How does Georgia sales tax apply to one-price subscription packages containing both taxable and nontaxable technology products and services?

Plain-English summary

A technology company planned monthly subscription packages combining electronics, software, online services, support, digital content, and applications. Its preselected packages had fixed contents and one non-itemized price. Its planned custom packages let customers mix and match products, with the total price varying based on their selections.

The Georgia Department of Revenue ruled that a fixed preselected package is a bundled transaction when it contains distinct and identifiable products sold for one non-itemized price and no statutory exception applies. It stays a bundle even when a component is available only inside the package or the package offers no discount compared with separate purchases.

The custom package is not a statutory bundled transaction because its price varies based on the customer's selections. But that label does not solve the tax-base question: whenever either kind of single-charge package includes taxable and nontaxable products, the seller must tax the full price unless its regularly maintained books and records provide reasonable, verifiable support for allocating the charge.

What this means for you

Subscription and technology businesses

A one-price package can be a bundled transaction even without a promotional discount and even if some components are never sold separately. If customers choose the components and the price changes with those choices, the package falls outside Georgia's bundled-transaction definition.

Sellers mixing taxable and non-taxable products

Classification as a bundle is separate from allocation. If a package contains even one taxable product and you cannot support the taxable and non-taxable portions with adequate regular-course books and records, Georgia requires tax collection on the entire package price.

Accountants and tax professionals

Build the allocation method and supporting records before launch. Customer invoices need not itemize each component for the package to qualify as a bundle, but the seller's internal books must provide reasonable and verifiable support if it wants to exclude the non-taxable portion from tax.

Common questions

Q: What makes a preselected package a bundled transaction?
A: It contains two or more distinct and identifiable products, is sold for one non-itemized price, does not vary based on customer selection, and meets no statutory exception.

Q: Must every package component also be sold separately?
A: No. A preselected package can remain a bundled transaction even when a component is available only as part of the package.

Q: Does the package need to offer a discount?
A: No. The preselected package remains a bundle even when its price equals the sum of the separately sold components.

Q: Is a mix-and-match package a bundled transaction?
A: Not when the price varies based on the products selected by the customer. The ruling treated that custom package as outside the statutory definition.

Q: Is the full package price taxable when it includes one taxable item?
A: Yes unless the seller's regular books and records reasonably and verifiably identify the portions attributable to taxable and nontaxable products.

Q: Can another subscription seller rely on this ruling?
A: No. It is limited to the requesting taxpayer and facts, including the pricing, customer choice, documentation, and recordkeeping.

Citations and references

Statutes:

• O.C.G.A. § 48-8-2(3)(A)-(C) (definition and elements of bundled transaction)
• O.C.G.A. § 48-8-2(3)(D) (statutory bundled-transaction exceptions)
• O.C.G.A. § 48-8-2(31)(G) (allocation between taxable and nontaxable products)

Source

• Landing page: Georgia Sales & Use Tax Letter Rulings
• Original PDF: LR SUT-2019-10

Original ruling text

Georgia Letter Ruling: LR SUT-2019-10
Topic: Sales Price
Date Issued: November 6, 2019

This letter is in response to your request for guidance on the application of Georgia sales and use tax to certain
bundled transactions.
Facts Presented by Taxpayer
Taxpayer is a technology company that develops and sells consumer electronics, computer software, online services,
and related support. Taxpayer also sells a range of third-party digital content and applications. Taxpayer sells its
products and services either at its brick and mortar retail locations or online through various company websites and
smartphone applications.
Preselected Product and Service Package Subscription Offering
Taxpayer plans to offer consumers new ways to purchase existing products, services, and support that Taxpayer has
traditionally offered on a stand-alone basis. Taxpayer will begin allowing customers to access a package of
preselected products and service (“Preselected Package”) offerings for a set monthly subscription price. Preselected
Packages must be purchased intact and cannot be broken down by the customer. In many instances, the price for the
Preselected Package subscription will include a discount as an incentive for customers to bundle their purchases.
Custom Product and Service Package Subscription Offering
In the future, Taxpayer intends for customers to be able to “mix and match” individual product and service offerings
resulting in a custom product and service subscription package (“Custom Package”). In many instances, Taxpayer
will include a discount as an incentive for customers to bundle their purchases. The discount will not be set ahead of
time and will likely vary based on what is bundled and how much is bundled.
Taxpayer anticipates that some of its subscription packages may include discounts while others may not. In
marketing its packages, Taxpayer could conceivably change which products or packages would include discounts
and which would remain full price, based on Taxpayer’s sales or marketing objectives. As discussed above, each of
the packages Taxpayer is selling, regardless of whether a discount is included, will be sold for “one non-itemized
price.” There will be no individual price assigned to any item in the bundle on any sales invoice, receipt, contract or
other agreement with the customer as it relates to the sale of a package. It may be possible for certain packages to
have the same total price as the individual products that compose the package if they were to be purchased
separately
Taxpayer confirms that all subscription packages are optional in that they are not required to either purchase a
device, or to make a device operational. With the exception one package which contains a device, all other
packages contain content that is only delivered electronically.
Taxpayer does not have a reasonable means to identify and allocate the charges between taxable and nontaxable
items in each package. As Taxpayer begins to expand the breadth of items included in its packages, applying an
allocation method would become increasingly difficult, if not commercially impracticable. Therefore, Taxpayer will
not be identifying the charges between taxable and non-taxable items in each package, it follows that Taxpayer’s
packages are subject to sales tax based on the full sales price to the extent that a single item included in the package
is taxable.
Issues
1.

