TITLE 44
Taxation
CHAPTER 44-18
Sales and Use Taxes Liability and Computation
SECTION 44-18-7.1
§ 44-18-7.1 Additional definitions.
(a) "Agreement" means the Streamlined Sales and Use Tax Agreement.
(b) "Alcoholic Beverages" means beverages that are suitable
for human consumption and contain one-half of one percent (.5%) or more of
alcohol by volume.
(c) "Bundled Transaction" is the retail sale of two 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 non-itemized price. A "bundled transaction" does not include the 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.
(i) "Distinct and identifiable products" does not include:
(A) 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 the products
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.
(B) 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 products "provided free of charge."
(C) Items included in the member state's definition of "sales
price," pursuant to Appendix C of the Agreement.
(ii) The term "one non-itemized 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.
(iii) A transaction that otherwise meets the definition of a
"bundled transaction" as defined above, is not a "bundled transaction" if it is:
(A) 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; or
(B) The "retail sale" of services where one 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; or
(C) 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 price" 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; or
(D) The "retail sale" of exempt tangible personal property
and taxable tangible personal property where:
1. the transaction includes "food and food ingredients",
"drugs", "durable medical equipment", "mobility enhancing equipment",
"over-the-counter drugs", "prosthetic devices" (all as defined in §
44-18-7.1) or medical supplies; and
2. where 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 may not use a combination of the "purchase price" and "sales
price" of the tangible personal property when making the fifty percent (50%)
determination for a transaction.
(d) "Certified Automated System (CAS)" means software
certified under the Agreement to calculate the tax imposed by each jurisdiction
on a transaction, determine the amount of tax to remit to the appropriate
state, and maintain a record of the transaction.
(e) "Certified Service Provider (CSP)" means an agent
certified under the Agreement to perform all the seller's sales and use tax
functions, other than the seller's obligation to remit tax on its own purchases.
(f) Clothing and Related Items
(i) "Clothing" means all human wearing apparel suitable for
general use.
(ii) "Clothing accessories or equipment" means incidental
items worn on the person or in conjunction with "clothing." "Clothing
accessories or equipment" does not include "clothing," "sport or recreational
equipment," or "protective equipment."
(iii) "Protective equipment" means items for human wear and
designed as protection of the wearer against injury or disease or as
protections against damage or injury of other persons or property but not
suitable for general use. "Protective equipment" does not include "clothing,"
"clothing accessories or equipment," and "sport or recreational equipment."
(iv) "Sport or recreational equipment" means items designed
for human use and worn in conjunction with an athletic or recreational activity
that are not suitable for general use. "Sport or recreational equipment" does
not include "clothing," "clothing accessories or equipment," and "protective
equipment."
(g) Computer and Related Items
(i) "Computer" means an electronic device that accepts
information in digital or similar form and manipulates it for a result based on
a sequence of instructions.
(ii) "Computer software" means a set of coded instructions
designed to cause a "computer" or automatic data processing equipment to
perform a task.
(iii) "Delivered electronically" means delivered to the
purchaser by means other than tangible storage media.
(iv) "Electronic" means relating to technology having
electrical, digital, magnetic, wireless, optical, electromagnetic, or similar
capabilities.
(v) "Load and leave" means delivery to the purchaser by use
of a tangible storage media where the tangible storage media is not physically
transferred to the purchaser.
(vi) "Prewritten computer software" means "computer
software," including prewritten upgrades, which is not designed and developed
by the author or other creator to the specifications of a specific purchaser.
The combining of two (2) or more "prewritten computer software" programs or
prewritten portions thereof does not cause the combination to be other than
"prewritten computer software." "Prewritten computer software" includes
software designed and developed by the author or other creator to the
specifications of a specific purchaser when it is sold to a person other than
the specific purchaser. Where a person modifies or enhances "computer software"
of which the person is not the author or creator, the person shall be deemed to
be the author or creator only of such person's modifications or enhancements.
"Prewritten computer software" or a prewritten portion thereof that is modified
or enhanced to any degree, where such modification or enhancement is designed
and developed to the specifications of a specific purchaser, remains
"prewritten computer software;" provided, however, that where there is a
reasonable, separately stated charge or an invoice or other statement of the
price given to the purchaser for such modification or enhancement, such
modification or enhancement shall not constitute "prewritten computer software."
