South Carolina—Sales and Use Tax: Taxability of Extended Warranties and Inventory Withdrawals Explained
South Carolina: The sale of an optional extended warranty in conjunction with the retail sale of the taxpayer’s medical equipment, is included in gross proceeds of sale for purposes of South Carolina sales tax. However, the sale of an optional extended warranty not in conjunction with the retail sale of equipment, is not taxable.
When the taxpayer withdraws a part from inventory to fulfill an optional extended warranty, the withdrawal is subject to sales and use tax based on the fair market value of the part. However, the withdrawal is not taxable if the part would have been exempt had it been sold by the retailer to the customer.
When the taxpayer withdraws a part from inventory to fulfill a new product limited warranty, the withdrawal is not taxable, provided:
- the warranty contract is given without charge at the time of original purchase, the tax was paid on the sale of the defective part or the sale of the property, and the customer is not charged for any labor or materials; or
- the part withdrawn from inventory is for the repair of medical equipment the sale of which was exempt when originally sold to the customer.
Private Letter Ruling #21-1, South Carolina Department of Revenue, June 8, 2021,
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