Bulletin Number
VTB 99-11
Tax Type
Retail Sales and Use Tax
Description
Retail Sales and Use Tax; Food Tax Reduction Program
Topic
Property Subject to Tax
Date Issued
10-01-1999
Notice: This Bulletin is being distributed to all registered dealers because the sales and use tax returns (Form ST-8 and Form ST-9) will change to allow for the reporting of qualifying food sales at the reduced sales tax rate. This upcoming change was announced in the coupon booklets mailed to dealers for the period July through December 1999. Dealers who do not sell eligible food products should continue to collect and report the tax on their taxable sales at the full 4.5% rate on the new forms. A sample of the revised layout for the new form is shown on page 7 of this bulletin.
As a result of legislation enacted by the 1999 General Assembly, the Food Tax Reduction Program will reduce the state sales and use tax rate on food purchased for human consumption. The law change does not affect the imposition of the 1% local sales and use tax. The state sales tax rate will be reduced by |1/2% each year for a total reduction of 2% over a four-year period. The first rate reduction will be effective January 1, 2000. The following table illustrates the implementation of the state sales and use tax rate reduction.
Effective Date State Tax Rate Local Tax Rate Total Tax Rate
January 1, 2000 ........ 3.0% 1.0% 4.0%
April 1, 2001 .......... 2.5% 1.0% 3.5%
April 1, 2002 .......... 2.0% 1.0% 3.0%
April 1, 2003 .......... 1.5% 1.0% 2.5%
Subsequent Rate Reductions
The rate reductions scheduled for April 1, 2001, 2002, 2003 are conditioned upon prescribed revenue growth requirements set out in the legislation. The Department of Taxation (TAX) will know no later than December of each year whether a rate reduction scheduled for the following April will take effect and will issue the proper notification to dealers and the public.
"Food purchased for human consumption means food for home consumption by humans, as defined under the Food Stamp Act of 1977, 7 U.S.C. § 2012. The definition includes most staple grocery food items and cold prepared foods packaged for home consumption. Specifically excluded from the definition of food for home consumption are alcoholic beverages, tobacco, and prepared hot foods sold for immediate consumption. The reduced sales and use tax rate does not apply to seeds and plants which produce food for human consumption.
The following lists of foods and beverages are categorized according to their eligibility under the federal food stamp definition. Food which is not considered "eligible food' under the federal food stamp program continues to be fully taxable at the 4.5% rate. TAX has relied upon the guidelines issued by the United States Department of Agriculture (USDA ) to define foods which are eligible for the reduced sales tax rate. The lists shown below are intended as a guide and are not intended to be all inclusive.
Staple food items:
Beans and peas, breads, canned foods, cereals, dairy products (including cheese, milk, and ice cream), edible gourds, egg products, flour products, frozen foods, fruits (including dried and candy-coated fruit), grain products, meats (including fish, shellfish, and poultry), nuts, pumpkins, sugar products and sugar substitutes, and vegetables.
Accessory food items:
Artificial food coloring,1 bottled drinking water (spring, purified, and sterilized), carbonated and noncarbonated beverages and drinks (including fruit juices, powdered soft drink crystals and mixes), cocoa products, coffee products and coffee substitutes, condiments, extracts, flavorings, herbs, marshmallow products, nondairy creamers, seasonings and spices, soups (packaged for home consumption), and tea products.
Snack foods:
Beef jerky, candy, candy and chocolate-coated products, confectionery, chewing gum, extruded snacks (including balls, curls, filled snacks, puffs, and twists), fabricated snacks (including food bars or squares, grain cakes, and shoestring potato snacks), fruit-flavored snacks (fruit roll-ups and Iike items), granola bars, mints, potato chips, popcorn products (including popped popcorn packaged for home consumption), and prepackaged gelatin and puddings.
Bakery foods:2
Bagels, brownies, cakes, cookies, crackers, croissants, doughnuts, pies, and pastries.
