Was a mandatory electrical-appliance service-warranty charge taxable when separately stated on the customer's bill?

Short answer Yes. A mandatory warranty charge was part of taxable gross receipts from the appliance sale whether bundled into the price or stated separately.

State

Ruling

Annotation 490.0720

Tax type

Sales and Use Tax

Issued

1966-05-12

Issued by

California State Board of Equalization

Requested by

Redacted electrical-appliance seller

Topics

mandatory warranty service warranty gross receipts separate charge

Source

View Original PDF

Apply this to your situation

This page answers the general question as of 1966. Ask about yours and see what current California tax law says, with citations.

Disclaimer: This May 12, 1966 letter addressed mandatory charges for warranty service included with taxable retail sales of electrical appliances. It did not analyze an optional warranty, a warranty sold by a separate provider, or an exempt underlying sale. CDTFA says statutory law controls if it conflicts with an annotation. Whether coverage is required, who sells it, whether the property sale is taxable, invoice wording, and current warranty regulations 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

An electrical-appliance retailer required customers to pay for warranty service as part of buying the tangible property.

California treated that mandatory charge as part of the gross receipts from the appliance sale. Separately stating the warranty amount on the customer's bill did not remove it from the taxable selling price.

The answer assumed the underlying retail sale of the appliance was taxable.

Common questions

Did a separate invoice line make the mandatory warranty nontaxable?

No.

Why was the charge taxable?

Because the customer had to pay it as part of the taxable tangible-property sale.

Did the letter decide optional-warranty treatment?

No.

Citations and references

California taxable-gross-receipts rule — the mandatory service-warranty charge followed the tax treatment of the underlying tangible-property sale

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/490-0720.pdf

Original ruling text

490.0720

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION

May 12, 1966

G--- E--- C---, Inc.
M--- A--- Division
XXX --- ----- ---, CA XXXXX
Attention:

L. W. B--Operating Manager

SZ -- XX XXXXXX
SZ -- XX XXXXXX

Gentlemen:
This is in reply to your letter of May 5, 1966, regarding the application of the sales tax to your mandatory charges for warranty service included in the selling price of your electrical appliances. When the retailer of tangible personal property makes a mandatory charge for a service warranty, we believe that the charge is properly regarded as part of the gross receipts from the sale of tangible personal property, whether or not that charge is separately stated on the customer’s billing. Thus if the property is sold in a taxable retail sale, the mandatory charge in connection with that sale must be included in the gross receipts. If you have any further questions, please do not hesitate to write us again. Very truly yours,

Philip R. Dougherty
Associate Tax Counsel
PRD:ab
cc:

Out-of-State – District Administrator

What does the law say today, for your facts?

This ruling is from 1966. Ezel checks current California tax law against your situation and cites the authority it relies on.

Opens in Ezel Pro.

Checks the law as it stands today, not only this page
Cites every source it relies on, so you can verify it
Chat, drafting and research in one workspace