12 CSR 10-103.700 - Packaging and Shipping Materials
(1)
In general, purchases of packaging and shipping materials included with, or
used to deliver, a product for ultimate sale at retail are not subject to tax.
Purchases of non-reusable items by eating or food service establishments are
not subject to tax.
(2) Definition
of Terms.
(A) Packaging and shipping
materials-containers, pallets, drums, and other items used to ship merchandise
to customers. It also includes supplies used in shipping, such as tape,
strapping, plastic peanuts, foam, cardboard pads, packaging slips, etc.
Finally, packaging encompasses integral parts of the finished product such as
display cartons and packaging containing the product, e.g., cereal box, and
shipping containers.
(3)
Basic Application of Tax.
(A) The purchase of
packaging and shipping materials are taxable if-
1. The packaging is used solely "in house" by
the seller and is not subsequently transferred to a purchaser;
2. The packaging material must be returned to
the seller and the customer does not acquire title to, ownership of, or the
right to use the packaging material;
3. The packaging is transferred incidental to
the rendering of a non-taxable service, such as with the sale of custom
software or color separations; or
4. The packaging is used to ship items that
are being transferred, such as gifts or free samples.
(B) Purchases of items of a non-reusable
nature by persons operating eating or food service establishments making retail
sales are not subject to tax if the item is furnished with or in conjunction
with the retail sale. Such items include, but are not limited to, wrapping and
packaging items, non-reusable paper, wood, plastic, and aluminum articles
including containers, trays, napkins, dishes, silverware, cups, bags, boxes,
straws, and toothpicks.
(4) Examples.
(A) A retailer packages its goods to be
shipped to its customers. The packaging and shipping items include boxes,
pallets, metal banding, cardboard pads, etc. The customer is not required to
return any of these items. The retailer does not owe tax on its purchase of
these items.
(B) A distributor
separately purchases boxes to store its merchandise in its warehouse. These
boxes are not subsequently used for shipments to its customers. The purchase of
these boxes is subject to tax.
(C)
A grocery store purchases bags that its customers use to carry out their
groceries. The grocery store may purchase these bags exempt from tax.
(D) A taxpayer purchases or leases pallets
that will be used to ship merchandise to its customers. The customer is
required to return the pallet and never acquires title to, ownership of, or the
right to use them. The purchase or lease of the pallets is taxable.
(E) A taxpayer purchases or leases pallets
that will be used to ship merchandise to its customers. The customer is
required to return the pallet, but does have the right to use the pallet until
it is returned. If there is consideration paid for the use of the pallet, the
purchase or lease of the pallets is not taxable.
(F) A dry cleaner purchases plastic bags used
to protect clothes after cleaning. Because the dry cleaning is not a taxable
service, the dry cleaner must pay tax on the purchase of the bags.
Notes
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