Cooking Ingredients:
Baking products, butter, cooking and vegetable oils, cooking sprays, cooking wine and wine vinegar, lard, margarine (oleo), shortening, and pectin.
Health food items:
Acidophilus milk products, brewer's yeast, rose hips powder used for preparing tea, sunflower seeds, wheatgerm, other food products which are substituted for more commonly used food items in the diet.
Specialty dietary foods:
Foods that are diabetic or dietetic in nature and enriched or fortified food products intended to substitute in whole or in part for food in an ordinary diet, such as:
Boost, Carnation drinks, Enfamil, Ensure, Herbalife Slim and Trim drinks, Metrecal, Ovaltine, Pediasure, Pedialyte, Shaklee drinks and bars, Slender, Slim Fast drinks, bars, and pasta foods, Sustecal drinks and puddings, Sustegen, Weight Watchers products, and other similar products.
Cold prepared foods:
The following foods are eligible when sold in single or multiple serving sizes and actually packaged for home consumption:
Cold sandwiches, cold salads, and salad bar foods packaged for home consumption. This includes prepackaged cold sandwiches and prepackaged salads in any size container. Also included are salads prepared by the customer from a selection of items on a cold salad bar and packaged in a to-go container with a lid.
Cold prepared foods packaged as one or more meals and marketed for home consumption. The food items are usually packaged individually in closed containers and bagged or boxed to go. This includes take-home cold dinners.
Cold fountain drinks, beverages, juice drinks in containers with seals, lids, or tops.
Ice cream, frozen yogurt, sherbet, sorbet, milkshakes dispensed from self-serve machines into containers with seals, lids, or tops.
Hot prepared foods surplused at the end of the day and refrigerated overnight for sale the next day as cold food. The cold food must be packaged for home consumption. This includes fried chicken, roasted chicken, casseroles, pizzas, and side dishes.
Cold deli trays and party platters packaged in containers affixed with lids or tops.
Uncooked prepared pizzas packaged in boxes, plastic wrap, or other containers for home consumption.
Miscellaneous:
Ice; Infant formulas; Nonalcoholic cocktail mixes.
Eligible "meals':
Hot meals for immediate consumption are generally excluded under the federal food stamp definition, except in the instances listed below. The reduced sales tax rate applies to the sale of meals purchased:
By the elderly from nonprofit meal delivery services, such as Meals-On-Wheels or other meal preparation services for the elderly;
Through authorized drug addiction and alcoholic treatment and rehabilitation centers;
For residents through certain certified nonprofit group living arrangements;
Through shelters for battered women and children;
For the homeless through authorized nonprofit establishments that feed homeless persons and restaurants authorized to accept food stamps.
The reduced sales tax rate on hot meals sold in the above instances does not affect the application of the exemption from the sales and use tax provided in Code of Virginia § 58.1-609.8(3)(a) for food and food products sold to the elderly through nutrition programs administered by the Virginia Department for the Aging. The same statute also provides an exemption for food and food products sold through such programs to disabled or handicapped persons under the age of sixty.
The following do not qualify as food for home consumption, and would not qualify for the reduced sales tax rate:
Alcoholic beverages, canning supplies, cleaning products, cooking utensils, cosmetics and beauty aids, freezer bags and containers, health aids, household items, medicines, minerals, paper products, pet and animal foods and supplies, soaps and detergents, tobacco products, toiletry items, tonics, and vitamins.
Catered food and meals.
Hot foods and hot beverages (including hot meals).
Cold food and cold beverages served in open containers or on plates, platters and trays for immediate consumption.
Food marketed or advertised for heating in the store whether or not hot at the point of sale.
Cold sandwiches, cold salads, and cold beverages sold in combination with hot foods for a single price.
This does not apply when hot and cold foods and beverages are sold individually in one transaction.
The reduced sales tax rate will apply to foods that are deemed eligible under the federal food stamp definition without regard to the nature of the retailer making the sale of the food or whether the retailer participates in the federal food stamp program administered by the USDA.
