§ 57-40.2-04.1 — Use tax exemption for food and food ingredients

North Dakota § 57-40.2-04.1

• Jurisdiction: North Dakota
• Title 57: Taxation
• Ch. 57-40.2: Use Tax

Text

Gross receipts from sales for human consumption of food and food ingredients are exempt
from taxes imposed under this chapter. Gross receipts from sales for human consumption of
food and food products given, or to be given, as samples to consumers for consumption on the
premises of a food store are exempt from taxes imposed by this chapter. For purposes of this
section, "food" and "food ingredients" mean substances, whether in liquid, concentrated, solid,
frozen, dried, or dehydrated form, which are sold for ingestion or chewing by humans and are
consumed for taste or nutritional value.
1. For purposes of this section, "food" and "food ingredients" do not include:
a. Alcoholic beverages.
b. Candy or chewing gum.
c. Dietary supplements.
d. Prepared food.
e. Soft drinks containing fifty percent or less fruit juice.
f. Tobacco.
2. For purposes of this section:
a. "Alcoholic beverages" means beverages that are suitable for human consumption
and contain one-half of one percent or more of alcohol by volume.
b. "Candy" means a preparation of sugar, honey, or other natural or artificial
sweeteners in combination with chocolate, fruits, nuts, or other ingredients or
flavoring in the form of bars, drops, or pieces. Candy does not include any
preparation containing flour and that does not require refrigeration.
c. "Dietary supplement" means any product, other than tobacco, intended to
supplement the diet which contains one or more of the following dietary
ingredients: a vitamin; a mineral; an herb or other botanical; an amino acid; a
dietary substance for use by humans to supplement the diet by increasing the
total dietary intake; an oral concentrate, metabolite, constitute, extract, or
combination of any dietary ingredients described in this subdivision and which is
intended for ingestion in tablet, capsule, powder, soft gel cap, or liquid form, or if
not represented for use as a sole item of a meal or of a diet; and is required to be
labeled as a dietary supplement, identifiable by the supplemental facts box found
on the label and as required pursuant to 21 CFR 101.36.

d. "Prepared food" means:
(1) Food sold in a heated state or heated by the seller;
(2) Two or more food ingredients mixed or combined by the seller for sale as a
single item; or
(3) Food sold with eating utensils provided by the seller, including plates,
knives, forks, spoons, glasses, cups, napkins, or straws. A plate does not
include a container or packaging used to transport the food.
e. "Prepared food" does not mean:
(1) Food that is only cut, repackaged, or pasteurized by the seller.
(2) Eggs, fish, meat, poultry, and foods containing these raw animal foods
requiring cooking by the consumer as recommended by the food and drug
administration in chapter 3, part 401.11, of its food code so as to prevent
foodborne illness.
(3) If sold without eating utensils provided by the seller:
(a) Food sold by a seller whose proper primary North American industry
classification system classification is manufacturing in sector 311,
except subsector 3118, bakeries.
(b) Food sold in an unheated state by weight or volume as a single item.
(c) Bakery items, including bread, rolls, buns, biscuits, bagels, croissants,
pastries, donuts, Danish, cakes, tortes, pies, tarts, muffins, bars,
cookies, and tortillas.
(d) Food sold that ordinarily requires additional cooking, as opposed to
just reheating, by the consumer prior to consumption.
f. "Soft drinks" means nonalcoholic beverages that contain natural or artificial
sweeteners. "Soft drinks" does not include beverages that contain milk or milk
products, soy, rice, or similar milk substitutes, or greater than fifty percent of
vegetable or fruit juice by volume.
g. "Tobacco" means cigarettes, cigars, chewing or pipe tobacco, or any other item
that contains tobacco.
3. For purposes of this section, "eating utensils provided by the seller" is determined as
follows:
a. Determine the prepared food ratio, where the numerator is the sum of food
defined in paragraphs 1 and 2 of subdivision d of subsection 2 plus food when
plates, bowls, glasses, or cups are necessary for the purchaser to receive the
food and the denominator is all sales of food and food ingredients, including
prepared food, candy, dietary supplements, and soft drinks. Alcoholic beverages
are not included in either the numerator or denominator.
b. If the prepared food ratio is seventy-five percent or less, utensils are provided by
the seller if the seller's practice is to physically give or hand them to the
purchaser, except plates, bowls, glasses, or cups necessary for the purchaser to
receive the food need only be made available.
c. If the prepared food ratio is greater than seventy-five percent, utensils are
provided by the seller if they are made available to the purchaser. When sellers
with a food ratio greater than seventy-five percent sell items that contain four or
more servings packaged as one item and sold for a single price, the item does
not become prepared food unless the seller's practice is to physically give or
hand the purchaser utensils as in subdivision b. Serving size is determined by the
label of the item sold. If no label is available, the seller will reasonably determine
the number of servings.
d. When a seller sells food items that have a utensil placed in a package by a
person other than the seller and that person's North American industry
classification system classification code is that of manufacturers (sector 311), the
seller shall not be considered to have provided the utensils except as in
subdivisions b and c. For any other packager with any other North American
industry classification system classification code, the seller shall be considered to
have provided the utensil.

e. The prepared food ratio is to be calculated by the seller for each calendar or fiscal
year not later than ninety days after the end of each year and based on the
seller's data from the previous year.
f. A single prepared food ratio will be determined annually and used for all of the
seller's locations in the state.
g. A new business shall make a good-faith estimate of the prepared food ratio for
the first year and shall adjust its good-faith estimate after the first three months if
the actual prepared food ratio is materially different than the estimate.