29 C.F.R. §§ 779.314–779.341

§779.314. “Goods” and “services” defined.

29 C.F.R. § 779.314

The term “goods” is defined in section 3(i) of the Act and has been discussed above in § 779.14. The Act, however, does not define the term “services.” The term “services,” therefore, must be given a meaning consistent with its usage in ordinary speech, with the context in which it appears and with the legislative history of the exemption as it explains the scope, the purposes and the objectives of the exemption. Although in a very general sense every business might be said to perform a service it is clear from the context and the legislative history that all business establishments are not making sales of “services” of the type contemplated in the Act; that is, services rendered by establishments which are traditionally regarded as local retail service establishments such as the restaurants, hotels, barber shops, repair shops, etc. (See §§ 779.315 through 779.320.) It is to these latter services only that the term “service” refers.

Notes, amendments, and revision history

Authority

Authority: Secs. 1-19, 52 Stat. 1060, as amended; 75 Stat. 65; Sec. 29(B), Pub. L. 93-259, 88 Stat. 55; 29 U.S.C. 201-219.

Source

Source: 35 FR 5856, Apr. 9, 1970, unless otherwise noted.

§779.315. Traditional local retail or service establishments.

29 C.F.R. § 779.315

The term “retail” whether it refers to establishments or to the sale of goods or services is susceptible of various interpretations. When used in a specific law it can be defined properly only in terms of the purposes and objectives and scope of that law. In enacting the section 13(a)(2) exemption, Congress had before it the specific object of exempting from the minimum wage and overtime requirements of the Act employees employed by the traditional local retail or service establishment, subject to the conditions specified in the exemption. (See statements of Rep. Lucas, 95 Cong. Rec. pp. 11004 and 11116, and of Sen. Holland, 95 Cong. Rec. pp. 12502 and 12506.) Thus, the term “retail or service establishment” as used in the Act denotes the traditional local retail or service establishment whether pertaining to the coverage or exemption provisions.

Notes, amendments, and revision history

Authority

Authority: Secs. 1-19, 52 Stat. 1060, as amended; 75 Stat. 65; Sec. 29(B), Pub. L. 93-259, 88 Stat. 55; 29 U.S.C. 201-219.

Source

Source: 35 FR 5856, Apr. 9, 1970, unless otherwise noted.

§779.316. Establishments outside “retail concept” not within statutory definition; lack first requirement.

29 C.F.R. § 779.316

The term “retail” is alien to some businesses or operations. For example, transactions of an insurance company are not ordinarily thought of as retail transactions. The same is true of an electric power company selling electrical energy to private consumers. As to establishments of such businesses, therefore, a concept of retail selling or servicing does not exist. That it was the intent of Congress to exclude such businesses from the term “retail or service establishment” is clearly demonstrated by the legislative history of the 1949 amendments and by the judicial construction given said term both before and after the 1949 amendments. It also should be noted from the judicial pronouncements that a “retail concept” cannot be artificially created in an industry in which there is no traditional concept of retail selling or servicing. (95 Cong. Rec. pp. 1115, 1116, 12502, 12506, 21510, 14877, and 14889; Mitchell v. Kentucky Finance Co., 359 U.S. 290; Phillips Co. v. Walling, 324 U.S. 490; Kirschbaum Co. v. Walling, 316 U.S. 517; Durkin v. Joyce Agency, Inc., 110 F. Supp. 918 (N.D. Ill.) affirmed sub nom Mitchell v. Joyce Agency, Inc., 348 U.S. 945; Goldberg v. Roberts 291 F. 2d 532 (CA-9); Wirtz v. Idaho Sheet Metal Works, 335 F. 2d 952 (CA-9), affirmed in 383 U.S. 190; Telephone Answering Service v. Goldberg, 290 F. 2d 529 (CA-1).) It is plain, therefore, that the term “retail or service establishment” as used in the Act does not encompass establishments in industries lacking a “retail concept”. Such establishments not having been traditionally regarded as retail or service establishments cannot under any circumstances qualify as a “retail or service establishment” within the statutory definition of the Act, since they fail to meet the first requirement of the statutory definition. Industry usage of the term “retail” is not in itself controlling in determining when business transactions are retail sales under the Act. Judicial authority is quite clear that there are certain goods and services which can never be sold at retail. (Idaho Sheet Metal Works, Inc. v. Wirtz, 383 U.S. 190, 202, rehearing denied 383 U.S. 963; Wirtz v. Steepleton General Tire Company, Inc., 383 U.S. 190, 202, rehearing denied 383 U.S. 963.)

Notes, amendments, and revision history

Authority

Authority: Secs. 1-19, 52 Stat. 1060, as amended; 75 Stat. 65; Sec. 29(B), Pub. L. 93-259, 88 Stat. 55; 29 U.S.C. 201-219.

Source

Source: 35 FR 5856, Apr. 9, 1970, unless otherwise noted.

§779.317. Reserved

29 C.F.R. § 779.317

Notes, amendments, and revision history

Authority

Authority: Secs. 1-19, 52 Stat. 1060, as amended; 75 Stat. 65; Sec. 29(B), Pub. L. 93-259, 88 Stat. 55; 29 U.S.C. 201-219.

Source

Source: 35 FR 5856, Apr. 9, 1970, unless otherwise noted.

§779.318. Characteristics and examples of retail or service establishments.