The following retailers should charge the reduced sales tax rate on sales of eligible food and beverages: bakeries, cafes, cafeterias, convenience stores, delicatessens, department stores, diners, doughnut and pastry shops, drug and sundry stores,3 farmer's markets, grocery stores, ice cream shops,4 lunch counters, mail order companies, supermarkets, sandwich shops, snack bars, specialty meat and produce stores, video stores, and weight reduction establishments.5
Exceptions
Some vendors are presumed sellers of food for immediate consumption and may not impose the reduced sales tax rate on sales of eligible foods. All sales of food and beverages are fully taxable at the 4.5% rate. These include caterers, concession vendors, entertainment facilities (theme parks, sports arenas, stadiums), 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.
Fast Food Establishment/Restaurants
Generally
For the period beginning January 2000, the sales and use tax returns will be revised to allow for the reporting of qualifying food sales at the reduced sales tax rate. The revised forms will be mailed to dealers in December, and will include a separate line for reporting taxable food sales at the reduced sales tax rate. Other taxable sales must be reported at the full sales tax rate. Because the local tax rate of 1% will not change, the local tax for all taxable sales will be reported on one line. A copy of the revised Form ST-9 is shown below.
Dealers Discount
The computation of the dealers discount as set out in Code of Virginia § 58.1-622 will not be affected. The discount will continue to apply to the total state sales tax liability.
Samples and Giveaways
Samples, free distributions, and giveaways of eligible food products by food wholesalers and retailers are subject to the reduced sales and use tax rate unless otherwise exempt from the tax. The tax should be computed on the cost price of the food and reported on the sales tax return. Samples, free distributions, and giveaways of ineligible food products by food retailers remain fully taxable unless otherwise exempt from the tax.
Businesses
Business establishments are required to pay the consumers use tax on untaxed purchases of tangible personal property for use in Virginia which are not otherwise exempt of the tax. Under the Food Tax Reduction Program, businesses should pay the reduced sales tax rate on untaxed purchases of eligible food products. The tax should be computed on the cost price of the eligible food purchases and reported on the appropriate return. Non-eligible food purchases and non-food purchases remain fully taxable.
Individuals
Individuals must pay the consumers use tax on tangible personal property purchased by mail, telephone or television shopping from businesses that do not charge the Virginia sales and use tax at the time of the purchase. Individuals are required to pay the tax on total purchases (more than $100 in a taxable year), less separately stated shipping or delivery charges. Under the Food Tax Reduction Program, individuals should pay the reduced sales tax rate on purchases of eligible food items and report such tax on the appropriate return. Non-eligible food purchases and non-food purchases remain fully taxable.
If you have any questions concerning the reduced sales tax on "food for human consumption,' please contact the department's Office of Customer Services at (804) 367-8037. Information is also available on TAX's webpage at http://www.tax.state.va.us/.
Retail Sales and Use Tax
Food Tax Reduction Program
Food Tax Reduction Program
As a result of legislation enacted by the 1999 General Assembly, the Food Tax Reduction Program will reduce the state sales and use tax rate on food purchased for human consumption. The law change does not affect the imposition of the 1% local sales and use tax. The state sales tax rate will be reduced by |1/2% each year for a total reduction of 2% over a four-year period. The first rate reduction will be effective January 1, 2000. The following table illustrates the implementation of the state sales and use tax rate reduction.
Effective Date State Tax Rate Local Tax Rate Total Tax Rate
January 1, 2000 ........ 3.0% 1.0% 4.0%
April 1, 2001 .......... 2.5% 1.0% 3.5%
April 1, 2002 .......... 2.0% 1.0% 3.0%
April 1, 2003 .......... 1.5% 1.0% 2.5%
Subsequent Rate Reductions
The rate reductions scheduled for April 1, 2001, 2002, 2003 are conditioned upon prescribed revenue growth requirements set out in the legislation. The Department of Taxation (TAX) will know no later than December of each year whether a rate reduction scheduled for the following April will take effect and will issue the proper notification to dealers and the public.