(h) Drugs and Related Items
(i) "Drug" means a compound, substance or preparation, and
any component of a compound, substance or preparation, other than "food and
food ingredients," "dietary supplements" or "alcoholic beverages:"
(A) Recognized in the official United States Pharmacopoeia,
official Homeopathic Pharmacopoeia of the United States, or official National
Formulary, and supplement to any of them; or
(B) Intended for use in the diagnosis, cure, mitigation,
treatment, or prevention of disease; or
(C) Intended to affect the structure or any function of the
body.
"Drug" shall also include insulin and medical oxygen whether
or not sold on prescription.
(ii) "Over-the-counter-drug" means a drug that contains a
label that identifies the product as a drug as required by 21 C.F.R. §
201.66. The "over-the-counter-drug" label includes:
(A) A "Drug Facts" panel; or
(B) A statement of the "active ingredient(s)" with a list of
those ingredients contained in the compound, substance or preparation.
"Over-the-counter-drug" shall not include "grooming and
hygiene products."
(iii) "Grooming and hygiene products" are soaps and cleaning
solutions, shampoo, toothpaste, mouthwash, antiperspirants, and suntan lotions
and screens, regardless of whether the items meet the definition of
"over-the-counter-drugs."
(iv) "Prescription" means an order, formula or recipe issued
in any form of oral, written, electronic, or other means of transmission by a
duly licensed practitioner authorized by the laws of the member state.
(i) "Delivery charges" means charges by the seller of
personal property or services for preparation and delivery to a location
designated by the purchaser of personal property or services including, but not
limited to, transportation, shipping, postage, handling, crating, and packing.
"Delivery charges" shall not include the charges for delivery
of "direct mail' if the charges are separately stated on an invoice or similar
billing document given to the purchaser.
(j) "Direct mail" means printed material delivered or
distributed by United States mail or other delivery service to a mass audience
or to addressees on a mailing list provided by the purchaser or at the
direction of the purchaser when the cost of the items are not billed directly
to the recipients. "Direct mail" includes tangible personal property supplied
directly or indirectly by the purchaser to the direct mail seller for inclusion
in the package containing the printed material. "Direct mail" does not include
multiple items of printed material delivered to a single address.
(k) "Durable medical equipment" means equipment including
repair and replacement parts for same which:
(i) Can withstand repeated use; and
(ii) Is primarily and customarily used to serve a medical
purpose; and
(iii) Generally is not useful to a person in the absence of
illness or injury; and
(iv) Is not worn in or on the body.
Durable medical equipment does not include mobility enhancing
equipment.
(l) Food and Related Items
(i) "Food and food ingredients" means substances, whether in
liquid, concentrated, solid, frozen, dried, or dehydrated form, that are sold
for ingestion or chewing by humans and are consumed for their taste or
nutritional value. "Food and food ingredients" does not include "alcoholic
beverages," "tobacco," "candy," "dietary supplements" and "soft drinks."
(ii) "Prepared food" means:
(A) Food sold in a heated state or heated by the seller;
(B) Two (2) or more food ingredients mixed or combined by the
seller for sale as a single item; or
(C) Food sold with eating utensils provided by the seller,
including plates, knives, forks, spoons, glasses, cups, napkins, or straws. A
plate does not include a container or packaging used to transport the food.
"Prepared food" in (B) does not include food that is only
cut, repackaged, or pasteurized by the seller, and eggs, fish, meat, poultry,
and foods containing these raw animal foods requiring cooking by the consumer
as recommended by the Food and Drug Administration in chapter 3, part 401.11 of
its Food Code so as to prevent food borne illnesses.
(iii) "Candy" means a preparation of sugar, honey, or other
natural or artificial sweeteners in combination with chocolate, fruits, nuts or
other ingredients or flavorings in the form of bars, drops, or pieces. "Candy"
shall not include any preparation containing flour and shall require no
refrigeration.
