KRS § 139.215 — KY Code / Title XI / Chapter 139 / Section 139.215
139.215 Taxation of bundled transactions
Status: in_force

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

all of a telecommunications service, ancillary service, Internet access, audio

programming, or video programming:

(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

subject to tax unless the provider can identify, by reasonable and verifiable

standards, the portion of the products that are nontaxable from its books and

records that are kept in the regular course of business for other purposes,

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

the highest rate unless the provider can identify, by reasonable and verifiable

standards, the portion of the price attributable to the products subject to tax at

the lower rate from its books and records that are kept in the regular course of

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:

(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

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

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:

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

materials, labels, tags, or instruction guides that accompany the retail

sale of the products and are incidental or immaterial to the retail sale

thereof. Examples include grocery sacks, shoe boxes, dry cleaning

garment bags, and express delivery envelopes and boxes.

2. A product provided free of charge with the required purchase of another

product. 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; or

3. Items included in the definition of sales price: and

(c) "One (1) nonitemized price" does not include a price that is separately

identified by product on binding sales or other supporting sales-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.

(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

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

exclusively in connection with the service, and the true object of the

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

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

exclusively in connection with the second service and the true object of the

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

purposes of this section, "de minimis" means the seller's purchase price or the

sales price of the taxable products is ten percent (10%) or less of the total

purchase price or sales price of the bundled products. Sellers shall use either

the purchase price or the sales price of the products to determine if the taxable

products are de minimis. Sellers shall not use a combination of the purchase

price and the sales price of the products to determine if the taxable products

are de minimis. Sellers shall use the full term of a service contract to

determine if the taxable products are de minimis; or

(f) The retail sale of exempt tangible personal property and taxable tangible

personal property where:

1. The transaction includes:

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

property is fifty percent (50%) or less of the total purchase price or sales

price of the bundled tangible personal property. Sellers shall not use a

combination of the purchase price and the sales price of the tangible

personal property when making the fifty percent (50%) determination

for a transaction.