The Department has received questions recently about whether sales tax applies to "service contracts" for computers. As of July 1, 2005, the sales tax applies to sales of both service (or maintenance) contracts and warranty contracts. However, prior to July 1, 2005, only sales of service/maintenance contracts were subject to sales tax. Telling the difference between a service/maintenance contract and a warranty contract can be difficult and the label (its title) used by the seller is not controlling.
"A maintenance agreement" includes a requirement that the maintenance provider perform cleaning, servicing, alterations, or improvements to the computer hardware and/or software regardless of whether the computer hardware and/or software is operating properly. The maintenance may be provided on a regular or irregular basis. A warranty is distinguished from a maintenance agreement in that the warranty requires these services only when the computer is not operating properly." See ETA 3103. The name given to the agreement is not controlling.