This excerpt taken from the VM 10-Q filed Aug 14, 2008.
(1) Income Tax means any (i) tax on or measured by the net income of a Party (including franchise taxes, gross receipts taxes, taxes on capital or net worth that are imposed as an alternative to a tax based on net or gross income and the Michigan Single Business Tax), or (ii) taxes which are of the nature of excess profits tax, minimum tax on tax preferences, alternative minimum tax, accumulated earnings tax, personal holding company tax, capital gains tax, withholding tax or franchise tax for the privilege of doing business, to the extent such taxes as set forth in (i) and/or (ii) above are imposed on such Party by any federal, state, or local government of or in the United States, any taxing authority of any possession of the United States, or any government of a foreign country, including subdivisions thereof.
(2) Service Taxes means all sales, lease, service, value-added, use, personal property, excise, consumption, goods and services, provincial sales, retail sales and other taxes or duties that are assessed on the provision of the Services to VMU as a whole, or on any particular Service received by VMU from IBM; excluding, however, state and local business and occupation tax, Income Tax and other similar taxes.
The Parties respective responsibilities for taxes arising under or in connection with this Agreement shall be as follows:
(1) Income Tax.
(a) Each Party shall be responsible for its Income Taxes.
(b) As between IBM and VMU under this Agreement, (i) VMU shall be responsible for the employment tax withholding, employer payroll taxes, and related reporting responsibilities with respect to its employees and VMU Affiliate employees, and (ii) IBM shall be responsible for the employment tax withholding, employer payroll taxes, and related reporting responsibilities with respect to its employees, and IBM Affiliate employees.
(a) Except as set forth in Sections 23.5B(2)(b) and 23.5B(2)(d) below, VMU shall be responsible for the payment of all Service Taxes and new Service Taxes. In the event there is a new Service Tax that is not clearly allocated to VMU or IBM under this Section 23.5B(2), VMU shall be responsible for such new Service Tax. IBM shall correctly invoice all applicable taxes. IBM shall not provide tax-only invoices.
(b) IBM shall be responsible for any Service Taxes and new Service Taxes on real property and/or other tangible or intangible property, it owns (or leases or rents from a third party).
(c) Prior to agreeing to any new Service Tax assessment, IBM shall work with the VMU Tax Department in order to ensure that the proposed tax assessment is properly allocated and accurately determined. IBM shall also ensure that all taxable and nontaxable components are separately stated, with an adequate description for tax purposes as to the taxable nature of the items purchased. In the event that a Service Tax is assessed on the receipt of any of the Services, the Parties shall work together to segregate the payments under this Agreement into four (4) payment streams on the invoice:
(i) those for taxable Services;
(ii) those for other nontaxable Services;
(iii) those for exempt Services; or
(iv) in respect of goods, Services, or supplies where Service Tax has already been paid by VMU or IBM;
(d) IBM shall be responsible for all current and any new Service Taxes payable by IBM on any goods or third party services acquired, used, or consumed by IBM in providing the Services where such tax is imposed on IBMs acquisition or use of such goods or services.
(e) IBM shall make purchases of goods and services that are delivered or provisioned to VMU on a sale for resale basis, when applicable, so that double taxation of goods and services does not occur.
(f) VMU shall be responsible for telecommunication surcharges or user fees imposed by government authorities and mandated by law or regulation that are applicable to end users.
C. Cooperation; Invoices
The Parties agree to reasonably cooperate with each other to enable each to more accurately determine its own tax liability and to minimize such liability to the extent legally permissible. IBM invoices shall separately state the amounts of any taxes (by taxing jurisdiction) IBM is properly collecting from VMU pursuant to the terms hereof. Each Party will make available to the other Party any resale certificates, information regarding out-of-state or out-of-country sales or use of equipment, materials, or services, and other exemption certificates or information reasonably requested by the other Party. Specifically, VMU requires the following:
The total amount invoiced for Services will include any and all freight, duty, and taxes, with the exception of the following items, which, if applicable, must be identified and listed separately on IBM invoice: any U.S. state or local sales or use tax imposed on the transaction.