Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2013
Sales and Use Tax Annotations
515.0000 SERVICE ENTERPRISES GENERALLY—Regulation 1501
(e) MISCELLANEOUS ACTIVITIES
515.0975 Diet Counseling Service. The franchiser of a diet counseling clinic, charges its franchisees a "gross daily license fee" per customer. For this fee, the franchisee receives a daily packet of eight supplement capsules which is provided to each customer as part of the diet counseling services. The franchisee also resells the daily packets to other sub-franchisees for their customers. In addition, the franchisee also purchases manuals, video instructional programs and business cards for resale to counselors and other diet center operators.
The franchisee is the consumer of the daily packets provided as part of their diet counseling services, which is provided for a lump sum. The daily packets are only incidentally provided as part of the diet counseling services and is not an item sought as a "true object" of the contract. As the franchiser does not make a separate charge for the daily packets, a portion of the gross daily license fee is allocable as the cost of the daily packets, and is subject to tax.
Tax is also due on the retail selling price of the manuals, video instructional programs, business cards and the daily packets that are sold to other counselors, other diet center operators or sub-franchisees. 3/22/90.