(iv) "Soft drinks" means non-alcoholic beverages that contain
natural or artificial sweeteners. "Soft drinks" do not include beverages that
contain milk or milk products, soy, rice or similar milk substitutes, or
greater than fifty percent (50%) of vegetable or fruit juice by volume.
(v) "Dietary supplement" means any product, other than
"tobacco," intended to supplement the diet that:
(A) Contains one or more of the following dietary ingredients:
1. A vitamin;
2. A mineral;
3. An herb or other botanical;
4. An amino acid;
5. A dietary substance for use by humans to supplement the
diet by increasing the total dietary intake; or
6. A concentrate, metabolite, constituent, extract, or
combination of any ingredient described in above; and
(B) Is intended for ingestion in tablet, capsule, powder,
softgel, gelcap, or liquid form, or if not intended for ingestion in such a
form, is not represented as conventional food and is not represented for use as
a sole item of a meal or of the diet; and
(C) Is required to be labeled as a dietary supplement,
identifiable by the "Supplemental Facts" box found on the label and as required
pursuant to 21 C.F.R. § 101.36.
(m) "Food sold through vending machines" means food dispensed
from a machine or other mechanical device that accepts payment.
(n) "Hotel" means every building or other structure kept,
used, maintained, advertised as or held out to the public to be a place where
living quarters are supplied for pay to transient or permanent guests and
tenants and includes a motel.
(i) "Living quarters" means sleeping rooms, sleeping or
housekeeping accommodations, or any other room or accommodation in any part of
the hotel, rooming house or tourist camp which is available for or rented out
for hire in the lodging of guests.
(ii) "Rooming house" means every house, boat, vehicle, motor
court or other structure kept, used, maintained, advertised or held out to the
public to be a place where living quarters are supplied for pay to transient or
permanent guests or tenants, whether in one or adjoining buildings.
(iii) "Tourist camp" means a place where tents or tent
houses, or camp cottages, or cabins or other structures are located and offered
to the public or any segment thereof for human habitation.
(o) "Lease or rental" means any transfer of possession or
control of tangible personal property for a fixed or indeterminate term for
consideration. A lease or rental may include future options to purchase or
extend. Lease or rental does not include:
(i) A transfer of possession or control of property under a
security agreement or deferred payment plan that requires the transfer of title
upon completion of the required payments;
(ii) A transfer or possession or control of property under an
agreement that requires the transfer of title upon completion of required
payments and payment of an option price does not exceed the greater of one
hundred dollars ($100) or one percent of the total required payments; or
(iii) Providing tangible personal property along with an
operator for a fixed or indeterminate period of time. A condition of this
exclusion is that the operator is necessary for the equipment to perform as
designed. For the purpose of this subsection, an operator must do more than
maintain, inspect, or set-up the tangible personal property.
(iv) Lease or rental does include agreements covering motor
vehicles and trailers where the amount of consideration may be increased or
decreased by reference to the amount realized upon sale or disposition of the
property as defined in 26 U.S.C. § 7701(h)(1).
(v) This definition shall be used for sales and use tax
purposes regardless if a transaction is characterized as a lease or rental
under generally accepted accounting principles, the Internal Revenue Code, the
Uniform Commercial Code, or other provisions of federal, state or local law.
(vi) This definition will be applied only prospectively from
the date of adoption and will have no retroactive impact on existing leases or
rentals. This definition shall neither impact any existing sale-leaseback
exemption or exclusions that a state may have, nor preclude a state from
adopting a sale-leaseback exemption or exclusion after the effective date of
the Agreement.
(p) "Mobility enhancing equipment" means equipment including
repair and replacement parts to same, which:
(i) Is primarily and customarily used to provide or increase
the ability to move from one place to another and which is appropriate for use
either in a home or a motor vehicle; and
(ii) Is not generally used by persons with normal mobility;
and
(iii) Does not include any motor vehicle or equipment on a
motor vehicle normally provided by a motor vehicle manufacturer.
Mobility enhancing equipment does not include durable medical
equipment.
(q) "Model 1 Seller" means a seller that has selected a CSP
as its agent to perform all the seller's sales and use tax functions, other
than the seller's obligation to remit tax on its own purchases.
