Almost every state, plus the District of Columbia, has a state sales tax. But do you know how many state sales tax laws apply to the purchase of a service contract? The answer is approximately 35. In at least one state, sales tax is applicable to the sale of motor vehicle and consumer goods service contracts, but not to home service contracts. In another state, the sales tax is due only if the obligor of the service contract is an entity other than a licensed insurance company. Failure to collect sales tax when it is applicable can lead to lost revenues and even administrative penalties. Be sure that your program has all the right information to avoid adverse consequences.
