Sales of Food

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

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 94.25 percent before applying the 6 percent rate to determine the tax due on gross receipts derived from vending machine sales.