Iowa Administrative Code › Agency 701 - Revenue Department › Title III - Sales, Use, and Excise Tax › Chapter 220 - Exemptions Primarily of Benefit to Consumers › Rule 701-220.3 - Sales of Food and Food Ingredients

Current through Register Vol. 47, No. 3, July 24, 2024
On and after July 1, 2004, the sales price from all sales of
				  food and food ingredients is exempt from tax. For the purposes of this rule,
				  "food and food ingredients" means substances, whether in liquid, concentrated,
				  solid, frozen, dried, or dehydrated form, that are sold for ingestion or
				  chewing by humans and are consumed for their taste or nutritional value.
(1) Most substances can easily be classified
				either as food, food ingredients, or nonfood items. 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
				which may be purchased with food coupons issued by the United States Department
				of Agriculture under the regulations in effect on July 1, 1974, remain exempt
				from tax on and after July 1, 2004. However, since the exemption no longer
				depends on ability to be purchased with food stamps (reference 701-subrule
				20.1(1)), sales of certain substances which can be purchased with food stamps
				but are neither food nor food ingredients are taxable on and after July 1,
				2004.
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" on
				  and after July 1, 2004.
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 eligible 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 which 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 which are packaged for human consumption, and rose hips powder
				which is used for preparing tea. It is not possible to formulate a
				comprehensive list of eligible 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 eligible 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 an eligible
				  item.
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. Alcoholic beverages, candy, and soft drinks are examples
				of snack foods the sales of which are not exempt from tax; see subrule
				231.3(2).
e. Others. There are
				certain eligible food substances which are normally consumed only after being
				incorporated into foods sold for ingestion or chewing by humans. Sales of
				substances which are ingredients of items identical to those which 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
				701-231.5 (423):
Bread and flour products
Bottled water, unless it is a sweetened bottled water and
				  thus taxable as a soft drink (a change from previous law; reference
				  701-subparagraph 20.1(3)
"b"
(1))
Cereal and cereal products
Cocoa and cocoa products, unless taxable in the form of candy
				  as in rule 701-231.4 (423)
Coffee and coffee substitutes, unless taxable as soft drinks;
				  see paragraph 231.3(2)
"f"
Dietary substitutes, other than dietary supplements; see
				  paragraphs 231.3(1)
"c"
and 231.3(2)
"a"
Eggs and egg products
Fish and fish products
Frozen foods
Fruits and fruit products including fruit juices, unless
				  taxable as soft drinks; see paragraph 231.3(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 (a
				  change from previous law; reference 701-subparagraph
				  20.1(3)
"b"
(2))
Spices, condiments, extracts, and artificial food
				  coloring
Sugar and sugar products and substitutes, unless taxable in
				  the form of candy as in rule
				  701-231.4 (423)
Tea, unless taxable as a soft drink; see paragraph
				  231.3(2)
"f"
Vegetables and vegetable products