(r) "Model 2 Seller" means a seller that has selected a CAS
to perform part of its sales and use tax functions, but retains responsibility
for remitting the tax.
(s) "Model 3 Seller" means a seller that has sales in at
least five member states, has total annual sales revenue of at least five
hundred million dollars ($500,000,000), has a proprietary system that
calculates the amount of tax due each jurisdiction, and has entered into a
performance agreement with the member states that establishes a tax performance
standard for the seller. As used in this definition, a seller includes an
affiliated group of sellers using the same proprietary system.
(t) "Prosthetic device" means a replacement, corrective, or
supportive devices including repair and replacement parts for same worn on or
in the body to:
(i) Artificially replace a missing portion of the body;
(ii) Prevent or correct physical deformity or malfunction; or
(iii) Support a weak or deformed portion of the body.
(u) "Purchaser" means a person to whom a sale of personal
property is made or to whom a service is furnished.
(v) "Purchase price" applies to the measure subject to use
tax and has the same meaning as sales price.
(w) "Seller" means a person making sales, leases, or rentals
of personal property or services.
(x) "State" means any state of the United States and the
District of Columbia.
(y) "Telecommunications" tax base/exemption terms
(i) Telecommunication terms shall be defined as follows:
(A) "Ancillary services" means services that are associated
with or incidental to the provision of "telecommunications services",
including, but not limited to, "detailed telecommunications billing",
"directory assistance", "vertical service", and "voice mail services".
(B) "Conference bridging service" means an "ancillary
service" that links two (2) or more participants of an audio or video
conference call and may include the provision of a telephone number.
"Conference bridging service" does not include the "telecommunications
services" used to reach the conference bridge.
(C) "Detailed telecommunications billing service" means an
"ancillary service" of separately stating information pertaining to individual
calls on a customer's billing statement.
(D) "Directory assistance" means an "ancillary service" of
providing telephone number information, and/or address information.
(E) "Vertical service" means an "ancillary service" that is
offered in connection with one or more "telecommunications services", which
offers advanced calling features that allow customers to identify callers and
to manage multiple calls and call connections, including "conference bridging
services".
(F) "Voice mail service" means an "ancillary service" that
enables the customer to store, send or receive recorded messages. "Voice mail
service" does not include any "vertical services" that the customer may be
required to have in order to utilize the "voice mail service".
(G) "Telecommunications service" means the electronic
transmission, conveyance, or routing of voice, data, audio, video, or any other
information or signals to a point, or between or among points. The term
"telecommunications service" includes such transmission, conveyance, or routing
in which computer processing applications are used to act on the form, code or
protocol of the content for purposes of transmission, conveyance or routing
without regard to whether such service is referred to as voice over Internet
protocol services or is classified by the Federal Communications Commission as
enhanced or value added. "Telecommunications service" does not include:
(1) Data processing and information services that allow data
to be generated, acquired, stored, processed, or retrieved and delivered by an
electronic transmission to a purchaser where such purchaser's primary purpose
for the underlying transaction is the processed data or information;
(2) Installation or maintenance of wiring or equipment on a
customer's premises;
(3) Tangible personal property;
(4) Advertising, including, but not limited to, directory
advertising.
(5) Billing and collection services provided to third parties;
(6) Internet access service;
(7) Radio and television audio and video programming
services, regardless of the medium, including the furnishing of transmission,
conveyance and routing of such services by the programming service provider.
Radio and television audio and video programming services shall include, but
not be limited to, cable service as defined in 47 U.S.C. § 522(6) and
audio and video programming services delivered by commercial mobile radio
service providers, as defined in 47 CFR 20.3;
(8) "Ancillary services"; or
(9) Digital products "delivered electronically", including,
but not limited to, software, music, video, reading materials or ring tones.
(H) "800 service" means a "telecommunications service" that
allows a caller to dial a toll-free number without incurring a charge for the
call. The service is typically marketed under the name "800", "855", "866",
"877", and "888" toll-free calling, and any subsequent numbers designated by
the Federal Communications Commission.
