered to be part of real property. A maintenance contract covering the
cost of repair or maintenance of an elevator or an escalator is not a service
warranty.
(c)
1. If a transaction involves both the
issuance of a service warranty subject to tax and the issuance of a warranty,
guaranty, extended warranty or extended guaranty, contract, agreement, or other
written promise which is not subject to tax, the consideration shall be
separately identified and stated with respect to the taxable and nontaxable
portions of the transaction. If the consideration for such a transaction is not
separately identified and stated, the entire transaction is taxable.
2. If a reasonable, good faith apportionment
of the actual consideration for the taxable portion is not evident, that is, if
only a nominal amount of the consideration is attached to the taxable portion,
the Department shall have the power to reform the contract; such reformation by
the Department shall be considered prima facie correct; and the burden to show
the contrary shall rest upon the dealer. Sales tax shall apply to the
transaction to the extent that the consideration is for a service warranty
subject to tax.
3.
a. Example: A service contract covers the
cost of repairing a central air conditioning system and a refrigerator. The
cost of the contract covering the repair of the central air conditioning system
and repair of the refrigerator are separately identified and stated on the
service contract. The separately identified and stated amount of the contract
for the cost of coverage for repair of the central air conditioning system is
$500. The separately identified and stated amount of the contract for the cost
of coverage for repair of the refrigerator is $100. The portion of the contract
covering the refrigerator ($100) is taxable, while that portion covering the
central air conditioning system ($500) is not subject to tax.
b. Example: A service contract covers the
cost of repairing a central air conditioning system and a refrigerator. The
costs of the contract covering the repair of the central air conditioning
system and repair of the refrigerator are separately identified and stated on
the service contract. The separately identified and stated amount of the
contract for the cost of coverage for repair of the central air conditioning
system is $599. The separately identified and stated amount of the contract for
the cost of coverage for repair of the refrigerator is $1. Evidence provided to
the Department fails to show the apportionment between the taxable and
nontaxable portion of the contract was made on a good faith basis, and the
Department determines $500 represents the fair amount of the contract which
represents coverage for the repair of the central air conditioning system and
$100 represents the fair amount of the contract which represents coverage for
the repair of the refrigerator. The portion of the contract covering the
refrigerator ($100) is taxable, while that portion covering the central air
conditioning system ($500) is not subject to tax.
4. Example: A service contract covers the
cost of repairing a central air conditioning system and a refrigerator. A
single charge is made for the contract, and items covered under the contract
are not separately stated. The entire charge for the contract is
taxable.
(d) The partial
exemption for the sale of new or used motor vehicles to a resident of another
state authorized pursuant to section
212.08(10),
F.S., does not apply to the sale of service warranty
contracts.
(2)
(a) The tax shall be due at the rate of 6% on
the total consideration received or to be received by any person for the
privilege of engaging in the business of soliciting, offering, providing,
entering into, issuing, or delivering any service warranty.
(b) The tax shall be due and payable by the
person receiving the consideration from the service warranty agreement holder
at the time such consideration is received. The person receiving the
consideration from the service warranty agreement holder shall collect the tax
and remit it to the Department at the times and in the manner provided in rule
12A-1.056, F.A.C.
(c) Any dealer registered with the Department
who performs repairs or maintenance of tangible personal property indemnified
under a service warranty may purchase repair parts, materials, and labor
incorporated into the repair or maintenance of indemnified property tax-exempt
for the purposes of resale. The repair dealer is required to issue a copy of
the dealer's Annual Resale Certificate to the selling dealer at the time of
purchase in lieu of paying tax, as provided in rule
12A-1.039, F.A.C.
(d) If the person receiving consideration
from the service warranty agreement holder is not the person issuing such
warranty, then the issuer of the service warranty shall take from that person,
in lieu of sales tax, a copy of that person's Annual Resale Certificate (Form
DR-13).
(e) When a service
agreement is sold in conjunction with the lease of tangible personal property,
including the lease of a motor vehicle, tax is due at the time of the sale of
the service agreement. If the amount of such premium and assessment, on which
sales tax has been collected, is prorated over the term of the lease, the
prorated amount of the cost of the service agreement in each lease payment is
exempt if separately stated in the lease agreement.