Definition of Food
"Food purchased for human consumption means food for home consumption by humans, as defined under the Food Stamp Act of 1977, 7 U.S.C. § 2012. The definition includes most staple grocery food items and cold prepared foods packaged for home consumption. Specifically excluded from the definition of food for home consumption are alcoholic beverages, tobacco, and prepared hot foods sold for immediate consumption. The reduced sales and use tax rate does not apply to seeds and plants which produce food for human consumption.
The following lists of foods and beverages are categorized according to their eligibility under the federal food stamp definition. Food which is not considered "eligible food' under the federal food stamp program continues to be fully taxable at the 4.5% rate. TAX has relied upon the guidelines issued by the United States Department of Agriculture (USDA ) to define foods which are eligible for the reduced sales tax rate. The lists shown below are intended as a guide and are not intended to be all inclusive.
Eligible Food and Beverages
Staple food items:
Beans and peas, breads, canned foods, cereals, dairy products (including cheese, milk, and ice cream), edible gourds, egg products, flour products, frozen foods, fruits (including dried and candy-coated fruit), grain products, meats (including fish, shellfish, and poultry), nuts, pumpkins, sugar products and sugar substitutes, and vegetables.
Accessory food items:
Artificial food coloring,1 bottled drinking water (spring, purified, and sterilized), carbonated and noncarbonated beverages and drinks (including fruit juices, powdered soft drink crystals and mixes), cocoa products, coffee products and coffee substitutes, condiments, extracts, flavorings, herbs, marshmallow products, nondairy creamers, seasonings and spices, soups (packaged for home consumption), and tea products.
Snack foods:
Beef jerky, candy, candy and chocolate-coated products, confectionery, chewing gum, extruded snacks (including balls, curls, filled snacks, puffs, and twists), fabricated snacks (including food bars or squares, grain cakes, and shoestring potato snacks), fruit-flavored snacks (fruit roll-ups and Iike items), granola bars, mints, potato chips, popcorn products (including popped popcorn packaged for home consumption), and prepackaged gelatin and puddings.
Bakery foods:2
Bagels, brownies, cakes, cookies, crackers, croissants, doughnuts, pies, and pastries.
Cooking Ingredients:
Baking products, butter, cooking and vegetable oils, cooking sprays, cooking wine and wine vinegar, lard, margarine (oleo), shortening, and pectin.
Health food items:
Acidophilus milk products, brewer's yeast, rose hips powder used for preparing tea, sunflower seeds, wheatgerm, other food products which are substituted for more commonly used food items in the diet.
Specialty dietary foods:
Foods that are diabetic or dietetic in nature and enriched or fortified food products intended to substitute in whole or in part for food in an ordinary diet, such as:
Boost, Carnation drinks, Enfamil, Ensure, Herbalife Slim and Trim drinks, Metrecal, Ovaltine, Pediasure, Pedialyte, Shaklee drinks and bars, Slender, Slim Fast drinks, bars, and pasta foods, Sustecal drinks and puddings, Sustegen, Weight Watchers products, and other similar products.
Cold prepared foods:
The following foods are eligible when sold in single or multiple serving sizes and actually packaged for home consumption:
Cold sandwiches, cold salads, and salad bar foods packaged for home consumption. This includes prepackaged cold sandwiches and prepackaged salads in any size container. Also included are salads prepared by the customer from a selection of items on a cold salad bar and packaged in a to-go container with a lid.
Cold prepared foods packaged as one or more meals and marketed for home consumption. The food items are usually packaged individually in closed containers and bagged or boxed to go. This includes take-home cold dinners.
Cold fountain drinks, beverages, juice drinks in containers with seals, lids, or tops.
Ice cream, frozen yogurt, sherbet, sorbet, milkshakes dispensed from self-serve machines into containers with seals, lids, or tops.