29 C.F.R. § 779.318

(a)

Typically a retail or service establishment is one which sells goods or services to the general public. It serves the everyday needs of the community in which it is located. The retail or service establishment performs a function in the business organization of the Nation which is at the very end of the stream of distribution, disposing in small quantities of the products and skills of such organization and does not take part in the manufacturing process. (See, however, the discussion of section 13(a)(4) in §§ 779.346 to 779.350.) Such an establishment sells to the general public its food and drink. It sells to such public its clothing and its furniture, its automobiles, its radios and refrigerators, its coal and its lumber, and other goods, and performs incidental services on such goods when necessary. It provides the general public its repair services and other services for the comfort and convenience of such public in the course of its daily living. Illustrative of such establishments are: Grocery stores, hardware stores, clothing stores, coal dealers, furniture stores, restaurants, hotels, watch repair establishments, barber shops, and other such local establishments.

(b)

The legislative history of the section 13(a)(2) exemption for certain retail or service establishments shows that Congress also intended that the retail exemption extend in some measure beyond consumer goods and services to embrace certain products almost never purchased for family or noncommercial use. A precise line between such articles and those which can never be sold at retail cannot be drawn. But a few characteristics of items like small trucks and farm implements may offer some guidance; their use is very widespread as is that of consumer goods; they are often distributed in stores or showrooms by means not dissimilar to those used for consumer goods; and they are frequently used in commercial activities of limited scope. The list of strictly commercial items whose sale can be deemed retail is very small and a determination as to the application of the retail exemption in specific cases would depend upon the consideration of all the circumstances relevant to the situation. (Idaho Sheet Metal Works, Inc. v. Wirtz and Wirtz v. Steepleton General Tire Company, Inc., 383 U.S. 190, 202, rehearing denied 383 U.S. 963.)

Notes, amendments, and revision history

Amendments

[35 FR 5856, Apr. 9, 1970, as amended at 36 FR 14466, Aug. 6, 1971]

Authority

Authority: Secs. 1-19, 52 Stat. 1060, as amended; 75 Stat. 65; Sec. 29(B), Pub. L. 93-259, 88 Stat. 55; 29 U.S.C. 201-219.

Source

Source: 35 FR 5856, Apr. 9, 1970, unless otherwise noted.

Amendments

[35 FR 5856, Apr. 9, 1970, as amended at 36 FR 14466, Aug. 6, 1971]

§779.319. A retail or service establishment must be open to general public.

29 C.F.R. § 779.319

The location of the retail or service establishment, whether in an industrial plant, an office building, a railroad depot, or a government park, etc., will make no difference in the application of the exemption and such an establishment will be exempt if it meets the tests of the exemption. Generally, however, an establishment, wherever located, will not be considered a retail or service establishment within the meaning of the Act, if it is not ordinarily available to the general consuming public. An establishment, however, does not have to be actually frequented by the general public in the sense that the public must actually visit it and make purchases of goods or services on the premises in order to be considered as available and open to the general public. A refrigerator repair service shop, for example, is available and open to the general public even if it receives all its orders on the telephone and performs all of its repair services on the premises of its customers.

Notes, amendments, and revision history

Authority

Authority: Secs. 1-19, 52 Stat. 1060, as amended; 75 Stat. 65; Sec. 29(B), Pub. L. 93-259, 88 Stat. 55; 29 U.S.C. 201-219.

Source

Source: 35 FR 5856, Apr. 9, 1970, unless otherwise noted.

§779.320. Reserved

29 C.F.R. § 779.320

Notes, amendments, and revision history

Authority

Authority: Secs. 1-19, 52 Stat. 1060, as amended; 75 Stat. 65; Sec. 29(B), Pub. L. 93-259, 88 Stat. 55; 29 U.S.C. 201-219.

Source

Source: 35 FR 5856, Apr. 9, 1970, unless otherwise noted.

§779.321. Inapplicability of “retail concept” to some types of sales or services of an eligible establishment.

29 C.F.R. § 779.321

(a)

Only those sales or services to which the retail concept applies may be recognized as retail sales of goods or services for purposes of the exemption. The fact that the particular establishment may have a concept of retailability, in that it makes sales of types which may be recognized as retail, is not determinative unless the requisite portion of its annual dollar volume is derived from particular sales of its goods and services which have a concept of retailability. Thus, the mere fact that an establishment is of a type noted in § 779.320 does not mean that any particular sales of such establishment are within the retail concept. As to each particular sale of goods or services, an initial question that must be answered is whether the sales of goods or services of the particular type involved can ever be recognized as retail. The Supreme Court in Wirtz v. Steepleton General Tire Co., 383 U.S. 190, confirmed the Department's position that (1) The concept of “retailability” must apply to particular sales of the establishment, as well as the establishment or business as a whole, and (2) even as to the establishment whose sales are “variegated” and include retail sales, that nonetheless classification of particular sales of goods or services as ever coming within the concept of retailability must be made. Sales of some particular types of goods or services may be decisively classified as nonretail on the ground that such particular types of goods or services cannot ever qualify as retail whatever the terms of sale, regardless of the industry usage or classification.

(b)

An establishment is, therefore, not automatically exempt upon a finding that it is of the type to which the retail concept of selling or servicing is applicable; it must meet all the tests specified in the Act in order to qualify for exemption. Thus, for example, an establishment may be engaged in repairing household refrigerators, and in addition it may be selling and repairing manufacturing machinery for manufacturing establishments. The retail concept does not apply to the latter activities. In such case, the exemption will not apply if the annual dollar volume derived from the selling and servicing of such machinery, and from any other sales and services which are not recognized as retail sales or services, and from sales of goods or services for resale exceeds 25 percent of the establishment's total annual dollar volume of sales of goods or services.

(c)

Since there is no retail concept in the construction industry, gross receipts from construction activities of any establishment also engaged in retail selling must be counted as dollar volume from sales not recognized as retail in applying the percentage tests of section 13(a)(2). Also, since construction and the distribution of goods are entirely dissimilar activities performed in industries traditionally recognized as wholly separate and distinct from each other, an employee engaged in construction activities is not employed within the scope of his employer's otherwise exempt retail business in any week in which the employee engages in such construction work, and is therefore (see § 779.308) not employed “by” a retail or service establishment within the meaning of the Act in such workweek.

