Virginia DMV Salesperson Practice Exam

Question: 1 / 400

On extended service contracts, what must the dealer collect for tax purposes?

Retail sales tax on the total cost

Retail sales tax on one half of the retail cost

For extended service contracts, the dealer must collect retail sales tax on one half of the retail cost. In Virginia, this approach is taken because the service contracts are often considered to cover a specific period of time during which repairs or services are provided, rather than being a simple sales transaction. As a result, the tax is only assessed on a portion of the total cost, reflecting the portion that applies to the service provided rather than the entire retail value.

In this context, the rationale for collecting tax on one half of the retail cost aligns with state tax regulations, which aim to balance the need for revenue with the nature of these specific contracts. This method acknowledges that the service contract fee does not correspond to a traditional purchase and thus is treated differently for tax purposes.

Get further explanation with Examzify DeepDiveBeta

No tax is collected

Only a flat fee

Next Question

Report this question

Download Virginia DMV Salesperson Practice Exam PDF Study Guide
Subscribe

Get the latest from Examzify

You can unsubscribe at any time. Read our privacy policy