Ezel / Tax Rulings / CA

Were automobile service-guarantee charges taxable, and how were repair parts sold to the guarantee company treated?

Short answer A guarantee included with the automobile was taxable; a strictly optional guarantee was not. Repair parts sold to the guarantee company were taxable retail sales.
State
CA
Ruling
Annotation 490.0660
Tax type
Sales and Use Tax
Issued
1957-07-18
Issued by
California State Board of Equalization
Requested by
Board staff reviewing automobile service guarantees
Topics
automobiles mandatory warranty optional warranty repair parts taxable measure
Source
View Original PDF

Apply this to your situation

This page answers the general question as of 1957. Ask about yours and see what current California tax law says, with citations.

Currency note: this ruling is from 1957
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This brief July 18, 1957 internal opinion addressed automobile guarantees issued by a redacted guarantee corporation. It distinguished guarantees sold as part of the automobile sale from those sold on a strictly optional basis and treated the guarantee corporation as the consumer when a repairman sold it parts. It does not describe premium flows, claim deductibles, labor charges, or contract language. CDTFA says statutory law controls if it conflicts with an annotation. True optionality, who sells and obligates the coverage, parts invoicing, and current warranty law can change the result.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page as a PDF) is the authoritative source for any reliance.
View original ruling (PDF)

Plain-English summary

California treated an automobile service guarantee sold as part of the vehicle sale like other mandatory warranties. Any amount charged for that included guarantee was part of the taxable measure.

If the guarantee was sold on a strictly optional basis, its charge was not taxable as part of the automobile sale.

The guarantee corporation was the consumer of repair parts. A repairman's sale of parts to that corporation therefore was a taxable retail sale.

Common questions

Was an included automobile guarantee taxable?

Yes.

Was strictly optional coverage taxable as part of the car sale?

No.

Was the guarantee company buying repair parts for resale?

No. It was treated as the consumer.

Citations and references

  • California mandatory- and optional-warranty treatment — applied to the automobile guarantee charge and repair-parts sales

Source

Original ruling text

STATE BOARD OF EQUALIZATION
OFFICE CORRESPONDENCE

490.0660

Date:
To:

Mr. H. A. Dickson

From:

E. H. Stetson

Re:

Service Guaranties on Automobiles

Sacramento
July 18, 1957

SR -- XX-XXXXXX

It is our opinion that the sale of the automobile guaranties issued by the U--- S--- G--Corporation when made as part of the sale of the automobile it warrants should be treated for tax purposes in the same manner as are television warranties, that is, any amount charged for the warranty should be included in the taxable measure. However, when the warranty is sold on a strictly optional basis, we do not believe the tax applies. The sale of parts by the repairman to the U--- S--- G--- Corporation should be considered as being made to a consumer and therefore taxable.

JJD:tl

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