(I) "900 service" means an inbound toll "telecommunications
service" purchased by a subscriber that allows the subscriber's customers to
call in to the subscriber's prerecorded announcement or live service. "900
service" does not include the charge for: collection services provided by the
seller of the "telecommunications services" to the subscriber, or service or
product sold by the subscriber to the subscriber's customer. The service is
typically marketed under the name "900 service," and any subsequent numbers
designated by the Federal Communications Commission.
(J) "Fixed wireless service" means a "telecommunications
service" that provides radio communication between fixed points.
(K) "Mobile wireless service" means a "telecommunications
service" that is transmitted, conveyed or routed regardless of the technology
used, whereby the origination and/or termination points of the transmission,
conveyance or routing are not fixed, including, by way of example only,
"telecommunications services" that are provided by a commercial mobile radio
service provider.
(L) "Paging service" means a "telecommunications service"
that provides transmission of coded radio signals for the purpose of activating
specific pagers; such transmissions may include messages and/or sounds.
(M) "Prepaid calling service" means the right to access
exclusively "telecommunications services", which must be paid for in advance
and which enables the origination of calls using an access number or
authorization code, whether manually or electronically dialed, and that is sold
in predetermined units or dollars of which the number declines with use in a
known amount.
(N) "Prepaid wireless calling service" means a
"telecommunications service" that provides the right to utilize "mobile
wireless service" as well as other non-telecommunications services including
the download of digital products "delivered electronically", content and
"ancillary services" which must be paid for in advance that is sold in
predetermined units of dollars of which the number declines with use in a known
amount.
(O) "Private communications service" means a
telecommunications service that entitles the customer to exclusive or priority
use of a communications channel or group of channels between or among
termination points, regardless of the manner in which such channel or channels
are connected, and includes switching capacity, extension lines, stations, and
any other associated services that are provided in connection with the use of
such channel or channels.
(P) "Value-added non-voice data service" means a service that
otherwise meets the definition of "telecommunications services" in which
computer processing applications are used to act on the form, content, code, or
protocol of the information or data primarily for a purpose other than
transmission, conveyance or routing.
(ii) "Modifiers of Sales Tax Base/Exemption Terms" the
following terms can be used to further delineate the type of
"telecommunications service" to be taxed or exempted. The terms would be used
with the broader terms and subcategories delineated above.
(A) "Coin-operated telephone service" means a
"telecommunications service" paid for by inserting money into a telephone
accepting direct deposits of money to operate.
(B) "International" means a "telecommunications service" that
originates or terminates in the United States and terminates or originates
outside the United States, respectively. United States includes the District
of Columbia or a U.S. territory or possession.
(C) "Interstate" means a "telecommunications service" that
originates in one United States state, or a United States territory or
possession, and terminates in a different United States state or a United
States territory or possession.
(D) "Intrastate" means a "telecommunications service" that
originates in one United States state or a United States territory or
possession, and terminates in the same United States state or a United States
territory or possession.
(E) "Pay telephone service" means a "telecommunications
service" provided through any pay telephone.
(F) "Residential telecommunications service" means a
"telecommunications service" or "ancillary services" provided to an individual
for personal use at a residential address, including an individual dwelling
unit such as an apartment. In the case of institutions where individuals
reside, such as schools or nursing homes, "telecommunications service" is
considered residential if it is provided to and paid for by an individual
resident rather than the institution.
The terms "ancillary services" and "telecommunications
service" are defined as a broad range of services. The terms "ancillary
services" and "telecommunications service" are broader than the sum of the
subcategories. Definitions of subcategories of "ancillary services" and
"telecommunications service" can be used by a member state alone or in
combination with other subcategories to define a narrower tax base than the
definitions of "ancillary services" and "telecommunications service" would
imply. The subcategories can also be used by a member state to provide
exemptions for certain subcategories of the more broadly defined terms.
A member state that specifically imposes tax on, or exempts
from tax, local telephone or local telecommunications service may define "local
service" in any manner in accordance with § 44-18.1-28, except as limited
by other sections of this Agreement.
(z) "Tobacco" means cigarettes, cigars, chewing or pipe
tobacco, or any other item that contains tobacco.
History of Section.
(P.L. 2006, ch. 246, art. 30, § 10; P.L. 2007, ch. 6, § 4.)
