Wholesale Sale of Groceries Exclusion

# (1)

(1) *Definitions.*

(a) "Processing" means transforming or changing the physical characteristics of an item, including incorporation or consumption of an item as an ingredient or component in the production or manufacture of another item. "Processing" includes activities such as (but not limited to): baking, canning, churning, cooking, concentrating, cutting, dehydrating, drying, extracting, freezing, heating, grinding, mixing, pasteurizing, preserving, or otherwise altering, manufacturing, or producing an item. For purposes of this rule, "processing" does not include activities conducted by a retail store in assembling, cleaning, preparing, storing, handling or displaying groceries for retail sale to the final consumer for home consumption. Retail store activities such as preparing filleted or gutted fish, produce trimming, and processed meat and cheese slicing, are not processing as defined in this rule, provided that such activities are conducted by a retail store as part of the services they offer to their customers.

(b) "Store" for purposes of this rule, refers to the location from which a taxpayer sells goods at retail to the final consumer for home consumption. "Store" includes both physical locations and online storefronts.

(c) "Wholesale sale" is the sale of goods to a purchaser for the purpose of resale without further processing in the regular course of the purchaser's trade or business. A wholesale sale of groceries, for purposes of the exclusion in ORS 317A.100(1)(b)(EE), may be determined by using factors such as (but not limited to):

(A) The sale is of grocery items in a quantity usable for resale, or materially in excess of the total quantity of goods that are, on average, purchased by a member of the consuming public.

(B) The items are sold at a discounted price from the fair market value of the items if sold at retail.

(C) The sale is made to another business entity.

# (2)

(2) The list of factors in sections (1)(c)(A) through (1)(c)(C) are nonexclusive. The factors will be considered based on facts and circumstances and only to the extent that they are relevant. The department may consider any other relevant factors and circumstances.

# (3)

(3) *Excludable Receipts from Wholesale Sales.* A person may exclude receipts realized from the wholesale sale of groceries, as that term is defined in ORS 317A.100(8), provided that the sales transaction meets the following requirements:

(a) The transaction is a wholesale sale;

(b) The items sold in the transaction are food or food products that meet the definition of groceries, in a form that may be resold to the final consumer for home consumption without processing;

(c) The sale is made for the purpose of reselling the groceries to the final consumer for home consumption; and

(d) The wholesale seller obtains written verification from the purchaser that the purchased groceries will be resold without processing, by a store that typically sells groceries to the final consumer for home consumption.

# (4)

(4) *Documentation Required for Verification.* A wholesale seller must retain sufficient documentation to demonstrate the requirements in section (3) have been met. Any document may serve as verification, provided that it contains the following information:

(a) The purchaser's name and address;

(b) The date of the purchase, the item(s) purchased, and the amount purchased; and

(c) Verification from the purchaser of the amount of the purchase that will be resold, without processing, to the final consumer for home consumption.

# (5)

(5) *Safe Harbor for Wholesale Sales.*A wholesale seller is not required to obtain separate verification from the purchaser if:

(a)(A) The purchaser is a qualified Supplemental Nutrition Assistance Program (SNAP) retailer with a current permit to accept SNAP benefits issued by the U.S. Department of Agriculture; or

(B) The purchaser is a store that meets the definition of a retail food store for purposes of the SNAP under 7 U.S.C. 2012(o)(1), (2), (4) or (5); and

(b) The purchase was made for the purpose of resale of groceries, without further processing, at a store that meets the requirement in subsection (a). The wholesale seller must retain sufficient documentation to demonstrate that the sale was made to a store that meets the requirements in subsection (a).

# (6)

(6) *Examples.*

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Publications:

Contact the Oregon Department of Revenue for information about how to obtain a copy of the publication referred to or incorporated by reference in this rule pursuant to ORS 183.360(2) and ORS 183.355(1)(b).]