GENERAL ASSEMBLY OF NORTH CAROLINA

SESSION 1995

H	3 

HOUSE BILL 1242
Committee Substitute Favorable 6/13/96
Third Edition Engrossed 6/19/96

Short Title:  Clarify Free Item Sales Tax.	(Public)

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Sponsors:

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Referred to:  

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May 20, 1996

A BILL TO BE ENTITLED
AN ACT TO CLARIFY THE SALES TAX TREATMENT OF ITEMS GIVEN AWAY BY MERCHANTS.
The General Assembly of North Carolina enacts:
Section 1.  G.S. 105-164.3(15) reads as rewritten:
"(15)	'Sale' or "selling. – The transfer of title or possession of tangible personal property, conditional or otherwise, in any manner or by any means whatsoever, for a consideration paid or to be paid.
	The term includes the fabrication of tangible personal property for consumers by persons engaged in business who furnish either directly or indirectly the materials used in the fabrication work.  The term also includes the furnishing or preparing for a consideration of any tangible personal property consumed on the premises of the person furnishing or preparing the property or consumed at the place at which the property is furnished or prepared.  The term also includes a transaction in which the possession of the property is transferred but the seller retains title or security for the payment of the consideration.
	If a retailer engaged in the business of selling prepared food and drink for immediate or on-premises consumption also gives prepared food or drink to its patrons or employees free of charge, for the purposes of this Article the property given away is considered sold along with the property sold.  If a retailer gives an item of inventory to a customer free of charge on the condition that the customer purchase similar or related property, the item given away is considered sold along with the item sold.  In all other cases, property given away or used by any retailer or wholesale merchant is not considered sold, whether or not the retailer or wholesale merchant recovers its cost of the property from sales of other property."
Sec. 2.  G.S. 105-164.3 is amended by adding a new subdivision to read:
"(11a)	Prepared food and drink. –  Meals, food, and beverages to which a retailer has added value or whose state the retailer has altered (other than solely by cooling) by preparing, combining, dividing, heating, or serving, in order to make them available for immediate human consumption."
Sec. 3.  This act becomes effective July 1, 1996.