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Business Taxes Law Guide—Revision 2024
Sales and Use Tax Annotations
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315.0000 Installing, Repairing, Reconditioning in General—Regulation 1546
Annotation 315.0328
(a) In General
315.0328 Third Party Service Repair Contracts. A taxpayer located in California performs third party service/repair calls for customers. The taxpayer is hired by customers who are located out of state and have no employees in California. Taxpayer is hired to perform repairs on products which are covered by some type of maintenance agreements issued by its customers.
If the taxpayer's customers contract for the repairs because they are obligated pursuant to optional maintenance agreements, the customers are the consumers of the parts the taxpayer sells. Therefore, the taxpayer's sales of parts to them are retail sales and sales tax applies to such charges for those parts. If the taxpayer's customers are obligated pursuant to mandatory maintenance agreements, the customers are the retailers of the parts they purchase. Thus, taxpayer's sales of the parts to them are nontaxable sales for resale.
When the repair service is performed on office equipment owned by the federal government, the application of the tax is the same as explained above. Although sales of tangible personal property directly to the United States are exempt from sales tax, this exemption does not apply here since the taxpayer will not be making the sales to the United States. Rather, taxpayer's sales of the parts are to the out-of-state customer under either an optional or mandatory maintenance agreement. (Regulations 1546(b)(3)(A) and 1655(c)(1).) 1/28/94.