Extended warranties

From the 2024 DOR Tax Exemption Study

Det. No. 07-0247, 27 WTD 41 (May 28, 2008) 45 (6) Retail sales tax. Persons who rent or lease tangible personal property to users or consumers are required to collect from their lessees the retail sales tax measured by gross income from rentals as of the time the rental payments fall due. (b) Financing leases are treated for state tax purposes as installment sales. The retail sales tax applies to the full selling price. Refer to WAC 458-20-198.2 (Footnote added.) In the case of rentals or true leases, DOR has provided for the collection of sales taxes or use taxes as the periodic payments fall due. See Rule 211(6) and (7). But DOR has not provided for the periodic collection of sales taxes or use taxes for installment sales of personal property; therefore the retail sales tax applies to the full selling price as discussed in Rule 198(2). For Washington tax purposes, we consider a variety of factors to determine whether a lease is to be treated as a financing or disguised security arrangement (such as in an installment sale or a loan) rather than a true lease. Such factors include, but are not limited to: (1) Whether the lessee is given an option to purchase the equipment, and, if s