(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
(2) Substances excluded from the
term "food and food ingredients." Sales of alcoholic beverages, candy, dietary
supplements, food sold through vending machines, prepared food, soft drinks,
and tobacco are not sales of "food" and are not exempt from tax by this rule.
a. "Alcoholic beverages" means beverages that
are suitable for human consumption and contain one-half of 1 percent or more of
alcohol by volume.
c. "Dietary supplement" means any product,
other than tobacco, intended to supplement the diet that contains one or more
of the following dietary ingredients:
(1) A
vitamin.
(2) A mineral.
(3) An herb or other botanical.
(4) An amino acid.
(5) A dietary substance for use by humans to
supplement the diet by increasing the total dietary intake.
(6) A concentrate, metabolite, constituent,
extract, or combination of any of the ingredients in subparagraphs
220.2(2)
"c"(1) through (5) that is intended for ingestion in
tablet, capsule, powder, softgel, gelcap, or liquid form, or if not intended
for ingestion in such a form, is not represented as conventional food and is
not represented for use as a sole item of a meal or of the diet; and is
required to be labeled as a dietary supplement, identifiable by the "supplement
facts" box found on the label and as required pursuant to 21 Code of Federal
Regulations 101.36.
Dietary supplements, as their name indicates, serve as
supplements to food or food products rather than as "food," and, therefore, are
not included within the definition of that word. Since these substances serve
as deficiency correctors or therapeutic agents to supplement diets deficient in
essential nutrition rather than as foods, they are not eligible for the food
and food ingredients exemption. In addition to vitamin and mineral tablets or
capsules, this category includes substances such as cod liver oil, which is
used primarily as a source of vitamins A and D. It is not possible to provide a
comprehensive list of other such items that are primarily used for medicinal
purposes or as health aids and that may be stocked by authorized firms.
d. "Food sold through
vending machines" means food dispensed from a machine or other mechanical
device that accepts payment, other than food that would be qualified for
exemption if purchased with coupons (commonly known as "food stamps") issued
under the federal Food Stamp Act of 1977,
7 United States Code
2011 et seq. Alcoholic beverages, candy,
dietary supplements, prepared food, soft drinks, and tobacco sold through
vending machines are sold subject to tax in all instances because they are
specifically excluded from this rule's definition of "foods"; see subrule
220.2(2) generally. This paragraph
"d" should be interpreted
in such a fashion that if the sale of a substance is exempt from tax because it
is a sale of "food" when the substance is sold by means other than a vending
machine, then the sale of that same substance through a vending machine will
also be exempt from tax. Conversely, if the sale of a substance by any means
other than through a vending machine is taxable, then the sale of that same
substance through a vending machine will also be taxable.
e. "Prepared food." See rule
701-220.4 (423).
f. "Soft drinks" means nonalcoholic beverages
that contain natural or artificial sweeteners. Soft drinks may be
noncarbonated. "Soft drinks" does not include beverages that contain milk or
milk products; soy, rice, or similar milk substitutes; coffee and tea that are
not sweetened; effervescent, noneffervescent, and mineral water sold in
containers; and beverages that contain greater than 50 percent of vegetable or
fruit juice by volume.
Taxable soft drinks are noncarbonated water and soda water if
naturally or artificially sweetened; soft drinks carbonated and noncarbonated
including but not limited to colas, ginger ale, near beer, and root beer;
bottled and sweetened tea and coffee; lemonade, orangeade, and all other drinks
or punches with natural fruit or vegetable juice less than 50 percent by
volume.
Beverage mixes and ingredients intended to be made into soft
drinks are taxable. Beverage mixes or ingredients may be liquid or frozen,
concentrated or nonconcentrated, dehydrated, powdered, granulated, sweetened or
unsweetened, seasoned or unseasoned. Sales of beverage mixes to which a
sweetener is to be added before drinking are taxable. Concentrates intended to
be made into beverages that contain natural fruit or vegetable juice of less
than 50 percent by volume are taxable.
Beverages, the sales of which are otherwise exempt, are
taxable if sold as prepared food under rule
701-220.4 (423).
Nondairy coffee "creamers" in liquid, frozen or powdered form
are not beverages. Sugar or other artificial or natural sweeteners sold
separately are not taxable as beverage ingredients. Specialty foods that are
liquids or that are to be added to a liquid and that are intended to be a
substitute in the diet for more commonly used food items are not beverages and
are not taxable as beverages. These foods include infant formula.
g. "Tobacco" means cigarettes,
cigars, chewing or pipe tobacco, or any other item that contains
tobacco.
(3) Other
substances that are not food or food ingredients. Various products are not
purchased for ingestion or chewing by humans or, if they are, are not consumed
for their taste or nutritional value. Therefore, they are not purchased exempt
from tax under this rule. They include, but are not limited to, the following:
a.
Health aids.
Over-the-counter medicines and other products used primarily as health aids or
therapeutic agents are not foods since they are consumed for their medicinal
value as opposed to their nutritional value or taste. Such products include
aspirin, cough drops or syrups and other cold remedies, antacids, and all
over-the-counter medicines or other products used as health aids. In addition
to these commonly used health aids, any product used primarily for medicinal
purposes is ineligible. An example of such products is slippery elm powder, a
demulcent that is used to soothe sore throats.
b.
Items not exempt. The
following general classifications of products are subject to tax:
Cosmetics
Household supplies
Paper products
Pet foods and supplies
Soaps and detergents
Tobacco products
Toiletry articles
Tonics
Lunch counter foods or foods prepared for consumption on the
premises of the retailer
This rule is intended to implement Iowa Code section
423.3(57).
