Was a microchipped medical-information bracelet taxable when furnished with nursing or data-entry services or sold by itself?

Plain-English summary

Nursing or nurse data-entry services that included a microchipped bracelet were exempt service transactions, not taxable bundled retail sales. The service provider was not acting as a retailer of bracelets in those scenarios, but had to pay sales or use tax when purchasing the bracelets.

A bracelet sold by itself without nursing or data-entry services was a taxable retail sale of tangible personal property.

Nursing and data-entry scenarios

In-home nursing that furnished the client a bracelet was not a bundled transaction. The Department did not need to apply the statutory true-object test because the provider was not selling the bracelet at retail.

The same result applied when the nursing service consisted only of entering medical information onto the bracelet, even though the bracelet cost was less than 5% of the flat service fee.

Stand-alone bracelet sale

When the company sold only the bracelet, it had to collect sales tax on the total selling price.

If the bracelet came from inventory on which the company had already paid tax, it still collected tax from the customer on the full price. When remitting, however, the company remitted tax only on the difference between its cost and the customer's selling price.

Common questions

Q: Did including tangible property automatically create a taxable bundle?

A: No. The nursing provider was not a retailer of the bracelet when it furnished the item as part of the service.

Q: Was a data-entry-only service taxable because the bracelet was included?

A: No. The charge remained an exempt nursing service under the described facts, while the provider paid tax on the bracelet purchase.

Q: Was the bracelet taxable when sold alone?

A: Yes. It was a retail sale of tangible personal property.

Q: Did tax-paid inventory eliminate customer tax on a later retail sale?

A: No. The seller collected on the total price, then remitted tax on the difference between its cost and selling price as described in the GIL.

Citations and references

• Neb. Rev. Stat. § 77-2701.48(1) — bundled-transaction definition
• Neb. Rev. Stat. § 77-2701.48(4) — true-object test not reached under the service facts
• Nebraska GIL 1-14-1 — nursing-service and stand-alone bracelet scenarios

Source

• Landing page: https://revenue.nebraska.gov/about/legal-information/general-information-letters-gils
• Original PDF: https://revenue.nebraska.gov/sites/revenue.nebraska.gov/files/doc/legal/gil/GIL01-14-01_Bundled_Transactions.pdf

Original ruling text

GIL 1-14-1 Sales and Use Tax: Bundled Transaction - Medical Information Bracelet
This guidance document is advisory in nature but is binding on the Nebraska Department of Revenue
(Department) until amended. A guidance document does not include internal procedural documents
that only affect the internal operations of the Department and does not impose additional
requirements or penalties on regulated parties or include confidential information or rules and
regulations made in accordance with the Administrative Procedure Act. If you believe that this
guidance document imposes additional requirements or penalties on regulated parties, you may
request a review of the document. This guidance document may change with updated information or
added examples. The Department recommends you do not print this document. Instead, sign up for
the subscription service at revenue.nebraska.gov to get updates on your topics of interest.
August 7, 2014
Dear XXXX:
We are in receipt of your letter, dated July 29, 2014, requesting sales tax information on bundled
transactions. Based upon the information contained in your letter we are providing this General
Information Letter (GIL).
GILs address general questions; provide analysis of issues; and direct taxpayers to the Nebraska
statutes, Nebraska Department of Revenue (Department) regulations, revenue rulings, or other
sources of information to help answer a question. A GIL is a statement of current Department policy,
and taxpayers may rely on the Department to follow the principles or procedures described in a GIL
until it is rescinded or superseded. You may also find current regulations, revenue rulings,
information guides, taxpayer rulings, and other GILs at revenue.nebraska.gov that may be helpful to
you.
Your letter presents three scenarios under which Company A, a provider of in-home nursing services,
transfers or furnishes a microchipped bracelet to a customer. You have asked for a determination
regarding the sales tax ramifications under each scenario.
In Scenario A you ask whether the furnishing of in-home nursing services, which includes furnishing
the client with a microchipped bracelet, constitutes a “bundled transaction?” You have indicated the
bracelet is a de minimis component of the transaction and the true object of the transaction is the
nursing services.
A bundled transaction, as defined in Neb. Rev. Stat. § 77-2701.48(1), must be comprised of at least
two distinct products which are sold at retail for one, nonitemized price. Persons providing the
nursing services described in Scenario A are not engaged in business as retailers of property, i.e., the
microchipped bracelets, when these items are furnished as part of their nursing services. Therefore,
charges by Company A for the nursing services described in Scenario A are not classified as bundled
transactions and are exempt from sales tax. It is not necessary to look further to the “true object of
the transaction” test in 77-2701.48(4). Company A must, however, pay sales or use tax on its
purchases of the bracelets furnished to clients in this manner.
In Scenario B you request a determination on whether the furnishing of a microchipped bracelet and
the provision of nursing services, which consist only of entering medical information onto

the bracelet, constitutes a bundled transaction. You have indicated the cost of the bracelets is less
than 5% of the flat fee charged for the nurse’s data entry services.
As indicated above, in order for a transaction to be considered a bundled transaction, the transaction
must be comprised of at least two distinct products which are sold at retail for one, nonitemized
price. Persons providing the data entry nursing services described in Scenario B, even though more
limited in nature than the services provided in Scenario A, are also not engaged in business as
retailers of property when these items are furnished as part of their nursing services. Therefore,
charges by Company A for the nursing services described in Scenario B are not classified as bundled
transactions and are exempt from sales tax. Company A must, however, pay sales or use tax on its
purchases of the bracelets furnished to clients in this manner.
In Scenario C you ask whether the selling of a microchipped bracelet to a customer, where no inhome care services or data entry services are provided, is considered a taxable sale. This transaction
does constitute a retail sale of tangible personal property and Company A must collect and remit
sales tax on the total amount charged for the bracelets. If Company A has withdrawn the bracelet
from a tax-paid inventory of bracelets, sales tax must still be collected from the customer on the total
selling price. However, when remitting tax to the Department, Company A will only remit tax on the
difference between its cost of the bracelet and the selling price to its customer.
Kim Conroy
Tax Commissioner