(d)

Certain business establishments engage in the retail sale to the general public, as goods delivered to purchasers at a stipulated price, of items such as certain plumbing and heating equipment, electrical fixtures and supplies, and fencing and siding for residential installation. In addition to selling the goods they may also install, at an additional charge, the goods which are sold. Installation which is incidental to a retail sale (as distinguished from a construction or reconstruction contract to do a building alteration, or repair job at a contract price for materials and labor required, see § 779.355(a)(1) is considered an exempt activity. By way of example, if the installation for the customer of such goods sold to him at retail requires only minor carpentry, plumbing or electrical work (as may be the case where ordinary plumbing fixtures, or household items such as stoves, garbage disposals, attic fans, or window air conditioners are being installed or replaced), or where only labor of the type required for the usual installation of chain link fences around a home or small business establishment is involved, will normally be considered as incidental to the retail sale of the goods involved (unless, of course, the transaction between the parties is for a construction job at an overall price for the job, involving no retail sale of goods as such). In determining whether such an installation is incidental to a retail sale or constitutes a nonretail construction activity, it is necessary to consider the general characteristics of the entire transaction. Where one or more of the following conditions are present, the installation will normally be considered a construction activity rather than incidental to a retail sale:

(1)

The cost to the purchaser of the installation in relation to the sale price of the goods is substantial;

(2)

The installation involves substantial structural changes, extensive labor, planning or the use of specialized equipment;

(3)

The goods are being installed in conjunction with the construction of a new home or other structure; or

(4)

The goods installed are of a specialized type which the general consuming public does not ordinarily have occasion to use.

(e)

An auxiliary employee of an exempt retail or service establishment performing clerical, maintenance, or custodial work in the exempt establishment which is related to the establishment's construction activities will, for enforcement purposes, be considered exempt in any workweek if no more than 20 percent of his time is spent in such work.

Notes, amendments, and revision history

Authority

Authority: Secs. 1-19, 52 Stat. 1060, as amended; 75 Stat. 65; Sec. 29(B), Pub. L. 93-259, 88 Stat. 55; 29 U.S.C. 201-219.

Source

Source: 35 FR 5856, Apr. 9, 1970, unless otherwise noted.

§779.322. Second requirement for qualifying as a “retail or service establishment.”

29 C.F.R. § 779.322

If the business is one to which the retail concept is applicable then the second requirement for qualifying as a “retail or service establishment” within that term's statutory definition is that 75 percent of the establishment's annual dollar volume must be derived from sales of goods or services (or of both) which are recognized as retail sales or services in the particular industry. Under the Act, this requirement is distinct from the requirement that 75 percent of annual dollar volume be from sales of goods or services “not for resale” (§ 779.329); many sales which are not for resale lack a retail concept and the fact that a sale is not for resale cannot establish that it is recognized as retail in a particular industry. (See Wirtz v. Steepleton General Tire Co., 383 U.S. 190.) To determine whether the sales or services of an establishment are recognized as retail sales or services in the particular industry, we must inquire into what is meant by the terms “recognized” and “in the particular industry,” and into the functions of the Secretary and the courts in determining whether the sales are recognized as retail in the industry.

Notes, amendments, and revision history

Authority

Authority: Secs. 1-19, 52 Stat. 1060, as amended; 75 Stat. 65; Sec. 29(B), Pub. L. 93-259, 88 Stat. 55; 29 U.S.C. 201-219.

Source

Source: 35 FR 5856, Apr. 9, 1970, unless otherwise noted.

§779.323. Particular industry.

29 C.F.R. § 779.323

In order to determine whether a sale or service is recognized as a retail sale or service in the “particular industry” it is necessary to identify the “particular” industry to which the sale or service belongs. Some situations are clear and present no difficulty. The sale of clothes, for example, belongs to the clothing industry and the sale of ice belongs to the ice industry. In other situations, a sale or service is not so easily earmarked and a wide area of overlapping exists. Household appliances are sold by public utilities as well as by department stores and by stores specializing in the sale of such goods; and tires are sold by manufacturers' outlets, by independent tire dealers and by other types of outlets. In these cases, a fair determination as to whether a sale or service is recognized as retail in the “particular” industry may be made by giving to the term “industry” its broad statutory definition as a “group of industries” and thus including all industries wherein a significant quantity of the particular product or service is sold. For example, in determining whether a sale of lumber is a retail sale, it is the recognition the sale of lumber occupies in the lumber industry generally which decides its character rather than the recognition such sales occupies in any branch of that industry.

Notes, amendments, and revision history

Authority

Authority: Secs. 1-19, 52 Stat. 1060, as amended; 75 Stat. 65; Sec. 29(B), Pub. L. 93-259, 88 Stat. 55; 29 U.S.C. 201-219.

Source

Source: 35 FR 5856, Apr. 9, 1970, unless otherwise noted.

§779.324. Recognition “in.”

