GMC DEALERS IN S. CAROLINA SALES TAX ON WARRANTY REPAIRS

To: GMC Truck Dealers In The State Of South Carolina

Subject: Sales Tax On Warranty Repairs - South Carolina

The South Carolina Tax Commission has ruled that in cases where a customer is charged a deductible of any amount, all repair parts used in the warranty work are taxable. This decision only covers those cases where a customer is charged a deductible. The state has not changed their opinion that all of the repair parts used in fulfillment of warranties issued without deductibles are exempt from tax.

General Motors believes this decision results in double taxation for charges to the customer over and above the deductible amount. We view this decision as a misinterpretation of a poorly worded statute written in 1957.

Since projected warranty costs are built into the purchase price of a vehicle, our position is that sales tax on warranty repairs is collected at the time a new vehicle is sold. In this connection, we believe any sales tax on warranty repairs over the $100 deductible amount has already been collected at the time of vehicle sale. No other state requires sales tax on the non-deductible portion of a warranty repair. With regard to sales tax on those amounts paid by the customer that are under the $100 deductible, GM will attempt to have these transactions exempted from tax as part of our effort for legislative change. However, sales tax on the deductible portion of a warranty repair is a requirement in several other states.

To correct this tax inequity, General Motors, along with other automobile manufacturers, is pursuing a legislative change. In the meantime, we seek the support of the South Carolina dealers in this initiative and request that you neither collect nor pay sales tax on warranty parts over the $100 deductible amount. In the event we are not successful in changing the interpretation and application of this sales tax law, GM will indemnify you in conjunction with any legal action filed against you as well as any tax assessments applied for the parts in question.

In the event you are assessed sales tax for repair costs over the deductible amount, please contact your District Service Manager/Service Development Manager immediately so that we can closely monitor the situation.

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