The Sac Rag reports

So I am having lunch the other day at Togo’s. I order the sandwich and am asked if it would be “For here, or to go?” (To go, Togo’s…hey, wait a minute!) which I reply, “To go.” The sandwich maker asks for a “ring” and the cashier then tells me the price. It’s the price on the board, $5.49. I then realize my lunch partner ordered his sandwich “for here.” So I tell the sandwichista that it’s for dine in and she then tells the cashier who then charges me sales tax and we get into this whole thing. The cashier tells me that they have to charge sales tax if you eat the food on the premises. This got me thinking. What’s the deal with dine in sales tax? I’ve heard over the years that it was related to hot food, but that is not always the case.

I went home and jumped on the Interweb and discovered that the rules regarding sales tax and food are, shocker, I know, sketchy at best. I thought I would break it down for you just in case you have nothing better to do than learn about sales tax.

(Warning the content after the jump is dry and, er, taxing. Proceed at your own risk.)

Update: see comment below.

From Wikipedia:

Groceries are not taxed. Ready-to-eat hot foods, whether sold by supermarkets or other vendors, are taxed. Restaurant bills are taxed. As an exception, hot beverages and bakery items are tax-exempt if and only if they are for take-out and are not sold with any other hot food. If consumed on the seller’s premises, such items are taxed like restaurant meals. All other food is exempt from sales tax.

From the California State Board of Equalization Web site (.pdf):

Tax generally applies to sales of food and beverages if those items are served for consumption at your place of business. You are considered to have a place of business where customers may consume their purchases if

• You provide tables and chairs or counters for dining, or provide trays, glasses, dishes, or other tableware; or
• You are located in a shopping mall and are near dining facilities provided by the mall (for example, you are located in or near a food court or near an area where tables and chairs are provided for dining).

Ok, cool, simple enough, right?

Food and beverages are considered served if they are intended to be eaten at your place of business or if they are provided on, or in, an individual returnable container from which they can be eaten. It does not matter whether a food product or beverage is sold à la carte or as part of a meal. If it is sold for consumption at your place of business, it is generally subject to tax. A meal is a combination of food products, or a combination of food products and edible nonfood products (such as carbonated and alcoholic drinks), sold for a single price.

Great what about food sold to go?

If you sell food on a to go or take-out basis, the taxability of your sale will depend on whether you come under the 80/80 rule.

What’s the 80/80 rule?

The 80/80 rule applies to your business if

• More than 80% of your business’s gross receipts come from the sale of food products (note: alcoholic and carbonated beverages, while taxable, are not considered food products); and
• More than 80% of your retail food product sales are taxable because they constitute
  • Sales of food products that you furnish, prepare, or serve for consumption at your place of business (see previous section for an explanation of served at your place of business); or
  • Sales of meals or hot prepared food products (see page 4, item 3, for an explanation of hot prepared food products); or
  • Sales of food products by a “drive-in” (food products ordinarily sold for immediate consumption at or near a location at which parking facilities are provided primarily for the use of patrons in consuming the products, even though they may be sold to go).

Man, I need a cup of coffee now.

Author: RonTopofIt

RonTopofIt is a complex personality, as are most of the small breed of modern day renaissance millionaires. He wishes more people were like him and yet believes that it takes all kinds. You've met RonTopofIt many times, you just don't remember him. View all posts by RonTopofIt