29 C.F.R. § 779.324

The express terms of the statutory provision requires the “recognition” to be “in” the industry and not “by” the industry. Thus, the basis for the determination as to what is recognized as retail “in the particular industry” is wider and greater than the views of an employer in a trade or business, or an association of such employers. It is clear from the legislative history and judicial pronouncements that it was not the intent of this provision to delegate to employers in any particular industry the power to exempt themselves from the requirements of the Act. It was emphasized in the debates in Congress that while the views of an industry are significant and material in determining what is recognized as a retail sale in a particular industry, the determination is not dependent on those views alone. (See 95 Cong. Rec. pp. 12501, 12502, and 12510; Wirtz v. Steepleton General Tire Co., 383 U.S. 190; Mitchell v. City Ice Co., 273 F. 2d 560 (CA-5); Durkin v. Casa Baldrich, Inc., 111 F. Supp. 71 (DCPR) affirmed 214 F. 2d 703 (CA-1); see also Aetna Finance Co. v. Mitchell, 247 F. 2d 190 (CA-1).) Such a determination must take into consideration the well-settled habits of business, traditional understanding and common knowledge. These involve the understanding and knowledge of the purchaser as well as the seller, the wholesaler as well as the retailer, the employee as well as the employer, and private and governmental research and statistical organizations. The understanding of all these and others who have knowledge of recognized classifications in an industry, would all be relevant in the determination of the question.

Notes, amendments, and revision history

Authority

Authority: Secs. 1-19, 52 Stat. 1060, as amended; 75 Stat. 65; Sec. 29(B), Pub. L. 93-259, 88 Stat. 55; 29 U.S.C. 201-219.

Source

Source: 35 FR 5856, Apr. 9, 1970, unless otherwise noted.

§779.325. Functions of the Secretary and the courts.

29 C.F.R. § 779.325

It may be necessary for the Secretary in the performance of his duties under the Act, to determine in some instances whether a sale or service is recognized as a retail sale or particular industry. In the exceptional case where the determination cannot be made on the basis of common knowledge or readily accessible information, the Secretary may gather the information needed for the purpose of making such determinations. Available information on usage and practice in the industry is carefully considered in making such determinations, but the “word-usage of the industry” does not have controlling force; the Secretary “cannot be hamstrung by the terminology of a particular trade” and possesses considerable discretion as the one responsible for the actual administration of the Act. (Wirtz v. Steepleton General Tire Co., 383 U.S. 190; and see 95 Cong. Rec. 12501-12502, 12510.) The responsibility for making final decisions, of course, rests with the courts. An employer disagreeing with the determinations of the Secretary and claiming exemption has the burden of proving in a court proceeding that the prescribed percentage of the establishment's sales or services are recognized as retail in the industry and that his establishment qualifies for the exemption claimed by him. (See Wirtz v. Steepleton, cited above, and 95 Cong. Rec. 12510.)

Notes, amendments, and revision history

Authority

Authority: Secs. 1-19, 52 Stat. 1060, as amended; 75 Stat. 65; Sec. 29(B), Pub. L. 93-259, 88 Stat. 55; 29 U.S.C. 201-219.

Source

Source: 35 FR 5856, Apr. 9, 1970, unless otherwise noted.

§779.326. Sources of information.

29 C.F.R. § 779.326

In determining whether a sale or service is recognized as a retail sale or service in a particular industry, there are available to the Secretary a number of sources of information to aid him in arriving at a conclusion. These sources include: (a) The legislative history of the Act as originally enacted in 1938 and the legislative history of the 1949, 1961, and 1966 amendments to the Act pertaining to those sections in which the term “retail or service establishment” is found, particularly in the section 13(a)(2) exemption; (b) the decisions of the courts during the intervening years; and (c) the Secretary's experience in the intervening years in interpreting and administering the Act. These sources of information enable the Secretary to lay down certain standards and criteria, as discussed in this subpart, for determining generally and in some cases specifically what sales or services are recognized as retail sales or services in particular industries.

Notes, amendments, and revision history

Authority

Authority: Secs. 1-19, 52 Stat. 1060, as amended; 75 Stat. 65; Sec. 29(B), Pub. L. 93-259, 88 Stat. 55; 29 U.S.C. 201-219.

Source

Source: 35 FR 5856, Apr. 9, 1970, unless otherwise noted.

§779.327. Wholesale sales.

29 C.F.R. § 779.327

A wholesale sale, of course, is not recognized as a retail sale. If an establishment derives more than 25 percent of its annual dollar volume from sales made at wholesale, it clearly cannot qualify as a retail and service establishment. It must be remembered, however, that what is a retail sale for purposes of a sales tax law is not necessarily a retail sale for purposes of the statutory definition of the term “retail or service establishment”. Similarly, a showing that sales of goods or services are not wholesale or are made to the ultimate consumer and are not for resale does not necessarily prove that such sales or services are recognized in the particular industry as retail. (Wirtz v. Steepleton General Tire Co., 388 U.S. 190.)

Notes, amendments, and revision history

Authority

Authority: Secs. 1-19, 52 Stat. 1060, as amended; 75 Stat. 65; Sec. 29(B), Pub. L. 93-259, 88 Stat. 55; 29 U.S.C. 201-219.

Source

Source: 35 FR 5856, Apr. 9, 1970, unless otherwise noted.

§779.328. Retail and wholesale distinguished.

29 C.F.R. § 779.328

(a)

The distinction between a retail sale and a wholesale sale is one of fact. Typically, retail sales are made to the general consuming public. The sales are numerous and involve small quantities of goods or services. Wholesale establishments usually exclude the general consuming public as a matter of established business policy and confine their sales to other wholesalers, retailers, and industrial or business purchasers in quantities greater than are normally sold to the general consuming public at retail. What constitutes a small quantity of goods depends, of course, upon the facts in the particular case and the quantity will vary with different commodities and in different trades and industries. Thus, a different quantity would be characteristic of retail sales of canned tomato juice, bed sheets, furniture, coal, etc. The quantity test is a well-recognized business concept. There are reasonably definite limits as to the quantity of a particular commodity which the general consuming public regularly purchases at any given time at retail and businessmen are aware of these buying habits. These buying habits set the standard for the quantity of goods which is recognized in an industry as the subject of a retail sale. Quantities which are materially in excess of such a standard are generally regarded as wholesale and not retail quantities.

