Form Pub. Ks-1526 - Kansas Business Taxes For Motor Vehicle Transactions Page 15
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44The dealer can take a deduction when they file their
AUXILIARY SERVICES
July sales tax return. By claiming the deduction for
returned goods, the dealer will reduce the amount of
sales tax due on the July return. In effect, reducing the
Towing, winching, and jump-starting of vehicles, and
sales tax due on its return equal to the amount of sales
the delivery of fuel are not specifically enumerated as
tax refunded the customer. Further guidance regarding
taxable services in the sales tax act. Therefore, fees
warranty work is provided by K.A.R. 92-19-62:
for performing these services are not subject to Kansas
sales tax when they are separately stated on the invoice.
... “(d) If a retailer does not perform repair services under
However, sales tax is due on all articles of tangible
a warranty, maintenance or service contract, but instead
personal property and all labor services which involve
has a third party perform the repairs, the third party’s
repairing, servicing, altering or maintaining tangible
gross receipts received from that retailer are not subject
personal property.
to sales tax. The third party shall secure an exemption
certificate from the retailer which states:
You tow a customer’s car from his home
(1) that the service performed by the third party was
to your service department for repair. If
pursuant to a warranty, maintenance or service contract;
your towing fee is separately stated on
the parts and labor repair bill, it is not
(2) that the retailer collected from the consumer sales
subject to sales tax. However if your towing fee is not
tax on the total selling price of the warranty, maintenance
separately stated on the bill, it is subject to sales tax as
or service contract; and
a part of the gross receipts received for repair of the
(3) the retailer’s sales tax registration number.
customer’s car.
If a retailer has collected a deductible or similar charge
from the consumer, the retailer shall include the amount
WARRANTY WORK
in the retailer’s taxable gross receipts, even though a
third party may actually perform the service under the
warranty, maintenance or service contract.
When repair work is performed under a warranty,
maintenance or service contract without charge to the
(e) Each retailer gratuitously providing parts, services
consumer, it is not subject to sales tax on the amount of
or both to a consumer, is deemed to be the consumer
the reimbursement received from the warrantor, whether
of any materials, parts and third party services used.
reimbursement is in the form of money, credit or the
In this instance, each retailer shall pay sales tax to any
replacement of parts used to perform the repair work.
third party service provider, report the cost of materials
and parts on the retailer’s sales tax return, and pay the
However, any charge such as a deductible or similar
appropriate sales tax.”
charge which the consumer is obligated to pay under
the warranty, maintenance or service contract is fully
RECALL WORK
taxable, and each retailer shall collect sales tax on the
total charge paid by the consumer.
There is no sales tax due on work for which there is
A new car buyer also purchases a 100,000
no fee/charge. Recall work, to include parts and labor,
mile extended warranty for $1,200. Sales
which is provided free to the customer is not subject
tax is due on the $1,200 warranty. At
to sales tax. Reimbursement from a manufacturer to a
77,000 miles the oil pump fails and the
dealer for the recall work is also not subject to sales
cost of replacing the engine is covered by the warranty.
tax. However, any other work the customer has you do
However, the dealership charges $45 for new oil, oil
while the car is in for recall work (such as an oil change,
filter, spark plugs, etc. (not covered under the warranty).
etc.) remains subject to sales tax.
This $45 charge is subject to sales tax.
WASHING AND WAXING
Cancellation of a Warranty Contract
When a customer cancels a warranty contract before
Kansas sales tax law imposes a tax on the washing
its expiration and the dealer/manufacturer issues a
and waxing of vehicles. Thus, sales tax is due on the
partial refund to the customer for the unused portion of
gross receipts received for the service of washing and
the warrant, Kansas retailers’ sales tax should be
waxing of vehicles.
refunded to the customer.
Because it is a taxable service, car washing facilities
Customer purchased a $1,000 extended
qualify for a sales tax exemption on the water and
warranty contract in January and then
electricity that is directly used or consumed in washing
cancelled it in July – obtaining a $600
and waxing a vehicle. To claim the exemption, complete
Form ST-28B, Statement for Sales Tax Exemption on
refund. Since the dealer collected sales
Electricity, Gas, or Water Furnished Through One Meter,
tax at the time of purchase ($1,000 X .07 + $70.00),
on page 40. Electricity used for heating, lighting and
any amount refunded should include sales tax portion
cooling is subject to sales tax.
to the amount refunded ($600 X .07 + $42.00).
15
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