Hot prepared foods surplused at the end of the day and refrigerated overnight for sale the next day as cold food. The cold food must be packaged for home consumption. This includes fried chicken, roasted chicken, casseroles, pizzas, and side dishes.
Cold deli trays and party platters packaged in containers affixed with lids or tops.
Uncooked prepared pizzas packaged in boxes, plastic wrap, or other containers for home consumption.
Miscellaneous:
Ice; Infant formulas; Nonalcoholic cocktail mixes.
Eligible "meals':
Hot meals for immediate consumption are generally excluded under the federal food stamp definition, except in the instances listed below. The reduced sales tax rate applies to the sale of meals purchased:
By the elderly from nonprofit meal delivery services, such as Meals-On-Wheels or other meal preparation services for the elderly;
Through authorized drug addiction and alcoholic treatment and rehabilitation centers;
For residents through certain certified nonprofit group living arrangements;
Through shelters for battered women and children;
For the homeless through authorized nonprofit establishments that feed homeless persons and restaurants authorized to accept food stamps.
The reduced sales tax rate on hot meals sold in the above instances does not affect the application of the exemption from the sales and use tax provided in Code of Virginia § 58.1-609.8(3)(a) for food and food products sold to the elderly through nutrition programs administered by the Virginia Department for the Aging. The same statute also provides an exemption for food and food products sold through such programs to disabled or handicapped persons under the age of sixty.
Ineligible Food and Beverages
The following do not qualify as food for home consumption, and would not qualify for the reduced sales tax rate:
Alcoholic beverages, canning supplies, cleaning products, cooking utensils, cosmetics and beauty aids, freezer bags and containers, health aids, household items, medicines, minerals, paper products, pet and animal foods and supplies, soaps and detergents, tobacco products, toiletry items, tonics, and vitamins.
Catered food and meals.
Hot foods and hot beverages (including hot meals).
Cold food and cold beverages served in open containers or on plates, platters and trays for immediate consumption.
- Example 1. A grocery store sells prepared food and offers a cafe facility. A customer orders a barbeque sandwich, a side order of potato salad, a slice of cheesecake and a fountain drink. The order is served on a platter and placed on a tray to be eaten in the cafe.
Example 2. A delicatessen offers a seating area for patrons to eat on the premises. The customer orders a cold cut sandwich, a side order of pasta salad, and a cappuccino drink. The food is served on a plate to be eaten on the premises.
- Example 1. A gift basket that includes fruit packaged in a basket of other container and sold for a single price.
Example 2. A specialty gift basket containing meat, cheese or other eligible food together with a stuffed animal or alcoholic beverage and sold for a single price.
Food marketed or advertised for heating in the store whether or not hot at the point of sale.
- Example. A convenience store provides a microwave and advertises that the microwave is for customers to heat breakfast biscuits, danish, or pizza slices for immediate consumption.
- Example. Fried chicken, ribs, macaroni and cheese and other hot foods under heat lamps or other heat sources. Hot beverages in pots or in automatic dispensers with a heat source.
Cold sandwiches, cold salads, and cold beverages sold in combination with hot foods for a single price.
- Example. Combo meals that include a hot entree or a hot sandwich, hot side food, and a cold fountain drink, or any combination of hot and cold foods and beverages, and sold for a single price.
This does not apply when hot and cold foods and beverages are sold individually in one transaction.
- Example. A customer purchases a hamburger and a cold beverage with a lid from a fast food restaurant that is placed in a bag or other packaging to go. The hamburger is ineligible food that is fully taxable. The cold beverage qualifies as an eligible food subject to the reduced sales tax rate.
Retailer Classifications
The reduced sales tax rate will apply to foods that are deemed eligible under the federal food stamp definition without regard to the nature of the retailer making the sale of the food or whether the retailer participates in the federal food stamp program administered by the USDA.
