Section 11.985. Bundled transactions.

 

(1)   Definitions. In this section:

(a)

1. "Bundled transaction" means the retail sale of 2 or more products, not including real property and services to real property, if the products are distinct and identifiable products and sold for one nonitemized price.

2. "Bundled transaction" does not include any of the following:

a. The sale of any products for which the sales price varies or is negotiable based on the purchaser's selection of the products included in the transaction.

Example: Retailer A enters into a contract with Customer B to provide various information technology services. Customer B selects the information technology services it wants from Retailer A. Through negotiation, Retailer A and Customer B agree on a price based on the services selected and Retailer A bills Customer B one nonitemized price for all of the services. Since the price was based on the products selected by Customer B, the transaction is not a bundled transaction.

b. The retail sale of tangible personal property and a service, if the tangible personal property is essential to the use of the service, and provided exclusively in connection with the service, and if the true object of the transaction is the service. The Wisconsin sales and use tax treatment of this transaction would follow the tax treatment of the service provided.

c. The retail sale of a service and items, property, or goods under s. 77.52 (1) (b) , (c) , or (d) , Stats., if such items, property, or goods are essential to the use of the service, and provided exclusively in connection with the service, and if the true object of the transaction is the service. The Wisconsin sales and use tax treatment of this transaction would follow the tax treatment of the service provided.

d. The retail sale of services, if one of the services is essential to the use or receipt of a second service, and provided exclusively in connection with the second service, and if the true object of the transaction is the second service. The Wisconsin sales and use tax treatment of this transaction would follow the tax treatment of the second service.

e. A transaction that includes taxable and nontaxable products, if the seller's purchase price or the sales price of the taxable products is no greater than 10 percent of the seller's total purchase price or sales price of all the bundled products, as determined by the seller using either the seller's purchase price or sales price, but not a combination of both, or, in the case of a service contract, the full term of the service contract.

f. The retail sale of taxable tangible personal property, or items, property, or goods under s. 77.52 (1) (b) , (c) , or (d) , Stats., and tangible personal property, or items, property, or goods under s. 77.52 (1) (b) , (c) , or (d) , Stats., that is exempt from the taxes imposed under this subchapter, if the transaction includes food and food ingredients, drugs, durable medical equipment, mobility-enhancing equipment, prosthetic devices, or medical supplies and if the seller's purchase price or the sales price of the taxable tangible personal property, or items, property, or goods under s. 77.52 (1) (b) , (c) , or (d) , Stats., is no greater than 50 percent of the seller's total purchase price or sales price of all the tangible personal property, or items, property, or goods under s. 77.52 (1) (b) , (c) , or (d) , Stats., included in what would otherwise be a bundled transaction, as determined by the seller using either the seller's purchase price or the sales price, but not a combination of both.

(b) "Distinct and identifiable product" does not include any of the following:

1.

a. Packaging, including containers, boxes, sacks, bags, bottles, and envelopes; and other materials, including wrapping, labels, tags, and instruction guides; that accompany, and are incidental or immaterial to, the retail sale of any product.

b. Packaging that is incidental or immaterial to the retail sale of a product includes grocery sacks, shoeboxes, dry cleaning garment bags, and express delivery envelopes and boxes.

2.

a. A product that is provided free of charge to the consumer in conjunction with the required purchase of another product, if the sales price of the other product does not vary depending on whether the product provided free of charge is included in the transaction.

b. Products that are provided free of charge include a free car wash provided by a gas station with the purchase of 15 or more gallons of gas, a free place setting of dinnerware provided by a grocery store with the purchase $50 or more in groceries, and a free cap provided by an auto parts store with the purchase of a case of motor oil.

3.

a. Any items specified in the definition of "purchase price" in s. 77.51 (12m) (a) , Stats., or "sales price" in s. 77.51 (15b) (a) , Stats.

b. Items that are specified in the definition of "purchase price" and "sales price" include the cost of the property sold, the cost of materials used, labor or service cost, interest, losses, all costs of transportation to the seller, all taxes imposed on the seller, charges by the seller for any services necessary to complete the sale, delivery charges, and installation charges.

(c)

1. "One nonitemized price" does not include:

a. A price that is separately identified by product on a binding sales document, or other sales-related document, that is made available to the customer in paper or electronic form, including an invoice, a bill of sale, a receipt, a contract, a service agreement, a lease agreement, a periodic notice of rates and services, a rate card, or a price list.

b. A price for which the sales price varies or is negotiable based on the purchaser's selection of the products included in the transaction even if the seller only provides one price on its invoice to the purchaser.

