Sales Tax on Service Agreements

NOTICE:  The information below was obtained directly from the Florida Department of Revenue (DOR) website. Links are provided so you may access the content on the DOR website.

FAST FACTS

When you sell a service agreement the amount of sales tax you must collect is as follows:

  • When selling a service agreement to a customer who resides in Florida, you must collect 6% state sales tax plus the local discretionary sales surtax for the county in which the RV will be titled and registered.

NOTE: There is no $5,000 cap on the local discretionary sales surtax on service agreements. Therefore, if the service agreement is $10,000 and you sell one to a person who resides in a county with a 1% discretionary sales surtax, you will collect a total of $700.00 in sales tax (7% of the service agreement amount of $10,000).

  • When selling a service agreement to a customer who resides in another state or country, you must collect 6% state sales tax on the entire price of the service agreement. Local discretionary sales surtax does not apply and should not be collected for sales to out-of-state purchasers.

The Florida Department of Revenue Tax Information for Motor Vehicle Dealers Manual, page 27 reads as follows:

Service Warranties

Imposition of the Sales Tax on Service Warranties

A motor vehicle dealer is required to collect sales tax when a customer purchases a motor vehicle service warranty from the dealer. For purposes of applying the discretionary sales surtax, the $5,000 cap does not apply to the sale of a service warranty on a motor vehicle. A “service warranty” means any contract or agreement which indemnifies the holder of the contract or agreement for the cost of maintaining, repairing, or replacing tangible personal property, including motor vehicles.

Service warranties sold to out-of-state or out-of-country residents are subject to the state sales tax rate of 6 percent. The discretionary sales surtax (surtax) does not apply when the vehicle will be registered or licensed in another state or country. However, if the nonresident registers the vehicle in Florida, surtax will apply at the rate imposed by the county in which the vehicle is registered.

 

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