Audience: Businesses

In general, sales of food are subject to sales and use tax unless a person operating a substantial grocery or market business sells the food for consumption off the premises and is not a taxable prepared food. A grocery or market business is considered substantial if sales of grocery or market food items total at least 10 percent of all sales of food.

Among other things, the food items that might normally be consumed on the premises of a restaurant, but which are packaged to carry out, are not considered grocery or market food for the purpose of calculating the 10 percent threshold. The taxability of sales of ice cream, frozen yogurt, and other frozen desserts depends upon the size of each container sold. Thus, while the tax will apply to the sale of a single ice cream sandwich, it will not apply to a package of a dozen ice cream sandwiches containing more than one pint of ice cream.

The following foods are taxable even if they are sold at a substantial grocery or market business:

• Food from salad, soup or dessert bars
• Party platters
• Heated food
• Sandwiches suitable for immediate consumption
• Ice cream, frozen yogurt and other frozen desserts sold in containers of less than one pint

The tax also applies to,

• Caterers serving food at a customer's premises, even if the caterer also conducts a substantial grocery or market business; and,
• Sales of soft drinks, bottled water, alcoholic beverages, candy and confectionary, as these are not considered "food" for the purpose of sales and use tax.

The tax is exempt for,

• Sales of food to patients in a hospital when the food charges are included in the regular room rate;
• Sales of food and beverages on vehicles operating in interstate commerce;
• The sale of crabs for consumption off the premises;
• Sales of seafood to be consumed off the premises, if the seafood is not prepared for immediate consumption; and,
• Eligible food purchased with federal food coupons. Food stamp food encompasses everything that is considered food for sales and use tax purposes, plus soft drinks, candy, confectionery, water, ice and otherwise taxable and prepared foods

Snack foods

The sales and use tax does not apply to sales of snack food items by a substantial grocery or market business for consumption off the premises, or to the sale of snack food through vending machines. This exemption does not affect the taxability of snack food items sold with meals and food prepared for immediate consumption, which remain taxable. In addition, tax applies to the sale of all other food in vending machines, including prepared food such as sandwiches or ice cream. Vendors should multiply their gross receipts by 94.50 percent before applying the 6 percent rate to determine the tax due on gross receipts derived from vending machine sales.

Food and Beverages FAQs

Sales and Use Tax FAQs

Sales of Food at Special Events

All sales of food within an area to which an admission is charged are subject to tax. If there is no admission charge, the tax applies to all sales with the following exceptions:

• Sales of food (other than taxable prepared foods) by a person operating a substantial grocery or market business where the food is intended for consumption off the premises are not taxable;
• Sales of food, including taxable prepared foods, by religious organizations, volunteer fire companies and veterans organizations for consumption on the premises.
• Sales of food by non-profit vendors that do not provide food consumption facilities are exempt. Food consumption facilities include tables, chairs, booths, counters and stands. Facilities do not include parking lots alone.

For more information regarding admissions, see the Admissions and Amusement Tax section of our Web site.

Sales of Food at Public Markets

A vendor's premises include property owned or controlled by the vendor and made available primarily for the use of patrons. If a public market provides eating facilities for the use of any vendors in the market:

• Food vendors who conduct substantial grocery or market businesses are required to collect the tax on sales of food intended for consumption at these facilities.
• Other food vendors in the market are required to collect the tax on all their sales.

Purchases of Disposable Paper Products by Restaurants

Purchases of paper plates, bowls, cups and lids by a food server for use as containers for food sold are entitled to the resale exclusion. This exclusion applies whether the food sold will be consumed on or off the premises. The tax does apply, however, to a food server's purchases of disposable containers and wrappers made available for discretionary use and to all purchases of disposables such as napkins, straws, utensils and stirrers which are not in the nature of containers.

Mandatory Gratuities and Service Charges

Payment of a separately stated mandatory gratuity or service charge, which is in the nature of a tip, is not subject to the tax if the food or beverages are served to a group of ten persons or less. However, mandatory gratuity or service charges on sales of food or beverages to a group of more than ten persons are taxable whether or not they are separately stated.

Coupons and menu club tickets that are in the nature of discounts are not a part of the taxable price; however, if the vendor can obtain reimbursement from a third party for the coupon or ticket, it is part of the sales price and, therefore, subject to the tax.