Taxability of warranty replacements: free spare parts treated as taxable sale between dealer and OEM when compensated by credit notes.
Warranty replacements supplied free to customers are treated as a taxable sale between dealer and OEM where the dealership agreement creates the replacement obligation, the replacement effects title transfer, and the OEM issues credit notes that function as consideration; the court upheld prior authority on credit notes and consideration but did not decide whether warranty costs were already embedded in the vehicle's sale price, generating potential double taxation and avenues for industry review or further litigation. (AI Summary)