Is dry ice and packing material used to ship perishable products in disposable coolers subject to Nebraska sales tax?

Plain-English summary

Nebraska generally exempts nonreturnable containers and packaging that a seller uses to package a product it sells — the packaging is treated as part of the product, so the seller doesn't owe sales/use tax on buying it. This ruling applies that rule to an unusual item: dry ice used to keep shipped meat products cold.

The facts: a taxpayer buys dry ice, wraps it in 20-pound units, and places it — along with other packing materials — into disposable insulated coolers containing individual cuts of meat. The whole thing is then sold as a unit to other persons. Wrapped this way, the dry ice keeps the meat cold for seven to ten days in transit, and the taxpayer makes no other use of the dry ice.

The holding: the dry ice and other packing materials are considered an integral part of a nonreturnable container under Nebraska Sales and Use Tax Regulation 1-043.04. So tax does not apply to the taxpayer's purchases of the dry ice and packing materials — as long as they're placed by the purchaser together with the cuts of meat into the insulated containers and then sold as a unit to other persons.

The key is that the dry ice functions purely as disposable packaging that goes out the door with the product. Approved in October 1988.

What this means for you

Shippers of perishable goods (meat, seafood, frozen items)

The refrigerant and packing you buy to ship a product — including consumable coolants like dry ice — can qualify as tax-exempt nonreturnable packaging when they become part of the disposable package you sell to your customer. The exemption rides on the packaging being sold as part of the unit, not kept or reused by you.

Where the exemption would not reach

If you used the dry ice for some other purpose (say, cooling a storage room) rather than shipping it out as part of the sold unit, it wouldn't be part of a nonreturnable container and the analysis would differ.

Common questions

Q: Is dry ice used to ship a product taxable in Nebraska?
A: Not when it's placed with the product into a disposable insulated container and sold as a unit — it's treated as an integral part of a nonreturnable container under Regulation 1-043.04, so the seller's purchase is exempt.

Q: What's the condition for the exemption?
A: The dry ice and packing must be placed by the purchaser together with the product into insulated containers and then sold as a unit to other persons, with no other use of the dry ice.

Citations and references

• Nebraska Sales and Use Tax Regulation 1-043.04 — treats materials that are an integral part of a nonreturnable container as exempt; the basis for exempting the dry ice and packing here.

Source

• Landing page: https://revenue.nebraska.gov/about/legal-information/revenue-rulings-issued-tax-commissioner
• Original PDF: https://revenue.nebraska.gov/sites/revenue.nebraska.gov/files/doc/legal/rulings/rr018807_containers.pdf

Original ruling text

Revenue Ruling 1-88-7

Sales and Use Tax--Containers. DRY ICE PLACED I{ITH OTHER
peCXff.¡C MÀTERIÀLS INTO AN INSULATED COOIJER CONTAINING l4EÀT PRODUCTS SOLD BY gHE TÀXPÀYER TO OTHER PERSONS TS DEE¡{ED TO BE ÀN
TNTEGRAL PAR1T OF À NONRETI'RNÀBLE CONTAINER UNDER SATES ÀND USE
TAX REGT'I,ÀTION 1-043.

Advice has been requested whether dry ice included as an
of pãckaging, used in the transPortation of meat
integral. part
prodúcts, is subjeót tõ sales and use tax. The facts índicate
tfrat foitowing purchase, the dry ice is wrapped in 2O-polld
units and ptaõed together with packing materials into disposable
insulated éooters ðont,aining individual cuts of meat which are
sold by the taxpayer. The taxpayer makes no other use of the
dry icê. IÍhile in Lransit, dry ice wrapped in this manner has a
life of between seven and ten daYs.
The dry ice and other packing materials described above are
consideied an integral párt of a nonreturnable container under
Sales and Use Tax Regulãtion 1-043.04. Tax would not apply to
purchases of the dry iõe and o!,her packing material_s, so long a9
i,n"y are placed by the purchaser together: with the individual
cutË of mèat into- insulaLed containers and then sold as a unit
t,o other persons.
APPROVED ¡

October 7r1 , 1988