Food Tax Rate Reduction
Food purchased for home consumption is taxed at the reduced rate of 2.5 percent (1.5 percent state, 1 percent local).
Food purchased for home consumption includes most staple grocery food items and cold prepared foods packaged for home consumption (Food Stamp Act of 1997, 7 U.S.C. § 2012.) Specifically excluded from this are alcoholic beverages, tobacco, and prepared hot foods sold for immediate consumption on and off the premises. The reduced Sales and Use Tax rate also does not apply to seeds and plants that produce food for human consumption.
Whether a food item qualifies for the reduced rate or not is based on the food item itself, not the type of retailer selling it.
Certain types of vendors are presumed to be sellers of food for immediate consumption and may not impose the reduced sales tax rate on sales of eligible foods. These include caterers, concession vendors, entertainment facilities (theme parks, sports arenas, stadiums, etc.), fair and carnival vendors, gift shops, hamburger and hot dogs stands, honor snack vendors, ice cream stands and trucks, mobile food vendors, movie theaters, newsstands, and vending machine vendors.
Food sold by a retail establishment whose gross receipts from the sale of food for immediate consumption constitutes more than 80 percent of the total gross receipts of the establishment is not eligible to sell food at the reduced rate.
For purposes of determining the “80 percent rule,” a retail establishment that also sells motor fuel shall include these sales in determining its total gross receipts.
As a result of using the “80 percent rule,” food sold by most fast food establishments and restaurants does not qualify for the reduced rate. Such businesses do not have to keep separate records for food sales for take-out orders.
Generally, food for home consumption sold by convenience stores does qualify for the reduced tax rate.
For detailed lists of eligible qualifying foods, or for additional information relating to the Retail Sales and Use Tax food tax rate reduction, please refer to Tax Bulletin 5-78.
Last Updated 7/18/2012 9:52