The application of the concept of the sale of a warranty or service contract in relation to the types of agreements now available to consumers has become increasingly difficult. What appears to be a straight-forward concept in statute can become quite difficult when attempting to determine what is taxable or tax exempt in applying this exemption. The concept of the taxation of a warranty contract which is not separately stated or of a warranty which is a part of the sale of the product is a function of the requirements or benefits associated with the sale. A statutorily exempt warranty or service contract is separately identifiable. B. Implied warranties.
Statute provides guidelines on the existence of express and implied warranties.
47-2314 B. for the minimum standards regarding the merchantability of goods. When a buyer purchases an item from a vendor there are certain basic assumptions as to the merchantability of the product which are innate to that purchase. An implied or express warranty of merchantability, by its nature, warrants the condition of the item being purchased. When property is sold according to the concepts and requirements of A.R.S. 47-2316, the sale of such property does not include an implied warranty. C. Sale or use of the tangible personal property.