Evan Schuman's StorefrontBacktalk

Thus, the tax authority argued, the concessionaire could not claim the resale exemption when it transferred those toys to the consumer. The Texas Supreme Court disagreed, and found that these transactions were exempt from taxation. So, unless you are intimately associated with the corn dog and cotton candy industries, what does this mean to you?

We all know that sales are not generally about the product itself, but frequently about the experience surrounding the product. When you pay $4.50 for a Starbucks blonde coffee instead of $1.75 for the Dunkin Donuts brew, you are paying for the big brown leather chair you had to chase that snot-nosed teenager out of, and the fact that you can hang out at the café for a few hours. That “experience” is part of the “value” of the coffee, and is reflected in its taxable price.

These things are not exempt from taxation because they are an integral part of it. But what if Starbucks charged a “sitting fee” (or alternatively gave a take-away discount) and split the cost of the product from the service (assuming the service was not itself taxable).

Apple offers “Applecare” services – a warranty extension service. During the warranty period, you get free customer service; afterwards you pay. Imagine if Nordstrom’s did the same. To speak to a salesperson for help with sizes, etc., costs $5, but that is taken off the cost of the blouse or shoes.

So $50 shoes now cost $45 plus a $5 salesperson service charge. Assuming that the “service” is not taxable (and it probably is, since I am not a tax lawyer and hopefully can write that on my tombstone), can we split products and services for sales tax purposes? Should those Best Buy kiosks at the airport include a claw to exempt the headphones or charger from sales tax?

Each of these “schemes” has already been tried, and most of them unsuccessfully. For example, many states exempt food from sales tax. If you buy an orange for $30,000 (tax free) you get to buy a new car for only a buck (plus 6 cents in sales tax.) That dog won’t hunt. Taxing authorities are pretty vigilant about protecting their slice of the pie. The claw exception is a tiny chink in the armor, but I wouldn’t expect it to have much effect outside the boardwalk.

If you disagree with me, I’ll see you in court, buddy. If you agree with me, however, I would love to hear from you.