(b)

The sale of goods or services in a quantity approximating the quantity involved in a normal wholesale transaction and as to which a special discount from the normal retail price is given is generally regarded as a wholesale sale in most industries. Whether the sale of such a quantity must always involve a discount in order to be considered a wholesale sale depends upon industry practice. If the practice in a particular industry is such that a discount from the normal retail price is not regarded in the industry as significant in determining whether the sale of a certain quantity is a wholesale sale, then the question of whether the sale of such a quantity will be considered a wholesale sale would be determined without reference to the price. In some industries, the sale of a small quantity at a discount may also be regarded as a wholesale sale, in which case it will be so treated for purposes of the exemption. Generally, as the Supreme Court has recognized (Wirtz v. Steepleton General Tire Co., 383 U.S. 1900), both the legislative history and common parlance suggest that “the term retail becomes less apt as the quantity and the price discount increases in a particular transaction.”

(c)

In some cases, a purchaser contracts for the purchase of a large quantity of goods or services to be delivered or performed in smaller quantities or jobs from time to time as the occasion requires. In other cases, the purchaser instead of entering into a single contract for the entire amount of goods, or services, receives a series of regular deliveries of performances pursuant to a quotation, bid, estimate, or general business arrangement or understanding. In these situations, if the total quantity of goods or services which is sold is materially in excess of the total quantity of goods or services which might reasonably be purchased by a member of the general consuming public during the same period, it will be treated as a wholesale quantity for purposes of the statutory definition of the term “retail or service establishment”, in the absence of clear evidence that under such circumstances such a quantity is recognized as a retail quantity in the particular industry. For example, if a food service firm contracts with a college to provide meals for the latter's boarding students for a term, in consideration of payment by the college of a stipulated sum based on the number of students registered or provided with meals, the services are being sold in a wholesale, rather than a retail quantity. If such a contract is entered into as a result of formal bids, as noted in paragraph (d) of this section, this would be an additional reason for nonrecognition of the transaction as a retail sale of such services.

(d)

Sales made pursuant to formal bid procedures, such as those utilized by the agencies of Federal, State, and local governments and oftentimes by commercial and industrial concerns involving the issuance by the buyer of a formal invitation to bid on certain merchandise or services for delivery in accordance with prescribed terms and specifications, are not recognized as retail sales.

Notes, amendments, and revision history

Authority

Authority: Secs. 1-19, 52 Stat. 1060, as amended; 75 Stat. 65; Sec. 29(B), Pub. L. 93-259, 88 Stat. 55; 29 U.S.C. 201-219.

Source

Source: 35 FR 5856, Apr. 9, 1970, unless otherwise noted.

§779.329. Effect of type of customer and type of goods or services.

29 C.F.R. § 779.329

In some industries the type of goods or services sold or the type of purchaser of goods or services are determining factors in whether a sale or service is recognized as retail in the particular industry. In other industries a sale or service may be recognized as retail regardless of the type of goods or services sold or the type of customer. Where a sale is recognized as retail regardless of the type of customer, its character as such will not be affected by the character of the customer, with reference to whether he is a private individual or a business concern, or by the use the purchaser makes of the purchased commodity. For example, if the sale of a single automobile to anyone for any purpose is recognized as a retail sale in the industry, it will be considered as a retail sale for purposes of the exemption whether the customer be a private individual or an industrial concern or whether the automobile is used by the purchaser for pleasure purposes or for business purposes. If a sale of a particular quantity of coal is recognized in the industry as a retail sale, its character as such will not be affected by the fact that it is sold for the purpose of heating an office building as distinguished from a private dwelling. If the repair of a wash basin is recognized in the industry as a retail service, its character as such will not be affected by the fact that it is a wash basin in a factory building as distinguished from a wash basin in a private dwelling house. It must be remembered that these principles apply only to those sales of goods or services which have a retail concept, that is, where the subject matter is “retailable.” See § 779.321. The “industry-recognition” question as to whether such sales are recognized as retail in the industry has no relevancy if in fact the goods and services sold are not of a “retailable” character, as previously explained. If the subject of the sale does not come within the concept of retailable items contemplated by the statute, there can be no recognition in any industry of the sale of the goods or services as retail, for purposes of the Act, even though the nomenclature used by the industry members may put a retail label on the transaction. (See Wirtz v. Steepleton General Tire Co., 383 U.S. 190; Mitchell v. Kentucky Finance Co., 359 U.S. 290.)

Notes, amendments, and revision history

Authority

Authority: Secs. 1-19, 52 Stat. 1060, as amended; 75 Stat. 65; Sec. 29(B), Pub. L. 93-259, 88 Stat. 55; 29 U.S.C. 201-219.

Source

Source: 35 FR 5856, Apr. 9, 1970, unless otherwise noted.

§779.330. Third requirement for qualifying as a “retail or service establishment.”

29 C.F.R. § 779.330

The third requirement for qualifying as a “retail or service establishment” within that term's statutory definition is that 75 percent of the retail or service establishment's annual dollar volume must be from sales of goods or of services (or of both) which are not made for resale. At least three-fourths of the total sales of goods or services (or of both) (measured by annual dollar volume) must not be made for resale. Except under the special provision in section 3(n) of the Act, discussed in § 779.335, the requirement that 75 percent of the establishment's dollar volume be from sales of goods or services “not for resale” is a separate test and a sale which “for resale” cannot be counted toward the required 75 percent even if it is recognized as retail in the particular industry. The prescribed 75 percent must be from sales which are both not for resale and recognized as retail.

Notes, amendments, and revision history

Authority

Authority: Secs. 1-19, 52 Stat. 1060, as amended; 75 Stat. 65; Sec. 29(B), Pub. L. 93-259, 88 Stat. 55; 29 U.S.C. 201-219.

