A change in the Minnesota statutes prompted the Minnesota State Department to provide notice on the sales and use tax of warranty and maintenance contracts. Installing or installing a computer system or installing prefabricated hardware or software upgrades is taxable. This is the case when installation fees are charged by the system vendor and are charged by a third party who has only been incurred for the installation. The amounts paid for the reimbursement of the installer`s travel, accommodation, meals, etc. are part of the installation fee and are also taxable. “Since the services provided to contractors are not taxable until after June 30, contractors must ensure that the repair service provider properly separates the tax-free repairs made on the invoice and the taxable repair work after the June 30 deadline expires,” said Mr. Herold. Minnesota DOR defines a maintenance contract as “a contract under which spare parts and consumables required for equipment maintenance are provided at no additional cost.” “Consumer items” here refer to “items that are depleted, disposable, depleted, depleted, or items that need to be replaced after being used for a certain period of time.” A manufacturer`s warranty is included in the purchase price of the device. The spare parts or spare parts covered by the manufacturer`s warranty are inventory exchanges and are not taxable. All payments for prefabricated computer software are taxable, including payments billed at regular intervals (e.g., weekly, month, year) or by use or result. Example: An office supply company sells a photocopier to a customer. The customer also acquires an optional maintenance contract from the company for an unassigned price. The maintenance contract allows the customer to benefit from free service and sharing in the event of a photocopier failure.

The contract also provides for quarterly inspections; Replacing the drum after 100,000 copies; and toner, which must be made available as needed. The price of the personal material property used in the contract is more than 10% of the total group price. If the prefabricated software maintenance contract is optional, the separate fees are taxed as follows: For example, a customer acquires a maintenance contract that provides for repair and service computer equipment as well as technology upgrade services that allow the regular exchange of computers. The contract separately lists the cost of work for repairing and serviceing computer equipment and the price of replacement computers used in the technology update program. The costs of delivering taxable products, such as computer equipment or prefabricated software, are taxable. Shipping costs include shipping, postage, handling, cheese and packaging. Non-taxable delivery of goods or services are not taxable. For more information, check out Fact Sheet 155, delivery fee. A custom computer software program is not taxable.

A personalized program is a program that is prepared for the special order of the customer. It usually requires advice and analysis of the client`s requirements. The program can be transferred as written or content procedures or recorded on tapes, discs, cards or another device. It may also contain documentation or manuals to facilitate the use of the custom computer program. “When the DOR issues a revenue communication, we generally see more audit activity about a year after the notice is issued. This means that by the end of 2013, there may be more audits of companies offering maintenance contracts,” he explains.

Thursday, April 8th, 2021


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