The following retailers should charge the reduced sales tax rate on sales of eligible food and beverages: bakeries, cafes, cafeterias, convenience stores, delicatessens, department stores, diners, doughnut and pastry shops, drug and sundry stores,3 farmer's markets, grocery stores, ice cream shops,4 lunch counters, mail order companies, supermarkets, sandwich shops, snack bars, specialty meat and produce stores, video stores, and weight reduction establishments.5
Exceptions
Some vendors are presumed sellers of food for immediate consumption and may not impose the reduced sales tax rate on sales of eligible foods. All sales of food and beverages are fully taxable at the 4.5% rate. These include caterers, concession vendors, entertainment facilities (theme parks, sports arenas, stadiums), 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.
Fast Food Establishment/Restaurants
Filing Requirements
Retail Sales Tax
Retail Sales Tax
Generally
For the period beginning January 2000, the sales and use tax returns will be revised to allow for the reporting of qualifying food sales at the reduced sales tax rate. The revised forms will be mailed to dealers in December, and will include a separate line for reporting taxable food sales at the reduced sales tax rate. Other taxable sales must be reported at the full sales tax rate. Because the local tax rate of 1% will not change, the local tax for all taxable sales will be reported on one line. A copy of the revised Form ST-9 is shown below.
Dealers Discount
The computation of the dealers discount as set out in Code of Virginia § 58.1-622 will not be affected. The discount will continue to apply to the total state sales tax liability.
Samples and Giveaways
Samples, free distributions, and giveaways of eligible food products by food wholesalers and retailers are subject to the reduced sales and use tax rate unless otherwise exempt from the tax. The tax should be computed on the cost price of the food and reported on the sales tax return. Samples, free distributions, and giveaways of ineligible food products by food retailers remain fully taxable unless otherwise exempt from the tax.
Consumer's Use Tax
Businesses
Business establishments are required to pay the consumers use tax on untaxed purchases of tangible personal property for use in Virginia which are not otherwise exempt of the tax. Under the Food Tax Reduction Program, businesses should pay the reduced sales tax rate on untaxed purchases of eligible food products. The tax should be computed on the cost price of the eligible food purchases and reported on the appropriate return. Non-eligible food purchases and non-food purchases remain fully taxable.
Individuals
Individuals must pay the consumers use tax on tangible personal property purchased by mail, telephone or television shopping from businesses that do not charge the Virginia sales and use tax at the time of the purchase. Individuals are required to pay the tax on total purchases (more than $100 in a taxable year), less separately stated shipping or delivery charges. Under the Food Tax Reduction Program, individuals should pay the reduced sales tax rate on purchases of eligible food items and report such tax on the appropriate return. Non-eligible food purchases and non-food purchases remain fully taxable.
1 Artificial food coloring used as a cooking additive or ingredient is eligible for the reduced sales tax rate; however, decorative dye used for coloring hard cooked eggs or other foods is not eligible for the reduced tax rate.
2 Bagels, brownies, cakes, cookies, crackers, croissants, doughnuts, pies, pastries, and similar bakery items sold in any quantity are eligible for the reduced sales tax rate when they are packaged for home consumption. This includes bakery items chosen from a self-serve display case. Packaging for home consumption includes paper or other bagging, plastic or cellophane wrapping, cartons, and plastic or cardboard containers.
3 All drug and sundry stores are not considered sellers of food. However, those drug and sundry stores that sell food for home consumption should charge the reduced sales tax rate on sales of eligible food products.
4 Ice cream shops are considered sellers of food for home consumption if they sell prepackaged ice cream products. In this instance, the reduced sales tax rate should be charged on sales of prepackaged ice cream products. Otherwise, such establishments are considered sellers of ice cream products for immediate consumption similar to ice cream stands and trucks. Sales of ice cream products by these vendors are fully taxaable at the 4.5% rate.
5 Weight reduction establishments should charge the reduced sales tax rate on sales of eligible food and meal replacement products.
If you have any questions concerning the reduced sales tax on "food for human consumption,' please contact the department's Office of Customer Services at (804) 367-8037. Information is also available on TAX's webpage at http://www.tax.state.va.us/.
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