(a) The following transactions are exempt from the soft drink tax:

1. (1) Sales to the United States Government or its agencies;
2. (2) Sales by a distributor, wholesaler, or manufacturer for export from this state, including sales to an Arkansas retailer for delivery outside of this state;

3. (3)

   1. (A) The sale of any powder or base product which when mixed with water or other liquid produces coffee or tea.
   2. (B) Examples include powdered instant tea and coffee, whether:

(i) Caffeinated;

1. (ii) Decaffeinated; or

   1. (iii) Herbal.
   2. (C) Loose or bagged tea leaves, coffee beans, and loose or bagged ground coffee are not "powders or base products" subject to the tax;

2. (4)

   1. (A) The sale of any frozen concentrate or freeze-dried concentrate to which only water is added to produce a soft drink containing more than ten percent (10%) natural fruit or vegetable juice.

   2. (B) Examples include frozen concentrated:

      1. (i) Orange juice;
      2. (ii) Apple juice; or
      3. (iii) Grape juice;
3. (5) The sale of any soft drink containing more than ten percent (10%) natural fruit or vegetable juice;

4. (6)

   1. (A) Sales of soft drinks, syrups, simple syrups, powders, or base products by a distributor, manufacturer, or wholesaler to a licensed distributor, manufacturer, or wholesaler if the purchaser's license number is clearly shown on the invoice.
   2. (B) Sales to a retailer are not exempt;

5. (7)

   1. (A) The sale of any liquid or powder that is manufactured solely for consumption by infants and commonly called "infant formula".

   2. (B) Examples include:

      1. (i) Enfamil;
      2. (ii) Isomil;
      3. (iii) SMA;
      4. (iv) Prosobee;
      5. (v) Similac; and
      6. (vi) Nursoy;
6. (8) The sale of any liquid or powder that is manufactured for use solely as a dietary supplement or for weight reduction;
7. (9) Sales of bottled water to which no flavoring, whether artificial or natural, or carbonation has been added;

8. (10)

   1. (A) Sale of any powder or other base product solely intended by the manufacturer to be sold for the purpose of domestically mixing soft drinks by the ultimate consumer.

   2. (B) This exemption applies to sales of powders to:

      1. (i)

(a) (a) Retail businesses that purchase the powder for resale to customers, such as:

1. (1) (1) Grocery stores;
2. (2) (2) Health food stores; and
3. (3) (3) Convenience stores.

(b) (b) This exemption also applies to retail businesses that purchase the powder for both resale and for mixing and sale of soft drinks to the public, such as stores which operate:

1. (1) (1) Delicatessens;
2. (2) (2) Grills; and

3. (3) (3) Fountains; and

   1. (ii)

(b) (b) Examples include:

1. (1) (1) Hospitals;
2. (2) (2) Nursing homes;
3. (3) (3) Rehabilitation centers;
4. (4) (4) Daycares; and

5. (5) (5) Churches.

   1. (c) (c) This exemption also applies to sales to entities which purchase the powder for both in-house consumption and retail sale, such as hospitals and nursing homes which operate cafeterias open to the public.

      1. (d) (d) This exemption does not apply to the sale of powders to entities that are solely in the business of selling prepared food and beverages to customers, such as:
6. (1) (1) Bars;
7. (2) (2) Restaurants; and
8. (3) (3) Fast-food restaurants; and
9. (11) The sale of any product which has been prepared by the manufacturer with milk or milk products.

(b) There is no exemption from soft drink tax for soft drinks, syrups, simple syrups, powders, or base products:

1. (1) Donated by a licensee to:

   1. (A) Churches;
   2. (B) Schools;
   3. (C) Clubs;
   4. (D) Charitable organizations; or
   5. (E) Other organizations; or

2. (2) Distributed free of charge by a licensee for promotional or other purposes at:

   1. (A) Political fundraisers;
   2. (B) Rallies;
   3. (C) Sporting events;
   4. (D) Civic group meetings; or
   5. (E) Other similar gatherings.