Section Tax 11.27 - Maintenance contracts, insurance, and warranties(1) DEFINITIONS. In this section: (a) "Computer software maintenance contract" means a contract that obligates a vendor of computer software to provide a customer with future updates or upgrades to computer software, computer software support services, or both.(b) "Insurance" means a contract or agreement which promises indemnity against loss or damage resulting from perils outside of and unrelated to defects in tangible personal property or items, property, or goods under s. 77.52(1) (b), (c), or (d), Stats.(c) "Warranty" means a contract or agreement which promises indemnity against defects in tangible personal property or items, property, or goods under s. 77.52(1) (b), (c), or (d), Stats., sold.(2) RECEIPTS FROM INSURANCE. The sales price from the sale of insurance, except contracts under s. 77.52(2) (a)13m., Stats., are not subject to Wisconsin sales or use tax when separately stated on the invoice provided to the purchaser. Examples:
1) Company A rents a vehicle to Customer A for $200 which includes insurance. The entire charge of $200 is subject to Wisconsin sales or use tax because the charge for insurance is not separately stated.2) Company A rents a vehicle to Customer B for $200. On the invoice, Company A shows a charge for vehicle rental of $175 and a charge for insurance of $25. The charge of $175 is subject to Wisconsin sales or use tax. The $25 charge for the insurance is not subject to tax since it is separately stated on the invoice provided to the purchaser.(3) RECEIPTS FROM MAINTENANCE CONTRACTS AND WARRANTIES. Section 77.52(2) (a)13m., Stats., imposes Wisconsin sales tax on the sale of contracts, including service contracts, maintenance agreements, computer software maintenance contracts for prewritten computer software, and warranties, that provide, in whole or in part, for the future performance of or payment for the repair, service, alteration, fitting, cleaning, painting, coating, towing, inspection, or maintenance of tangible personal property or items, property, or goods under s. 77.52(1) (b), (c), or (d), Stats., unless the sale, license, lease, or rental in this state of the property, items, or goods to which the contract relates is or was exempt, to the purchaser of the contract, from taxation under subch. III of ch. 77, Stats. Examples:
1) Company A sells a machine to Customer C which will be used exclusively and directly in manufacturing. Customer C purchases an extended warranty with the machine. Customer C provides Company A with a properly completed exemption certificate. The sale of the extended warranty is not subject to Wisconsin sales or use tax because the machine to which it relates is exempt from Wisconsin sales or use tax. 2) Customer D, a resident of Minnesota, purchases an automobile from a dealership in Wisconsin. Customer D makes no use of the automobile in Wisconsin other than to drive it to his home in Minnesota. Customer D purchases an extended warranty with the automobile. The sale of the extended warranty is not subject to Wisconsin sales or use tax because the sale of the automobile is exempt from Wisconsin sales or use tax.3) Assume the same facts as in Example 2, except that Customer D does not purchase the extended warranty at the time of sale of the automobile. Instead, six weeks after the sale, Customer D purchases the extended warranty from the dealer. The sale of the extended warranty is not subject to Wisconsin sales or use tax because the automobile to which the sale relates was exempt from Wisconsin sales or use tax.4) Customer E, a resident of Wisconsin, purchases an appliance from a store in Wisconsin. Customer E purchases an extended warranty with the appliance. The sale of the extended warranty is subject to Wisconsin sales tax because the sale of the appliance is subject to Wisconsin sales tax.5) Assume the same facts as in Example 4, except that Customer E does not purchase the extended warranty at the time of sale of the appliance. Instead, 2 months after the sale, Customer E purchases the extended warranty from the store. The sale of the extended warranty is subject to Wisconsin sales tax because the appliance to which the sale relates was subject to Wisconsin sales tax.(4) REPAIRS BY RETAILERS UNDER INSURANCE PLANS. (a) The sales price from charges by a retailer to a customer or an insurer for taxable repair parts or taxable services performed under an insurance plan are subject to Wisconsin sales or use tax. Examples:
1) Company A sold an appliance to Customer E. Company A also sold an insurance plan for the appliance to Customer E. The appliance is later repaired by Company A under the insurance plan. Company A bills the insurance company for the repair. The charge to the insurance company is subject to Wisconsin sales or use tax.2) Company A sold an appliance to Customer F. Company A also sold an insurance plan for the appliance to Customer F. The appliance is later repaired by Company A under the insurance plan. Company A bills the customer for the repair. Customer F submits the bill to the insurance company and receives reimbursement from the insurance company. The charge to Customer F for the repair is subject to Wisconsin sales tax.(b)1. A retailer who provides parts or performs taxable repair services to tangible personal property or items, property, or goods under s. 77.52(1) (b), (c), or (d), Stats., under an insurance plan may purchase the tangible personal property or items, property, or goods under s. 77.52(1) (b), (c), or (d), Stats., transferred to the customer as part of the repair without Wisconsin sales or use tax as property for resale.2. A person who provides tangible personal property or items, property, or goods under s. 77.52(1) (b), (c), or (d), Stats., in repairing real property under an insurance plan is the consumer of the tangible personal property or items, property, or goods under s. 77.52(1) (b), (c), or (d), Stats., transferred to a customer as part of the repair to real property and is subject to Wisconsin sales or use tax on the purchase of the tangible personal property or items, property, or goods under s. 77.52(1) (b), (c), or (d), Stats., transferred. Note: Refer to s. Tax 11.68 for information about distinguishing between real and tangible personal property.
