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Sales Tax Issues for Products and Service Transactions: Taxable and Nontaxable Components, Audit Defense, and Documentation

Note: CLE credit is not offered on this program

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Thursday, May 12, 2022

Recorded event now available

or call 1-800-926-7926

This course will provide guidance to tax professionals and advisers on key issues regarding the sales taxation of products and services. The panel will provide a detailed analysis of transactions and products containing both taxable and nontaxable components, classifying products and services for sales tax purposes, and documentation, as well as offer best practices for audit defense for taxpayers.


Companies providing a mixed bag of products and services face special challenges in determining where and how its products and services will be taxed. There is a general lack of clarity and uniformity among states regarding taxes on transactions combining both products and services. Tax professionals must understand the nuances of these types of transactions and potential sales tax implications.

Among the challenges companies face in assessing whether they will be subject to transaction taxes in a particular state is determining the nature of the service or product offered. For many states, whether the transaction is subject to tax may come down to identifying the "true object" of the item sold. This is particularly true where the transaction has multiple bundled elements. In most jurisdictions, including a taxable product or service in a bundle with an otherwise nontaxable service may make the entire transaction subject to tax.

Other factors impacting whether services and products are subject to transaction tax are different states' rules for sourcing, how the various states treat and classify certain products and services, and whether the state has special rules for specific items.

Listen as our experienced panel discusses the various challenges of determining the proper tax treatment of transactions containing both taxable and nontaxable components. The panel will also offer techniques for structuring contracts and transactions in an attempt to segregate taxable from nontaxable services and products and to establish effective audit defense strategies.



  1. Determining the application of sales tax to products and services
  2. Describe transactions with both taxable and nontaxable components
  3. Discuss recent state sales tax legislation
  4. Offer best practices for tax professionals and multistate businesses to compute the tax due on bundled sales of products and services


The panel will discuss these and other key issues:

  • What approaches are states taking to define the nature of products or services for purposes of determining taxability for sales and use tax?
  • How do various states treat contracts and transactions that contain both taxable and nontaxable components for state sales and use tax purposes?
  • How are states approaching the question of the taxability of mixed bag transactions?
  • What are the common techniques for structuring contracts and transactions to segregate taxable from nontaxable services and products?


Gebeyehu, Tad
Tad Gebeyehu, CPA, MBA, CMI

Director – Indirect Tax

Mr. Gebeyehu is a Director in BPM’s Tax practice, helping clients of various sizes and across various industries...  |  Read More

Hayashi, John
John E. Hayashi, JD

Managing Director, Tax

Mr. Hayashi serves as a Managing Director of Tax at BPM, with nearly 30 years of public accounting and private...  |  Read More

Leighton, Suzanne
Suzanne P. Leighton, CPA, MST

Director, Tax

Ms. Leighton is a Director in the State & Local Taxes (SALT) practice at BPM, where she provides...  |  Read More

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