The Tax on Extended Warranties in South Carolina

When is the Tax Applied

• In South Carolina, you must pay sales and use tax on extended warranties, renewals of warranty, maintenance and other contracts for tangible personal properties. For example, if you purchase software and computer related items and also purchase an extended warranty at the time of purchase, you must pay tax on both the merchandise and the warranty. This tax also applies should you decide to purchase the warranty for the items at a later date. Extended warranties for automobiles, however, are exempt from tax in South Carolina.
  
  

Tax Rates

• As of the time of publication, the state sales tax in South Carolina is 6 percent. However, many municipalities also add their own component to the sales tax, so the actual sales tax you will have to pay can go as high as 10.5 percent. In many cases, you will have to pay a state, county and city sales tax in South Carolina when purchasing an extended warranty. Additionally, you must pay this tax if you purchase the extended warranty from any South Carolina business or if you are a resident of South Carolina and purchase the extended warranty from an out-of-state merchant.
  
  

Service Categories

• When you purchase a product, you may be able to buy several different types of services that do not count as warranties and, therefore, are not subject to taxation. These services include digital and informational services, standalone professional and non-professional services, tangible personal and real property services and bundled services. The tax determination associated with the service depends on the type of service performed and the association between the service and the product. In most cases, if the service directly relates to a specific product, the state of South Carolina will recognize the service as an extended warranty and impose tax on the purchase of the service.
  
  

Warranties in Other States

• Most sates impose a tax on certain types of extended warranties. For example, some states tax all warranty agreements, while other states tax only software maintenance contracts or annual fees for technical support. Before purchasing an extended warranty, ask the merchant if the price includes the state required tax. If you are purchasing a multiyear extended warranty on an expensive product, the tax can add up to a substantial amount.