Source

Source: 35 FR 5856, Apr. 9, 1970, unless otherwise noted.

§779.331. Meaning of sales “for resale.”

29 C.F.R. § 779.331

Except with respect to a specific situation regarding certain building materials, the word “resale” is not defined in the Act. The common meaning of “resale” is the act of “selling again.” A sale is made for resale where the seller knows or has reasonable cause to believe that the goods or services will be resold, whether in their original form, or in an altered form, or as a part, component or ingredient of another article. Where the goods or services are sold for resale, it does not matter what ultimately happens to such goods or services. Thus, the fact that the goods are consumed by fire or no market is found for them, and are, therefore, never resold does not alter the character of the sale which is made for resale. Similarly, if at the time the sale is made, the seller has no knowledge or reasonable cause to believe that the goods are purchased for the purpose of resale, the fact that the goods later are actually resold is not controlling. In considering whether there is a sale of goods or services and whether such goods or services are sold for resale in any specific situation, the term “sale” includes, as defined in section 3(k) of the Act, “any sale, exchange, contract to sell, consignment for sale, shipment for sale, or other disposition.” Thus, under the definition sales by an establishment to a competitor are regarded as sales for resale even though made without profit. (Northwestern-Hanna Fuel Co. v. McComb, 166 F. 2d 932 (CA-8).) Similarly, sales for distribution by the purchaser for business purposes are sales for resale under the “other disposition” language of the definition of “sale” even though distributed at no cost to the ultimate recipient. (See Mitchell v. Duplicate Photo Service, 13 WH Cases 71, 31 L.C. Par. 70,287 (S.D. Cal. 1956) accord, Mitchell v. Sherry Corine Corporation, 264 F. 2d 831 (CA-4) (sale of meals to airlines for distribution to their passengers).) It should be noted, however, that occasional transfer of goods from the stock of one retail or service establishment to relieve a shortage in another such establishment under the same ownership will not be considered as sales for resale.

Notes, amendments, and revision history

Authority

Authority: Secs. 1-19, 52 Stat. 1060, as amended; 75 Stat. 65; Sec. 29(B), Pub. L. 93-259, 88 Stat. 55; 29 U.S.C. 201-219.

Source

Source: 35 FR 5856, Apr. 9, 1970, unless otherwise noted.

§779.332. Resale of goods in an altered form or as parts or ingredients of other goods or services.

29 C.F.R. § 779.332

Sale for resale includes the sale of goods which will be resold in their original form, in an altered form, or as a part or ingredient of another article. A sale of goods which the seller knows, or has reasonable cause to believe, will be resold after processing or manufacture is a sale for resale. Thus, sales of parts with the expectation that they will be incorporated in aircraft and that the aircraft will be sold clearly are sales for resale. (Arnold v. Ben Kanowsky, Inc., 361 U.S. 388.) Similarly, the sale of lumber to furniture or box factories, or the sale of textiles to clothing manufacturers, is a sale for resale even though the goods are resold in the form of furniture or clothing. The principle is also illustrated in cases where the article sold becomes a part or an ingredient of another, such as scrap metal in steel, dyes in fabrics, flour in bread and pastries, and salt in food or ice in beverages. (Mitchell v. Douglas Auto Parts Co., 11 WH Cases 807, 25 L.C. Par. 68, 119 (N.D. Ill., 1954).) The fact that goods sold will be resold as a part of a service in which they are used or as a part of a building into which they are incorporated does not negate the character of the sale as one “for resale.” (Mitchell v. Furman Beauty Supply, 300 F. 2d 16 (CA-3); Mayol v. Mitchell, 280 F. 2d 477 (CA-1), cert. denied 364 U.S. 902; Goldberg v. Kleban Eng. Corp., 303 F. 2d 855 (CA-5).)

Notes, amendments, and revision history

Authority

Authority: Secs. 1-19, 52 Stat. 1060, as amended; 75 Stat. 65; Sec. 29(B), Pub. L. 93-259, 88 Stat. 55; 29 U.S.C. 201-219.

Source

Source: 35 FR 5856, Apr. 9, 1970, unless otherwise noted.

§779.333. Goods sold for use as raw materials in other products.

29 C.F.R. § 779.333

Goods are sold for resale where they are sold for use as a raw material in the production of a specific product to be sold, such as sales of coal for the production of coke, coal gas, or electricity, or sales of liquefied-petroleum-gas for the production of chemicals or synthetic rubber. However, the goods are not considered sold for resale if sold for general industrial or commercial uses, such as coal for use in laundries, bakeries, nurseries, canneries, or for space heating, or ice for use by grocery stores or meat markets in cooling and preserving groceries and meat to be sold. Similarly, ice used for cooling soft drinks while in storage will not be considered sold for resale. On the other hand, ice or ice cubes sold for serving soft drinks or other beverages will be considered as sales for resale.

Notes, amendments, and revision history

Authority

Authority: Secs. 1-19, 52 Stat. 1060, as amended; 75 Stat. 65; Sec. 29(B), Pub. L. 93-259, 88 Stat. 55; 29 U.S.C. 201-219.

Source

Source: 35 FR 5856, Apr. 9, 1970, unless otherwise noted.

§779.334. Sales of services for resale.

