Working draft – For Discussion Purposes Only
Updated 086/03150083/2004
Bundled Transaction
The purpose of this section is to define when a transaction is bundled. The tax treatment of a bundled transaction iswould be deter determined pursuant to each state's applicable statutes. The purpose of this section is to define when a transaction is bundled. For purposes of clarity, bundled transactions may be subject to taxation pursuant to each state's applicable statutes.
Definition
A bundled transaction is the retail sale of two or more products in a transaction s where: criteria (components, tests)? : (1) the products are otherwise distinct and identifiable, and (2) the products are sold for one non-itemized price. A bundled transaction does not include any product for which the sales price varies or is negotiable based on the selection of that product by the purchaser.
[A bundled transaction means: 1) the retail sale of otherwise distinct and identifiable products and; 3) for one non-itemized price and; 4) the price that does not vary and is not negotiable based on the selection of the products made by the purchaser].
(A)
The term “product” means tangible personal property or services and but does not include real property or services to real property.
(B)
The term “distinct and identifiable products” means any combination of products that are commonly understood are commonly pursuant to understood industry standards as are as separate and independent such as (list is not intended to be all inclusive):
n
Hardware, hardware maintenance, and/ or help desk support
n
Software, software maintenance, programming, training, and help desk support, and/or reimbursed expenses.
n
Data processing, data printing, consulting and/or outsourcing services
n
Prescription drugs, medical supplies, nursing and/or pharmacist consultation
n
Local telecommunications, long-distance telecommunications, Internet access, and/or ancillary services
n
Repair labor, fabrication, installation labor and/or materials
n
“Distinct and identifiable products” does not include:
(1)
Packaging – such as containers, boxes, sacks, bags, and bottles – or other materials – such as wrapping, labels, tags, and instruction guides – that accompany the retail sale of products that and are incidental or immaterial to the retail sale thereof. Examples of packaging that are incidental or immaterial include grocery sacks, shoeboxes, dry cleaning garment bags and express delivery envelopes and boxes.
(2)
A product provided free of charge with the required purchase of a non-taxable product.
i.
A product is “provided free of charge” if the sales price of the product purchased does not vary depending on the inclusion of the product “provided free of charge.”
(We need to work with retailers—Target, WalMart, Amazon, and FederatedNote: Target to provide re-worked language to address use tax) regarding the preservation of current treatment of the sale of promotional items with a taxable product to allow them to continue to properly issue a sale for resale certificate on the purchase of ‘give away/promotional' item. Does this require that we add something such as:
“Nothing in this provision is intended to affect a state's current treatment of the promotional products included in the sale of taxable products where tax is collected on the trans “products provided ‘free of charge' does not include items where the seller recovers the cost of such items in the retail sales price of the item sold and such treatment can be established in the sellers books and records”
OR ?
Need to ensure Telecom concern is also addressed. The “price” of a router that is provided “free of charge” with the provision of other telecom services cannot be allocated to the sale of the service in the tax software system—as sometimes, the customer chooses not to accept the free item.)
(3)
Products that are part of the sales price are listed in A. through E. and G. of the definition of sales price in Appendix C of the Agreement, so long as those items are included in the member state'sMember State's definition of “sales pricee.”as defined in Appendix C of the Agreement. of the product.
(Alternatively, consideration could be given to removing this provision.)
(Note: need to address “sales price” definition issue in the Agreement) (Redlined for removal)
(C)
The term “one non-itemized price” does not include a price that is separately identified by product on binding sales or other supporting sale-related documentation made available to the customer in paper or electronic form including, but not limited to, an invoice, bill of sale, receipt, contract, service agreement, lease agreement, periodic notice of rates and services, rate card, or price list.
Exclusions
We need to discuss with Mark Nebergall that we are re-inserting the term “binding” into the definition; FedEx to confirm whether the added language resolves their problem regarding separate stmt requirements
, where the purchaser is notified that such documentation is available upon request.
A transaction that otherwise meets the definition of a bundled transaction as defined above, is not a bundled transactionOR
The term “one-non-itemized price” does not include products which are separately itemized on binding support sales documentation, made available to the customer, in paper or electronic form. including, but not limited to, an invoice, bill of sale, contract, service agreement, lease agreement, periodic notice of rates and services, rate card, catalog, price list, or similar document. (Alternative to C) The term “one non-itemized price does not include charges for distinct and identifiable products which are reasonably identified in the seller's books and records, kept in the regular course of business, including, but not limited to, an invoice, bill of sale, contract, service agreement, lease agreement, periodic notice of rates and services, rate card, catalog, price list, or similar document, in paper or electronic form, where the purchaser is notified that such itemization is available upon request.
means the sales price of distinct and identifiable products are not separately itemized. Distinct and identifiable products are separately itemized if:
(1)
They are: (i) separately itemized on binding supporting sales documentation including, but limited to, invoices, bills of sale, contracts, service agreements, lease agreements, periodic notices of rates and services, rate cards, or similar documents, and (ii) the purchaser is notified that binding supporting sales documentation is made available to the purchaser, either in paper or electronic form, or
(1)
The charges for such distinct and identifiable products can be reasonably identified from the seller's books and records kept in the seller's regular course of business. For use tax purposes, the seller's books and records that substantiate the allocation of the charges for distinct and identifiable products must be made available to the purchaser in order for the charges to be treated as separately itemized. The seller must provide such information within 60 days of receiving a written request of the purchaser, unless otherwise provided by contract. The purchaser's request must contain the information necessary to address this request.
if it is either:
(A)
A transaction where (1) one of the products is essential to, or facilitates, the use of the second product, or and is provided exclusively in connection with the second product, and (2) the true object of the transaction is the second product; or This is a retail sale of the second product. – Note: should this sentence be removed?
(B)
A transaction that includes taxable products and nontaxable products and the purchase price or sales price of the taxable products is de minimis.
(1)
De minimis means the seller's purchase price or sales price of the taxable products is ten percent (10%) or less of the total purchase or sales price of the bundled products.
(2)
Sellers shall use either the purchase price or the sales price of the products to determine if the taxable products are de minimis. Sellers may not use a combination of the purchase price and sales price of the products to determine if the taxable products are de minimis.
(3)
Sellers shall use the full term of a service contract to determine if the taxable products are de minimis. ms.
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