Pursuant to O.C.G.A. § 48-8-2(3)(A), do the packages described above meet the definition of a “bundled
transaction” when the items included in the package(s) are all “distinct and identifiable,” offered for one, nonitemized price and meet no statutory exceptions under O.C.G.A. § 48-8-2(3)(D) apply?

Georgia Letter Ruling: LR SUT-2019-10
Topic: Sales Price
Date Issued: November 6, 2019
Page 2 of 3
2.

Pursuant to O.C.G.A. § 48-8-2(3)(A), do the packages described above continue to meet the definition of a
“bundled transaction” when they include items that are “distinct and identifiable,” offered for one, non-itemized
price, but are offered only as part of the package and not sold separately?

3.

Pursuant to O.C.G.A. § 48-8-2(3)(A), do the packages described above continue to meet the definition of a
“bundled transaction” when the items included in the package(s) are all “distinct and identifiable,” offered for
one, non-itemized price but the customer is offered no discount when compared to buying each component
separately?

4.

Pursuant to O.C.G.A. § 48-8-2(31), does Georgia sales tax apply to the full charge of a bundled transaction
when one of the items included in the bundle is subject to the sales tax and the customer will be charged one,
non-itemized price for the bundle?

Analysis
Bundled Transactions
“Bundled transaction” means the retail sale of two or more products, except real property and services to real
property, where the products are otherwise distinct and identifiable, and the products are sold for one nonitemized
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. The term “distinct
and identifiable products” does not include packaging, products provided free of charge, or certain items included in
the definition of “sales price”. The term “one nonitemized price” does not include a price that is separately
identified by product on sales related documentation made available to the customer in either paper or electronic
form.1
The sale of a package having distinct and identifiable products that is sold for a single charge is a bundled sale when
the customer does not receive documentation in either electronic or tangible format showing a price for an individual
product included in the package, and the price of the package does not vary based on the selection of products made
by the purchaser.
Price Attributable to Products that are Taxable and Products that are Nontaxable
If the price is attributable to products that are taxable and products that are nontaxable, the portion of the price
attributable to the nontaxable products may be subject to tax unless the provider can identify by reasonable and
verifiable standards such portion from its books and records that are kept in the regular course of business. 2 If the
seller cannot maintain adequately detailed records, the seller must collect tax on the total price of the package.3
Rulings
1.

Pursuant to O.C.G.A. § 48-8-2(3)(A), Taxpayer’s Preselected Packages meet the definition of a “bundled
transaction” when the items included in the package(s) are all “distinct and identifiable,” offered for one, nonitemized price and meet no statutory exceptions under O.C.G.A. § 48-8-2(3)(D). The statutory definition of
“bundled transaction” specifically excludes transactions in which the sales price varies based on selections
made by the purchaser of the products included in the transaction. Because the sales price of Taxpayer’s
Custom Packages varies based on the selection of products made by the purchaser, Taxpayer’s Custom
Packages are not bundled transactions.

1

O.C.G.A. § 48-8-2(3)(A)-(C).

2

O.C.G.A. § 48-8-2 (31)(G).

3

O.C.G.A. § 48-8-2 (31)(G).

Georgia Letter Ruling: LR SUT-2019-10
Topic: Sales Price
Date Issued: November 6, 2019
Page 3 of 3

2.

Pursuant to O.C.G.A. § 48-8-2(3)(A), Taxpayer’s Preselected Packages will continue to meet the definition of a
“bundled transaction” when they include items that are “distinct and identifiable,” offered for one, non-itemized
price, and are offered only as part of a package and not sold separately.

3.

Pursuant to O.C.G.A. § 48-8-2(3)(A), Taxpayer’s Preselected Packages will continue to meet the definition of a
“bundled transaction” when the items included in the package(s) are all “distinct and identifiable,” offered for
one, non-itemized price and the customer does not receive a discount when compared to buying each
component separately.

4.

Pursuant to O.C.G.A. § 48-8-2(31), when the sales price of either Taxpayer’s Preselected Package or
Taxpayer’s Custom Package offering is attributable to both taxable and nontaxable products, then Taxpayer
must collect tax on the total sales price of the package unless Taxpayer can maintain books and records
sufficient to determine which portion of the single charge is attributable to taxable item(s). If Taxpayer cannot
maintain adequately detailed records, then Taxpayer must collect tax on the total sales price of the package.

The opinions expressed in this ruling are based upon the information contained in your request and limited to the
specific transactions, facts, circumstances and taxpayer in question. The facts herein are those presented by the
taxpayer and the Department accepts them as true for this ruling. If the facts presented herein change, are not true,
are different, or material facts have been omitted, the conclusions reached in this ruling may change. In addition,
subsequent statutory or administrative rule changes or judicial interpretations of the statutes or rules upon which this
advice is based may subject similar future transactions to a different tax treatment than that expressed in this ruling.