29 C.F.R. § 779.334

The same principles apply in the case of sales of services for resale. A sale of services where the seller knows or has reasonable cause to believe will be resold is a sale for resale. Where, for example, an establishment reconditions and repairs watches for retail jewelers who resell the services to their own customers, the services constitute a sale for resale. Where a garage repairs automobiles for a secondhand automobile dealer with the knowledge or reasonable cause to believe that the automobile on which the work is performed will be sold, the service performed by the garage is a sale for resale. The services performed by a dental laboratory in the making of artificial teeth for the dentist for the use of his patients is a sale of services (as well as of goods) for resale. The services of a fur repair and storage establishment performed for other establishments who sell these services to their own customers, constitute sales for resale. As in the case of the sale of goods, in certain circumstances, sales of services to a business for a specific use in performing a different service which such business renders to its own customers are in economic effect sales for resale as a part of the service that the purchaser in turn sells to his customers, even though such services are consumed in the process of performance of the latter service. For example, if a storage establishment uses mothproofing services in order to render satisfactory storage services for its customers, the sale of such mothproofing services to that storage establishment will be considered a sale for resale.

Notes, amendments, and revision history

Authority

Authority: Secs. 1-19, 52 Stat. 1060, as amended; 75 Stat. 65; Sec. 29(B), Pub. L. 93-259, 88 Stat. 55; 29 U.S.C. 201-219.

Source

Source: 35 FR 5856, Apr. 9, 1970, unless otherwise noted.

§779.335. Sales of building materials for residential or farm building construction.

29 C.F.R. § 779.335

Section 3(n) of the Act, as amended, excludes from the category of sales for resale “the sale of goods to be used in residential or farm building construction, repair or maintenance: Provided, That the sale is recognized as a bona fide retail sale in the industry.” Under this section a sale of building materials to a building contractor or a builder for use in residential or farm building, repair or maintenance is not a sale for resale, provided, the sale is otherwise recognized as a bona fide retail sale in the industry. If the sale is not so recognized it will be considered a sale for resale. Thus, only bona fide retail sales of building materials to a building contractor or a builder for the uses described would be taken out of the category of sales for resale. (Sucrs. De A. Mayol & Co. v. Mitchell, 280 F. 2d 477 (CA-1); Elder v. Phillips & Buttroff Mfg. Co., 23 L.C. Par. 67,524 (Tenn., 1958).) The legislative history of the amendment indicates that it is not the intent of its sponsors to remove from the category of sales for resale such sales, for example, as sales of lumber to a contractor to build a whole residential subdivision. (See 95 Cong. Rec. 12533-12535; Sen. St. ibid; 14877.)

Notes, amendments, and revision history

Authority

Authority: Secs. 1-19, 52 Stat. 1060, as amended; 75 Stat. 65; Sec. 29(B), Pub. L. 93-259, 88 Stat. 55; 29 U.S.C. 201-219.

Source

Source: 35 FR 5856, Apr. 9, 1970, unless otherwise noted.

§779.336. Sales of building materials for commercial property construction.

29 C.F.R. § 779.336

Sales of building materials to a contractor or speculative builder for the construction, maintenance or repair of commercial property or any other property not excepted in section 3(n) of the Act, as explained above, will be considered as sales for resale. (See §§ 779.332 and 779.335.) Some employers who are dealers in building materials are also engaged in the business of building contractors or speculative builders. Building materials for the carrying on of the employer's contracting or speculative building business often are supplied by the employer himself from or through his building materials establishment. In the analysis of the sales of the building materials establishment for the purpose of determining the qualification of such establishment as a “retail or service establishment” all transfers of stock made by the employer from or through his building materials establishment to his building business for the construction, maintenance or repair of commercial property or any other property not excepted in section 3 (n) of the Act will be considered as sales made by such establishment for resale.

Notes, amendments, and revision history

Authority

Authority: Secs. 1-19, 52 Stat. 1060, as amended; 75 Stat. 65; Sec. 29(B), Pub. L. 93-259, 88 Stat. 55; 29 U.S.C. 201-219.

Source

Source: 35 FR 5856, Apr. 9, 1970, unless otherwise noted.

§779.337. Requirements of exemption summarized.

29 C.F.R. § 779.337

(a)

An establishment which is a “retail or service establishment” within the Act's statutory definition of that term (See discussion in §§ 779.312 to 779.336) must, to qualify as an exempt retail or service establishment under section 13(a)(2) of the Act (See § 779.301), meet both of the following tests:

(1)

More than 50 percent of the retail or service establishment's total annual dollar volume of sales must be derived from sales of goods or services (or both) which are made within the State in which the establishment is located; and

(2)

Either—

(i)

The retail or service establishment must not be in an enterprise of the type described in section 3(s), or

(ii)

If the retail or service establishment is in an enterprise of the type described in 3(s), it has an annual volume of sales (exclusive of excise taxes at the retail level which are separately stated) of less than $250,000.

(b)

The language of the statute in section 13(a)(2) expressly excludes from the exemption an establishment or employee engaged in laundering, cleaning, or repairing clothing or fabrics or an establishment engaged in the operation of a hospital, institution, or school described in section 3(s)(4) of the Act. No exemption for these is provided under this section even if the establishment meets the tests set forth in paragraph (a) of this section. (See § 779.338(b).) With respect to laundering and drycleaning establishments, which Congress found to lack a retail concept (See § 779.317) and had provided with a separate exemption in former section 13(a)(3) of the Act, repealed by the 1966 amendments, this exclusion simply clarifies the congressional intent to cover employees in such work under section 3(s)(2) of the present Act and to make sure that no exemption under 13(a)(2) will be construed so as to defeat the purpose of repealing the prior special exemption.

Notes, amendments, and revision history

Authority

Authority: Secs. 1-19, 52 Stat. 1060, as amended; 75 Stat. 65; Sec. 29(B), Pub. L. 93-259, 88 Stat. 55; 29 U.S.C. 201-219.

Source

Source: 35 FR 5856, Apr. 9, 1970, unless otherwise noted.

§779.338. Effect of 1961 and 1966 amendments.

