ARSD § 64:06:03:09 — Containers

A container is an article whose
major function is as a receptacle or flexible covering for shipment or
transportation of goods. Items such as molds, dies, or castings, the chief
purpose of which is for use in a manufacturing or fabricating process rather
than for shipping or transportation, are not containers.
Containers are taxable as follows:
(1) Containers and similar
articles, such as drums, cartons, pallets, and shipping cases, used or consumed
by manufacturers, processors, or fabricators are not subject to sales or use
tax. A manufacturer, processor, or fabricator is one who produces, whether by
hand or machinery, a new or different article or product from raw or prepared
materials. To constitute manufacturing, processing, or fabricating, there must
be some substantial or significant change in the basic materials;
(2) Sales of certain
containers to retailers are exempt from tax. The retailer exemption applies
only to paper and plastic bags, wrapping paper, twine, tape, and similar
articles which are used to hold other property sold by the retailer which is
subject to sales or use tax. The containers must be supplied free as a
convenience to the customer;
(3) Gross receipts from
sales of containers to retail customers are subject to tax. If
title to the container passes to the customer, the receipts are subject to tax
even when the receipt is called a deposit. Passage of title to the
container is indicated by the following:
(a) Containers are not
identified to a particular retailer by a logo, stamp, inventory number, or
other means;
(b) The retailer will
refund the deposit on any container returned regardless of where the container
was obtained;
(c) The retailer makes
no effort to identify or keep records on which customers have their containers;
(d) The retailer makes
no effort, such as a phone call or letter, to get the container back if it is
not returned; and
(e) An invoice, sales
slip, or other document may contain language showing passage of title.