A used motor vehicle dealer’s sale of extended warranties, service and maintenance contracts and agreements for vehicles purchased in Virginia but licensed and registered in another state are subject to Virginia retail sales and use tax. Virginia tax law provides that motor vehicles are not subject to retail sales and use tax. However, there is no exemption for maintenance and warranty agreements sold with motor vehicles, whether the motor vehicles are titled and registered in or outside Virginia. Per Virginia tax law, maintenance contracts, the terms of which provide for both repair or replacement parts and repair labor, are subject to tax upon 50% of the total charge for such contracts. In order to determine whether tax applies to the sale of maintenance agreements sold in connection with vehicles titled and registered outside Virginia, the situs of the sale must be evaluated. Even though the vehicle which was titled out of state was exempt from the Virginia sales tax, the situs of sale for the agreements is the dealer’s Virginia locations, where the actual sale was made. As a result, the agreements are subject to Virginia sales tax on 50% of the charge for the agreement, regardless of where the dealer’s customer will use the agreement. The dealer requested guidance regarding the application of the tax on the sale of the agreement depending upon where the repairs are performed. Since the agreements are taxed at the time of purchase, any parts provided and covered under the warranty work would not be taxed at the time of installation. (Ruling of Commissioner, P.D. 18-152, Virginia Department of Taxation, August 8, 2018)