Could a dealer furnishing factory-warranty parts for a car sold by another dealer treat the replacement as a resale transaction?

Plain-English summary

An automobile manufacturer allowed a dealer to furnish a factory-warranty replacement part even when another dealer had sold the car.

California said the servicing dealer could be treated as the original selling dealer's agent. On that structure, the transfer of the replacement part to the agent could be treated as a sale for resale under the warranty rule.

The letter emphasized appropriate accounting procedures so the servicing dealer's records showed that it furnished the part as agent for the dealer that made the original sale.

Common questions

Did the customer have to return to the dealer that sold the car?

No, under the proposed agency treatment.

How was the servicing dealer characterized?

As agent for the original selling dealer.

What operational step did California expect?

Accounting records showing the agency-based warranty transaction.

Citations and references

• Historical California Ruling 67 — factory-warranty replacement-parts rule applied through dealer agency

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/490-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/490-0420.pdf

Original ruling text

490.0420

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

October 22, 1952

X-----------------------------

Gentlemen:
I have discussed with Mr. X-----------------, Sales Tax Administrator, your letter of October 13 addressed to him regarding the change in poly of the Ford Motor Company respecting parts furnished as replacements in satisfaction of the Manufacturer’s Guaranty and Warranty. In our opinion Sales and Use Tax Ruling 67 may be considered applicable, regardless of the fact that the retailer furnishing the replacement part pursuant to the warranty may furnish it for a car which was sold by some other dealer. This can perhaps be best accomplished by regarding the dealer actually furnishing the replacement part as the agent of the dealer who sold the car and who would have furnished the replacement part pursuant to the same warranty, had the owner gone to that dealer to secure the replacement. Presumably appropriate accounting procedures can be established so that the dealer furnishing the replacement part can show the transaction in his records for sales tax purposes as one in which he furnished a replacement part as agent for the dealer who sold the car. Very truly yours,

E. H. Stetson
Tax Counsel
EHS:ph
cc:

San Francisco – Tax Administrator