139.215 Taxation of bundled transactions.
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<![CDATA[ Page 1 of 3 139.215 Taxation of bundled transactions. (1) Unless otherwise provided by federal law, the following rules shall apply to a bundled transaction, as defined in subsection (3) of this section, that includes any or <br>all of a telecommunications service, ancillary service, Internet access, audio <br>programming, or video programming: <br>(a) If the price is attributable to products that are taxable and products that are nontaxable, the portion of the price attributable to the nontaxable product is <br>subject to tax unless the provider can identify, by reasonable and verifiable <br>standards, the portion of the products that are nontaxable from its books and <br>records that are kept in the regular course of business for other purposes, <br>including nontax purposes; or (b) If the price is attributable to products that are subject to tax at different rates, the total price shall be treated as attributable to the products subject to tax at <br>the highest rate unless the provider can identify, by reasonable and verifiable <br>standards, the portion of the price attributable to the products subject to tax at <br>the lower rate from its books and records that are kept in the regular course of <br>business for other purposes, including nontax purposes. (2) The following rules shall apply to all bundled transactions, except as provided in subsection (1) of this section: <br>(a) If the price is attributable to products where taxable and exempt tangible personal property have been bundled together and sold by the retailer as a <br>bundled transaction, the entire charge is subject to tax; (b) If the price is attributable to products where taxable products and exempt services have been bundled together and sold by the retailer as a bundled <br>transaction, the entire charge is subject to tax. (3) For purposes of this section: (a) "Bundled transaction" means the retail sale of two (2) or more products, except real property and services to real property, where: <br>1. The products are otherwise distinct and identifiable; and 2. The products are sold for one (1) nonitemized price; (b) "Distinct and identifiable products" do not include: 1. Packaging such as containers, boxes, sacks, bags, bottles, wrapping <br>materials, labels, tags, or instruction guides that accompany the retail <br>sale of the products and are incidental or immaterial to the retail sale <br>thereof. Examples include grocery sacks, shoe boxes, dry cleaning <br>garment bags, and express delivery envelopes and boxes. 2. A product provided free of charge with the required purchase of another <br>product. A product is provided free of charge if the sales price of the <br>product purchased does not vary depending on the inclusion of the <br>product provided free of charge; or 3. Items included in the definition of sales price: and Page 2 of 3 (c) "One (1) nonitemized price" does not include a price that is separately identified by product on binding sales or other supporting sales-related <br>documentation made available to the customer in paper or electronic form, <br>including but not limited to an invoice, bill of sale, receipt, contract, service <br>agreement, lease agreement, periodic notice of rates and services, rate card, or <br>price list. (4) A "bundled transaction" does not include: (a) The retail sale of any products in which the sales price varies or is negotiable, based on the selection by the purchaser of the products included in the <br>transaction; (b) The retail sale of tangible personal property and a service where the tangible personal property is essential to the use of the service, and is provided <br>exclusively in connection with the service, and the true object of the <br>transaction is the service; (c) The retail sale of digital property and a service where the digital property is essential to the use of the service, and is provided exclusively in connection <br>with the service, and if the true object of the transaction is the service; (d) The retail sale of services where one (1) service is provided that is essential to the use or receipt of a second service and the first service is provided <br>exclusively in connection with the second service and the true object of the <br>transaction is the second service; (e) A transaction that includes taxable products and nontaxable products if the purchase price or sales price of the taxable products is de minimis. For <br>purposes of this section, "de minimis" means the seller's purchase price or the <br>sales price of the taxable products is ten percent (10%) or less of the total <br>purchase price or sales price of the bundled products. Sellers shall use either <br>the purchase price or the sales price of the products to determine if the taxable <br>products are de minimis. Sellers shall not use a combination of the purchase <br>price and the sales price of the products to determine if the taxable products <br>are de minimis. Sellers shall use the full term of a service contract to <br>determine if the taxable products are de minimis; or (f) The retail sale of exempt tangible personal property and taxable tangible personal property where: <br>1. The transaction includes: <br>a. Food and food ingredients as defined in KRS 139.485; b. Drugs as defined in KRS 139.472; c. Durable medical equipment as defined in KRS 139.472; d. Mobility enhancing equipment as defined in KRS 139.472; e. Medical supplies; or f. Over-the-counter drugs as defined in KRS 139.472; and 2. The seller's purchase price or sales price of the taxable tangible personal <br>property is fifty percent (50%) or less of the total purchase price or sales Page 3 of 3 price of the bundled tangible personal property. Sellers shall not use a <br>combination of the purchase price and the sales price of the tangible <br>personal property when making the fifty percent (50%) determination <br>for a transaction. Effective: July 1, 2009 <br>History: Amended 2009 Ky. Acts ch. 73, sec. 5, effective July 1, 2009. -- Amended 2008 Ky. Acts ch. 95, sec. 7, effective August 1, 2008. -- Created 2007 Ky. Acts <br>ch. 141, sec. 6, effective July 1, 2007. ]]>