July 11, 1979

You have requested a ruling on the Massachusetts sales tax consequences of the ********** program under which retail purchasers of your passenger cars and light trucks may obtain protection against the expenses arising out of vehicle malfunctions which are not covered by your warranty.

The program is known as the ********** ("Plan"). The Plan is offered through ********** dealers and is normally purchased through the dealer by the customer at the same time the customer purchases his new vehicle. The Plan covers the vehicle for 36 months or 36,000 miles (or optionally for 36 months or 50,000 miles) whichever elapses first.

The Plan provides broad coverage for nine major vehicle components: engine, transmission, front drive axle, rear drive axle, steering, suspension, brakes, electrical system, and air conditioner. In most instances the customer will pay a $25.00 deductible amount for any single covered repair. The balance of the repair bill, including the dealer's charge for both parts and labor, is paid by [your company].

The repair work covered by the Plan may be performed by any ********** dealer. The vehicle does not have to be returned to the dealer through whom the coverage was purchased. With prior approval ********** the repairs may also be performed at other service outlets.

The Plan also provides for payment of charges for towing and emergency road service labor up to a limit of $25 for each occurrence. If the vehicle is kept by the dealer providing the covered repairs overnight or longer, the customer's expense for a rental car is reimbursed up to $15 per day with a maximum of $75 for any one period.

The customer may not transfer the protection under the Plan to another person. The customer may cancel the coverage at any time and receive a refund of the purchase price reduced proportionally to the elapsed time or mileage. The customer may receive a full refund if he cancels the coverage within 60 days of the purchase of the covered vehicle and no claims have been made.

Based on the foregoing it is ruled:

1. The purchase price of the ********** Plan is not subject to the Massachusetts sales tax.

2. The entire repair charge by the dealer is taxable under the Massachusetts sales tax, if the charge for parts is not separately stated, and whether or not the charges are partially or fully covered by the Plan.

3. If the charges for parts and labor are separately stated, the entire amount charged by the dealer for parts is taxable under the Massachusetts sales tax whether or not the charges are partially or fully covered by the Plan.

Very truly yours,

/s/L. Joyce Hampers

L. Joyce Hampers
Commissioner of Revenue

LJH/JJW/jmp

LR 79-19