To whom is the sales tax on a warranty or service agreement sold to a customer paid?

The sales tax on a warranty or service agreement sold to a customer is paid to the Virginia Department of Taxation. This is because state sales tax is collected on specific transactions and must be remitted to the appropriate state agency responsible for tax collection and regulation. In Virginia, the Department of Taxation oversees the collection of sales tax, ensuring that the funds are directed towards state services and infrastructure.

The dealership itself does not retain this tax, as it acts as a collector for the state rather than the ultimate recipient of the tax revenue. The federal government does not impose a sales tax, which is why that option is not applicable. The consumer ultimately pays the sales tax as part of their purchase, but the actual payment and remittance are done through the dealership to the state tax authority. Thus, the correct answer identifies the state agency tasked with managing and collecting sales tax on such agreements.