(5) REPAIRS BY RETAILERS UNDER MAINTENANCE CONTRACTS AND WARRANTIES. (a) The sales price from charges by a retailer to a customer for taxable repair parts or taxable services performed under a maintenance contract or warranty and that are not reimbursed by the seller of the maintenance contract or warranty are subject to Wisconsin sales or use tax. Example: Customer A purchased an automobile from a dealership in Wisconsin. Customer A purchased an extended warranty from the dealership which was subject to Wisconsin sales or use tax. Customer A brings the automobile to the dealership for repair under the warranty. Under the terms of the warranty, Customer A must pay a deductible of $100. The $100 charge to Customer A is subject to Wisconsin sales or use tax.
(b) Reimbursement to a retailer from a manufacturer or other person, whether in the form of money or replacement of parts used to perform repair services under a warranty is not subject to Wisconsin sales or use tax. Example: Customer B purchased a television with an extended warranty from an appliance store. Customer B has the television repaired under the warranty. The appliance store is reimbursed $200 by the warranty company for the repair of the television. The $200 reimbursement is not subject to Wisconsin sales or use tax.
(c)1. A retailer who provides parts or performs taxable repair services to tangible personal property or items, property, or goods under s. 77.52(1) (b), (c), or (d), Stats., under a maintenance contract or warranty may purchase the tangible personal property or items, property, or goods under s. 77.52(1) (b), (c), or (d), Stats., transferred to the customer as part of the repair without Wisconsin sales or use tax as property, items, or goods for resale.2. A person who provides tangible personal property or items or property, under s. 77.52(1) (b) or (c), Stats., in repairing real property under a maintenance contract or warranty is the consumer of the tangible personal property or items or property under s. 77.52(1) (b) or (c), Stats., transferred to a customer as part of the repair to real property and is subject to Wisconsin sales or use tax on the purchase of the tangible personal property or items or property, under s. 77.52(1) (b) or (c), Stats., transferred. Note: Refer to s. Tax 11.68 for information about distinguishing between real and tangible personal property or items or property under s. 77.52(1) (b) or (c), Stats.
(6) REPAIRS NOT BY RETAILERS. If a retailer does not repair tangible personal property or items, property, or goods under s. 77.52(1) (b), (c), or (d), Stats., under a maintenance contract, warranty, or insurance plan, but instead has another person perform the repairs covered under the maintenance contract, warranty, or insurance plan, the person's sales price from the sale of the repair to the retailer is not subject to Wisconsin sales or use tax provided the retailer gives the person a properly completed exemption certificate. The charge for repairs by the other person is exempt as a sale for resale whether or not the original sale of the property, item, or good to which the maintenance contract, warranty, or insurance plan relates occurred in Wisconsin. The sales and use tax treatment of the charge by the retailer to the customer or plan provider is the same as provided in subs. (4) and (5). Note: Refer to s. Tax 11.14 for information regarding exemption certificates.
(7) GOODWILL WORK. A retailer who provides free parts or services or both to a customer under an implied warranty in order to maintain good customer relations, although not required to do so under a sales agreement, maintenance agreement, express warranty, or insurance plan may purchase the parts without Wisconsin sales or use tax for resale. Example: Customer Z, a resident of Wisconsin, purchased an automobile and extended warranty from a Wisconsin dealership. The dealership charged Wisconsin sales tax on the sale of the automobile and warranty. Customer Z brought the vehicle to the dealership for repairs that were covered under the warranty. While performing the repairs, a part is damaged. The dealership, who is not required by the terms of the warranty to provide the part, provides the part free of charge to Customer Z. The dealership may purchase the part provided free to Customer Z without Wisconsin sales or use tax as property for resale.
Wis. Admin. Code Department of Revenue Tax 11.27
Cr. Register, November, 1977, No. 263, eff. 12-1-77; am. (1), (2) (a) and (b), Register, September, 1984, No. 345, eff. 10-1-84; am. (2) (c), Register, July, 1987, No. 379, eff. 8-1-87; r. and recr. Register, January, 1994, No. 457, eff. 2-1-94; EmR0924: emerg. am. (title), (2), (4), (5) (title), (a), (c), (6) and (7), renum. (1) (a) and (b) to be (1) (b) and (c) and am., cr. (1) (a), r. and recr. (3), eff. 10-1-09; CR 09-090: am. (title), (2), (4), (5) (title), (a), (c), (6) and (7), renum. (1) (a) and (b) to be (1) (b) and (c) and am., cr. (1) (a), r. and recr. (3) Register May 2010 No. 653, eff. 6-1-10. Section Tax 11.27 interpretss. 77.51(14) (intro.), (15b), 77.52 (2) (a) 10. and 13m., and 77.54 (8), Stats.
The interpretations in s. Tax 11.27 are effective under the general sales and use tax law on and after September 1, 1969, except that (a) the definitions in sub. (1) and the provisions in subs. (4) (b) 2. and (5) (c) 2. became effective on February 1, 1994; (b) The definition of computer software maintenance contract became effective October 1, 2009 pursuant to 2009 Wis. Act 2; (c) The specific imposition of tax on maintenance contracts and extended warranties became effective October 1, 2009 pursuant to 2009 Wis. Act 2; and (d) The change of the term "gross receipts" to "sales price" and the separate impositions of tax on coins and stamps sold above face value under s. 77.52(1) (b), Stats., certain leased property affixed to real property under s. 77.52(1) (c), Stats., and digital goods under s. 77.52(1) (d), Stats., became effective October 1, 2009, pursuant to 2009 Wis. Act 2.