Iowa Administrative Code › Agency 701 - Revenue Department › Title III - Sales, Use, and Excise Tax › Chapter 220 - Exemptions Primarily of Benefit to Consumers › Rule 701-220.2 - Food and Food Ingredients

Current through Register Vol. 47, No. 3, July 24, 2024
(1)
				Most substances can easily be classified either as food, food ingredients, or
				nonfood items in accordance with Iowa Code section
				423.3(57).
				There are, however, certain substances that are not readily distinguishable as
				food or nonfood and may present problems in judgment. The following guidelines
				apply to some of the more unique categories of eligible foods and food
				ingredients and ineligible nonfood items about which questions may arise. The
				guidelines and their lists are not to be considered all-inclusive:
a. Foods eligible for purchase with food
				coupons. Sales of almost all substances that may be purchased with food coupons
				issued by the United States Department of Agriculture are exempt from Tax.
				Sales of certain substances that can be purchased with food stamps but are
				neither food nor food ingredients are taxable.
These taxable sales include garden seeds and plants sold for
				  use in gardens to produce food for human consumption. Seeds and plants eligible
				  for purchase with food coupons include vegetable seeds and food-producing
				  plants such as tomato and green pepper plants and fruit trees, food-producing
				  roots, bushes, and bulbs (e.g., asparagus roots and onion sets) and seeds and
				  plants used to produce spices for use in cooking foods. Sales of all these
				  substances are taxable. Sales of chewing gum are taxable as sales of
				  "candy."
b. Distilled water
				and ice. These substances, although having some nonfood uses, are largely used
				as food or as ingredients in food for human consumption. Unless these
				substances are specifically labeled for nonfood use or the recipient indicates
				that they will be used for some purpose other than as food for human
				consumption or as ingredients in food for human consumption, their sales are
				exempt from tax.
c. Specialty
				foods. This category of exempt foods includes special dietary foods (e.g.,
				diabetic and dietetic), enriched or fortified foods, infant formulas, and
				certain foods commonly referred to as health food items. These substances are
				food products that are substituted for more commonly used food items in the
				diet, and thus they are purchased for ingestion by humans and are consumed for
				their taste or nutritional value. Examples of items in this category of
				eligible foods are Metrecal, Enfamil, Sustegen, wheat germ, brewer's yeast,
				sunflower seeds that are packaged for human consumption, and rose hips powder
				that is used for preparing tea. It is not possible to formulate a comprehensive
				list of exempt specialty foods. The guideline to be used to determine the
				eligibility of a specific product is the ordinary use of the product.
Note: If the product is primarily used as a food or as an
				  ingredient in food, then it is an exempt item; if it is primarily used for
				  medicinal purposes as either a therapeutic agent or a deficiency corrector and
				  only occasionally used as a food, the product is not exempt under this
				  provision.
d. Snack foods.
				These substances are food items and, therefore, are usually eligible for the
				exemption. Typical examples of snack foods are cheese puffs; corn chips;
				popcorn; peanuts; potato chips and sticks; packaged cookies, cupcakes, and
				donuts; and pretzels. Subrule 220.3(2) contains more information on candy and
				snack foods that are not exempt from tax and remain taxable.
e. Others. There are certain eligible food
				substances that are normally consumed only after being incorporated into foods
				sold for ingestion or chewing by humans. Sales of substances that are
				ingredients of items identical to those that are eligible for exemption when
				sold as finished products are sales eligible for exemption. Since these
				substances are food ingredients, their sales are exempt. An example is pectin.
				Pectin is the generic term for products marketed under various brand names and
				commonly used as a base in making jams and jellies. When pectin is incorporated
				into jams or jellies, it becomes part of a food for human consumption and,
				therefore, is an eligible food item. Other examples are lard and vegetable
				oils.
f. The following general
				classifications of food products are also exempt from tax unless taxable as
				prepared food; see rule
				701-220.4 (423):
Bread and flour products
Bottled water, unless it is a sweetened bottled water and
				  thus taxable as a soft drink
Cereal and cereal products
Cocoa and cocoa products, unless taxable in the form of
				  candy as in rule 701-220.3 (423)
Coffee and coffee substitutes, unless taxable as soft drinks;
				  see paragraph 220.2(2)
"f"
Dietary substitutes, other than dietary supplements; see
				  paragraph 220.2(2)
"c"
Eggs and egg products
Fish and fish products
Frozen foods Fruits and fruit products including fruit
				  juices, unless taxable as soft drinks; see paragraph
				  220.3(2)
"f"
Margarine, butter, and shortening
Meat and meat products
Milk and milk products, including packaged ice cream
				  products
Milk substitutes, such as soy and rice milk
				  substitutes
Spices, condiments, extracts, and artificial food
				  coloring
Sugar and sugar products and substitutes, unless taxable in
				  the form of candy as in rule
				  701-220.3 (423)
Tea, unless taxable as a soft drink; see paragraph
				  220.2(2)
"f"
Vegetables and vegetable products