Example: Retailer C enters into a contract with Customer D to provide various information technology services. Customer D selects the information technology services it wants from Retailer C. Through negotiation, Retailer C and Customer D agree on a price based on the services selected and Retailer C bills Customer D one price for all of the services, some of which are taxable and some of which are not taxable. Although the invoice from Retailer C to Customer D only contains one price for all of the services, since the price was based on the products selected by Customer D, the price is not "one nonitemized price."

c. A single price that is equal to the total of the individually priced or itemized products contained in the supporting sales related documentation such as a catalog, price list, or service agreement.

2. If a transaction includes a bundle of products that are sold for one nonitemized price and also one or more additional products that were individually priced or itemized from the bundled products in a catalog or price list, but the invoice provided to the purchaser only included one price, the additional products that were individually priced in the catalog or price list are not part of the bundled transaction.

3. If the products in a transaction are not sold for one nonitemized price as provided in subds. 1. and 2. , and the total sales price of the transaction is further discounted, without itemizing the discount for each product, this will not cause the transaction to now be characterized as a bundled transaction. Unless sales related documentation or information is provided to show the allocation of the discount, the discount is to be allocated pro rata among the otherwise separately itemized products.

(d) "Product" includes tangible personal property, and items, property, and goods under s. 77.52 (1) (b) , (c) , and (d) , Stats., and services. For purposes of this rule, "product" does not include real property or services to real property.

(2)   Taxable receipts.

(a) Except as provided in par. (b) , the entire sales price of a bundled transaction is subject to Wisconsin sales or use tax.

(b)

1. At the retailer's option, if the retailer can identify, by reasonable and verifiable standards from the retailer's books and records that are kept in the ordinary course of its business for other purposes, including purposes unrelated to taxes, the portion of the price that is attributable to products that are not subject to the tax imposed under this subchapter, that portion of the sales price is not taxable.

2. The option provided to the retailer under subd. 1. does not apply to a bundled transaction that contains food and food ingredients as defined in s. 77.51 (3t) , Stats., drugs as defined in s. 77.51 (3pj) , Stats., durable medical equipment as defined in s. 77.51 (3pm) , Stats., mobility-enhancing equipment as defined in s. 77.51 (7m) , Stats., prosthetic devices as defined in s. 77.51 (11m) , Stats., or medical supplies.

(3)   Nontaxable receipts. The receipts from the following types of transactions are not subject to Wisconsin sales or use tax. Although these transactions would generally be thought of as being bundled transactions, since they meet certain specific conditions, they are excluded from the definition of a bundled transaction.

(a) The sales price received from sales of taxable products sold in what would be a bundled transaction, except that the sales price of the taxable products in the transaction are 10 percent or less of the seller's total sales price of all of the products in the transaction or the seller's total purchase price of the taxable products in the transaction are 10 percent or less of the seller's total purchase price of all of the products in the transaction. However, the first person combining the products shall pay the Wisconsin sales or use tax on their purchase price of the taxable items.

(b) If the transaction includes food and food ingredients as defined in s. 77.51 (3t) , Stats., drugs as defined in s. 77.51 (3pj) , Stats., durable medical equipment as defined in s. 77.51 (3pm) , Stats., mobility-enhancing equipment as defined in s. 77.51 (7m) , Stats., prosthetic devices as defined in s. 77.51 (11m) , Stats., or medical supplies, the sales price received from sales of taxable products sold in what would be a bundled transaction, except that the sales price of the taxable products in the transaction are 50 percent or less of the seller's total sales price of all of the products in the transaction or the seller's total purchase price of the taxable products in the transaction are 50 percent or less of the seller's total purchase price of all of the products in the transaction.

History: EmR0924 : emerg. cr. eff. 10-1-09; CR 09-090 : cr. Register May 2010 No. 653 , eff. 6-1-10; CR 10-094 : am. (1) (c) 3. Register November 2010 No. 659 , eff. 12-1-10.

Note

Section Tax 11.985 interprets ss. 77.51 (1f) , (3pf) , and (9p) and 77.52 (1) , (2) , (20) , (21) , (22) , and (23) , Stats. Microsoft Windows NT 6.1.7601 Service Pack 1 The interpretations in s. Tax 11.985 became effective October 1, 2009, pursuant to 2009 Wis. Act 2 . Microsoft Windows NT 6.1.7601 Service Pack 1