(f) When a service warranty contract,
including a motor vehicle service agreement, is assigned to a subsequent
purchaser of the property covered by such contract, the total consideration
received from such assignment by any person engaged in the business of
soliciting, offering, providing, entering into, issuing, or delivering service
warranties is taxable.
1. Example: A motor
vehicle service agreement is assigned to a subsequent purchaser of a motor
vehicle covered by such agreement for a $50 assignment fee. Tax is due on the
assignment fee in the amount of $3 ($50 x .06 = $3).
2. Example: A manufacturer's warranty is
assigned to a subsequent purchaser of a motor vehicle covered by such warranty
for a $100 assignment fee. Tax is due on the assignment fee in the amount of $6
($100 x .06 = $6).
(g)
The tax does not apply to any portion of the consideration received in
connection with the issuance of any service warranty contract upon which the
person issuing such contract is required to pay any premium tax imposed under
the Florida Insurance Code or the premium tax imposed on home warranty
associations pursuant to section
634.313(1),
F.S.
(h) The purchase of insurance
by persons issuing service warranty contracts to underwrite or protect
themselves from liabilities incurred from the payment of claims arising from
the issuance of service warranty contracts is not subject to sales
tax.
(3)
(a) When a service warranty is cancelled and
the consideration paid is refunded to the warranty holder, the person who
remitted the tax to the department shall also refund to the warranty holder the
tax paid by the warranty holder for the purchase of the service
warranty.
(b) When a service
warranty is cancelled and the amount of consideration from the sale of the
service warranty is refunded to the warranty holder on a prorated basis, the
person who remitted the tax to the Department shall also refund to the warranty
holder the tax paid by the warranty holder based on the same
proration.
(c) When refunds are
paid under the conditions stated in paragraphs a. and b., the dealer may then
apply directly to the Department of Revenue for a refund or take an equivalent
credit on its sales and use tax return. See rule
12A-1.014,
F.A.C.
(4)
(a) The payment of any claim arising under a
taxable service warranty by the person issuing the service warranty made to a
person performing repairs or maintenance of a product listed under the taxable
service warranty, or made directly to a lessor of the product listed under a
taxable service warranty, is not subject to sales tax.
(b) When such a claim is paid, the person
performing repairs or maintenance shall note the following elements on the
repair invoice:
1. The name of the person
issuing the service warranty;
2.
The identification number of the service warranty;
3. The date of issuance of the service
warranty;
4. The Florida Sales Tax
Certificate of Registration number of the service warranty issuer;
and,
5. The amount of the claim to
be paid by the service warranty issuer.
(c) Any dealer registered with the Department
who performs repairs or maintenance of tangible personal property indemnified
under a service warranty may purchase repair parts, materials, and labor
incorporated into the repair or maintenance of indemnified property tax-exempt
for the purposes of resale. The repair dealer is required to issue a copy of
the dealer's Annual Resale Certificate to the selling dealer at the time of
purchase in lieu of paying tax, as provided in rule
12A-1.039,
F.A.C.
(5) The payment of all, or any portion, of a claim arising under a taxable service warranty which is not paid directly to the person performing repairs or maintenance or directly to a lessor of the product listed in the service warranty by the issuer of the service warranty is subject to sales tax. The following amounts are subject to tax:
(a) Any deductible paid by
the service warranty holder;
(b)
Any amount paid by the service warranty holder directly to the person
performing repairs or maintenance of the product for which the warranty holder
may be subsequently reimbursed by the issuer of the service warranty; and,
(c) Payment by the warranty holder
for repairs or maintenance that are not covered by the service
warranty.
Rulemaking Authority 212.17(6), 212.18(2), 213.06(1) FS. Law Implemented 212.02(4), (14)(a), (16), 212.0506, 212.06, 212.08(7)(v), 212.18(3), 634.011, 634.131, 634.401, 634.415 FS.
New 1-2-89, Amended 12-11-89, 8-10-92, 1-4-94, 3-20-96, 4-2-00, 6-19-01, 5-1-06, 9-15-08 Cross Reference: Subsection (7) of Rule 12A-15.003, F.A.C.
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