Third-Party Warranty Repair Services Creating Nexus?

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If you manufacture any type of product and provide a warranty with your product, how are the repairs or warranty services provided? Are the services completed by your own employees or by an unrelated third-party?

If the services are provided by an unrelated third-party, and you have no other connection with the state where the services are being provided, you may think you have no tax obligations with that state; but you would be WRONG (sorry).

According to Multistate Tax Commission Nexus Bulletin (NB 95-1), in-state warranty repair services through third-party repair service providers creates constitutional nexus for imposition of use tax collection responsibility for all sales made to customers in that State, and for income, franchise, gross receipts taxes or other comparable taxes in the taxing State where the warranty services are performed. Approximately 25 states have explicitly stated they follow this Bulletin. Other states may as well.

The application of this bulletin has been litigated over the years since it was released, and taxpayers have not fared well.

If you believe you have nexus issues in relation to this bulletin, please contact me at or 612.876.4824.


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