29 C.F.R. § 779.338

(a)

The 1961 amendments to the Fair Labor Standards Act narrowed the exemption for retail or service establishments by permitting section 13(a)(2) to be applied only to an establishment which was not in a covered enterprise, or (if it was in such an enterprise) which had an annual gross volume of sales of less than $250,000 (exclusive of specified taxes). There were certain exemptions to this general principle. These exceptions were set out in section 13(a)(2)(ii) and (iii). The establishments enumerated therein were exempt whether or not they were in a covered enterprise and regardless of the annual dollar volume of sales. They were: Hotels, motels, restaurants, motion picture theaters, seasonally operated amusement or recreational establishments, hospitals, institutions primarily engaged in the care of the sick, the aged, the mentally ill or defective residing on the premises of the institution, and schools for physically or mentally handicapped or gifted children. These establishments were exempt if they met the basic 50 percent in State sales test and the 75 percent retail sales test of section 13(a)(2). The 1966 amendments to the Act repealed sections 13(a)(2)(ii) and (iii). Now to be exempt under section 13(a)(2) hotels, motels, and restaurants must meet the same tests as other retail or service establishments (see § 779.337). Seasonal amusement or recreational establishments and motion picture theaters now have special exemptions from both the minimum wage and overtime pay provisions of the Act as provided by the 1966 amendments in sections 13(a)(3) and 13(a)(9) respectively.

(b)

Certain establishments which were previously exempt under section 13(a)(2) prior to the 1966 amendments have been specifically excluded from this exemption as a result of the amendments, even though they may still qualify as retail or service establishments under the definition of such an establishment in that section. These are hospitals, institutions primarily engaged in the care of the sick, the aged, the mentally ill or defective residing on the premises of the institution, and schools for physically or mentally handicapped or gifted children. However, such institutions have been recognized as having a retail concept and where the nature of their operations has not changed and where they otherwise satisfy the Act's definition of a “retail or service establishment”, certain food service employees employed by such institutions will be considered to be exempt from the Act's overtime pay provisions under section 13(b)(18), exemptions for their administrative or executive employees will not be defeated by nonexempt work occupying less than 40 percent of the employee's time, and full-time students may be employed in accordance with the special minimum wage provisions of section 14 of the Act and part 519 of this chapter.

Notes, amendments, and revision history

Authority

Authority: Secs. 1-19, 52 Stat. 1060, as amended; 75 Stat. 65; Sec. 29(B), Pub. L. 93-259, 88 Stat. 55; 29 U.S.C. 201-219.

Source

Source: 35 FR 5856, Apr. 9, 1970, unless otherwise noted.

§779.339. More than 50 percent intrastate sales required.

29 C.F.R. § 779.339

The first test specified in section 13 (a)(2) is that more than 50 percent of the sales of goods or of services (or of both) of a “retail or service establishment” (Measured by annual dollar volume) must be made “within the State in which the establishment is located”. This limitation means that such establishment must be primarily engaged (more than 50 percent) in selling to or serving customers within its State. If the establishment is engaged to the extent of 50 percent or more in selling to or serving customers outside the State of its location, the requirement is not met and the establishment cannot qualify for exemption.

Notes, amendments, and revision history

Authority

Authority: Secs. 1-19, 52 Stat. 1060, as amended; 75 Stat. 65; Sec. 29(B), Pub. L. 93-259, 88 Stat. 55; 29 U.S.C. 201-219.

Source

Source: 35 FR 5856, Apr. 9, 1970, unless otherwise noted.

§779.340. Out-of-State customers.

29 C.F.R. § 779.340

Whether the sale or service is made to an out-of-State customer is a question of fact. In order for a customer to be considered an out-of-State customer, some specific relationship between him and the seller has to exist to indicate his out-of-State character. Sales made to the casual cash-and-carry customer of a retail or service establishment, who, for all practical purposes, is indistinguishable from the mass of customers who visit the establishment, are sales made within the State even though the seller knows or has reason to believe, because of his proximity to the State line or because he is frequented by tourists, that some of the customers who visit his establishment reside outside the State. If the customer is of that type, sales made to him are sales made within the State even if the seller knows in the particular instance that the customer resides outside the State. On the other hand, a sale is made to an out-of-State customer and, therefore, is not a sale made “within the State” in which the establishment is located, if delivery of the goods is made outside the State. It should be noted that sales of goods or services that are conditioned upon acceptance or rejection by an out-of-State source are interstates sales and not sales made within the State for purposes of section 13(a)(2). For example, a contract entered into in the State where the customer resides for the delivery of a magazine to the customer's residence, is an interstate sale if the contract must be approved by the out-of-State home office of the company publishing the magazine before it becomes effective.

Notes, amendments, and revision history

Authority

Authority: Secs. 1-19, 52 Stat. 1060, as amended; 75 Stat. 65; Sec. 29(B), Pub. L. 93-259, 88 Stat. 55; 29 U.S.C. 201-219.

Source

Source: 35 FR 5856, Apr. 9, 1970, unless otherwise noted.

§779.341. Sales “made within the State” and “engagement in commerce” distinguished.

29 C.F.R. § 779.341

Sales to customers located in the same State as the establishment are sales made “within the State” even though such sales may constitute engagement in interstate commerce as where the sale: (a) Is made pursuant to prior orders from customers for goods to be obtained from outside the State; (b) contemplates the purchase of goods from outside the State to fill a customer's order; or (c) is made to a customer for use in interstate commerce or in production of goods for such commerce.

Notes, amendments, and revision history

Authority

Authority: Secs. 1-19, 52 Stat. 1060, as amended; 75 Stat. 65; Sec. 29(B), Pub. L. 93-259, 88 Stat. 55; 29 U.S.C. 201-219.

Source

Source: 35 FR 5856, Apr. 9, 1970, unless otherwise noted.