Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2016
Sales and Use Tax Annotations
295.0000 GROSS RECEIPTS
295.0421 Pager Activation Fees. A taxpayer sells a variety of merchandise including pagers which the taxpayer purchases from a service supplier. A customer may go to any service supplier for activation but the taxpayer's sales clerks encourage customers to complete a written service agreement with the service supplier from which it purchases the pagers. Under the carrier agreements, the customers agree to pay the service supplier a monthly fee for air time and a one time $10.00 activation fee. If the customer enters into a service agreement at time of purchase, the taxpayer's sales clerk faxes the agreement to the service supplier for immediate approval and activation of the pager which occurs within thirty minutes after receipt of the fax by the service supplier.
The taxpayer charges and collects the $10.00 activation fee from customers who enter into the service agreements at the taxpayer's stores. A customer who does not enter into an agreement is not charged the fee. The taxpayer remits the activation fee to the service supplier. The service supplier does not reimburse the taxpayer for this service. The service supplier does, however, give a volume discount to the taxpayer based upon the number of pagers it sells.
In this case, the taxpayer charges the same price for the pager whether a customer elects to activate through the taxpayer or not. The taxpayer separately states the charges for optional activation fees on its sales receipts to the customers and the activation does not modify or alter the pager in any manner. In other words, the activation does not involve fabrication or assembly of the pager. Thus, the charges for the activation fees are not taxable. (Section 6012(b)(1).) 6/8/94.