M&E Unique Situations and Conclusions

Q:  Do maintenance agreements and warranties qualify for the M&E Exemption?

A:  No.  The DOR issued a special notice that specifically calls out extended warranties as being taxable even if the property is exempt.  If the warranty is included in the cost of the total sales price and can't be broken out separately, then it won't be subject to tax because it is considered part of the underlying price.  If it is broken out separately, then it is taxable.  Maintenance agreements continue to be taxable.  You can still combine the first year of a maintenance agreement or warranty into the total cost of a M&E qualifying piece of equipment, just use the equivalent non-M&E object code for the maintenance or warranty portion of the purchase.

Q:  Do labor and repair costs qualify for the M&E Exemption?

A:  Yes, please use object code 05-41 for the expenses.

Q:  Can replacement parts qualify for the M&E Exemption?

A:  Yes, please use object code 05-41 for the expenses.

Q:  Our department is fabricating a piece of equipment.  We are ordering multiple items under $1,000 from different vendors.  These items will be fabricated together to create one piece of equipment valued at over $1,000.  Can orders for these multiple items under $1,000 be purchased using 05-41 (M&E)? 

A:  Yes, these items can be purchased as 05-41 due to the fabricated item qualifying for the M&E Exemption.  The department will need to provide a comment stating that the items are going into a fabrication and also provide the fabrication tag number.

Q:  Can orders from multiple vendors (under $1,000) each be purchased as M&E if they are going to be add-costed to an existing M&E asset?  

A:  Yes.  Allowing this is consistent with how we treat components of a fabrication that are under $1,000 and also aligns with the Equipment Inventory Office's system policy.


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