Were carbon dioxide, nitrogen, and oxygen used inside fresh-seafood shipping packages taxable purchases?

Plain-English summary

Florida treated carbon dioxide, nitrogen, and oxygen used in fresh-seafood packages as exempt packaging materials.

The seller converted liquid carbon dioxide into dry-ice pellets for shipping containers and also injected carbon dioxide gas into sealed trays. Nitrogen distributed the carbon dioxide and helped prevent package breakage, while oxygen maintained the fish's flesh and blood color.

Because the gases preserved the seafood during shipment and passed with the packaged product, the ruling excluded their purchase from taxable retail sale under the historical packaging rule.

What this means for you

Food shippers should document where each gas is introduced, its packaging function, and whether it accompanies the product to the customer. The ruling addressed packaging use, not every operational use of industrial gases.

Common questions

Q: Was dry ice made from purchased carbon dioxide exempt?
A: Yes, when placed in seafood shipping packages as described.

Q: Did the answer cover nitrogen and oxygen?
A: Yes, for their stated roles inside the packaging.

Q: Why were the gases exempt?
A: Florida classified them as packaging materials used for shipment.

Citations and references

• Fla. Stat. § 212.02(14)(c) — historical packaging-material retail-sale exclusion
• Fla. Admin. Code r. 12A-1.040 — containers and packaging materials
• Fla. Stat. § 213.22 — Technical Assistance Advisements

Source

• Landing page: Florida Tax Law Library
• Advisement: TAA 03A-028

Original ruling text

SUMMARY

QUESTION: Are Taxpayer's purchases of Carbon Dioxide,
Nitrogen and Oxygen taxable?

ANSWER - Based on Facts Below: The gases, which are used to
maintain the freshness of the fresh during shipping, are
packaging materials. These items are excluded from the
definition of "retail sale," as provided in section
212.02(14)(c), Florida Statutes, and they are exempt from
tax when purchased for use as packaging materials.

Jun 10, 2003

Re: Technical Assistance Advisement 03A-028
Sales and Use Tax - Gas for Packing Seafood
Section: 212.02, F.S.
Rule: 12A-1.040, F.A.C.
Petitioner: XXX (herein "Taxpayer")
FEI: XX

Dear :

This letter is a response to your petition dated May 5, 2003,
for the Department's issuance of a Technical Assistance
Advisement ("TAA") concerning the above referenced party and
matter. Your petition has been carefully examined and the
Department finds it to be in compliance with the requisite
criteria set forth in Chapter 12-11, F.A.C. This response to
your request constitutes a TAA and is issued to you under the
authority of s. 213.22, F.S.

FACTS

Your petition sets forth the following pertinent information:

... [Taxpayer] is engaged in the wholesale and retail sale
of seafood, primarily fresh seafood. [Taxpayer] uses the

following in the packaging of fresh fish for shipping:

[Carbon Dioxide (CO2)] is purchased in a liquid state.
Liquid CO2 is compressed to make dry ice pellets. These
dry ice pellets (rather than water based ice) are put into
packages to keep the fish at specified temperatures during
shipping and to meet FDA regulations. They also extend the
shelf life of the product.

CO2 is also used in its gaseous state. CO2 converts to gas
as it warms up. CO2, in its gaseous state, is injected into
the sealed packages (trays) to meet customer specifications
and to extend the shelf life of the packaged fish.

Nitrogen [N] is also purchased in a liquid state and
converted to gas. Nitrogen gas is injected into the
packages (trays) and serves as an inert filler. This
better distributes the CO2 over the flesh of the fish and
prevents the packages from breaking[,] which would cause
the fish to spoil.

Oxygen [O] is purchased as a gas and is injected into the
packages to maintain the bright flesh and blood color of
the fish.

The three gases are combined in a machine called a "gas
mixer." Different species of fish require different
concentrations of these gases. The fish is packed using a
"tray pack machine." The machine takes trays of fish,
vacuums out the air, replaces it with the appropriate gas
mixture, of CO2, N and O, and seals the tray with clear
plastic.

This process creates what is known as a "modified
atmospheric package." The gases serve to create an
environment that protects the fish during shipping and
prevents the growth of bacteria, thereby increasing shelf
life. The gases do not convert, process or change the fish
in any way nor do they dissipate during the packaging and
shipping of the fish. They are released when the customer
opens the package. As such, they are a material that is

part of the final package that is sold and delivered to the
customer.

REQUESTED ADVISEMENT

Taxpayer requests advice of the taxability of its purchases of
Carbon Dioxide, Nitrogen and Oxygen.

APPLICABLE STATUTES AND RULES

Section 212.02(14)(c), Florida Statutes, provides in pertinent
part:

(c) "Retail sales," "sale at retail," "use," "storage," and
"consumption" do not include materials, containers, labels,
sacks, bags, or similar items intended to accompany a
product sold to a customer without which delivery of the
product would be impracticable because of the character of
the contents and be used one time only for packaging
tangible personal property for sale or for the convenience
of the customer or for packaging in the process of
providing a service taxable under this chapter....

Rule 12A-1.040, Florida Administrative Code, provides in
pertinent part:

(1) Items actually accompanying the product sold to the
final buyer or ultimate consumer without which delivery of
the product is impracticable on account of the character of
the contents and for which there is no separate charge are
exempt. These items include such things as cans in which
canned goods, paints and other commodities are contained,
medicine bottles, boxes in which jewelry, candy, suits,
dresses and hats are delivered to customers, wrapping
paper, paper bags, ice cream cartons and ice cream cones,
twine, milk bottle caps, paper discs, meat skewers, etc.,
crating, packing cases, excelsior, bail bindings, bulkhead
materials and the like when used in connection with the
packaging for shipment for sale of other tangible personal
property where these materials pass to the retailer or
ultimate consumer together with the tangible personal

property originally containing only directions for use when
it accompanies the article sold and where it is
impracticable to affix such printed matter to the article
sold.

(22) Ice and salt are exempt when purchased by the seller
of perishable food commodities and placed directly in the
shipping container or package for shipment in either
interstate or intrastate commerce.

CONCLUSION

The gases, which are used to maintain the freshness of the fresh
during shipping, are packaging materials. These items are
excluded from the definition of "retail sale," as provided in
section 212.02(14)(c), Florida Statutes, and they are exempt
from tax when purchased for use as packaging materials.

This response constitutes a Technical Assistance Advisement
under Section 213.22, F.S., which is binding on the department
only under the facts and circumstances described in the request
for this advice, as specified in Section 213.22, F.S. Our
response is predicated upon those facts and the specific
situation summarized above. You are advised that subsequent
statutory or administrative rule changes or judicial
interpretations of the statutes or rules upon which this advice
is based may subject similar future transactions to a different
treatment from that which is expressed in this response.

You are further advised that this response, your request and
related backup documents are public records under Chapter 119,
F.S., and are subject to disclosure to the public under the
conditions of s. 213.22, F.S. Confidential information must be
deleted before public disclosure. In an effort to protect
confidentiality, we request you provide the undersigned with an
edited copy of your request for Technical Assistance Advisement,
the backup material and this response, deleting names, addresses
and any other details which might lead to identification of the
taxpayer. Your response should be received by the Department
within 15 days of the date of this letter.

Sincerely,

Sara D. Faulkenberry
Tax Law Specialist
Technical Assistance and Dispute Resolution
850/414-9838

Control #55111