Guest Author - Reshma Vyas
With soaring food prices, every cent spent on groceries counts. But one significant aspect of food expense that often goes unnoticed is the measurable impact of sales taxes. State sales taxes vary tremendously. In some states, the state sales tax on groceries might be 1% whereas in another state it could as high as 7%. In addition to a state sales tax, local jurisdictions such as boroughs and municipalities may also assess a tax on prepared food and/or groceries. Some states do not have a sales tax but local governments within the state can still charge a sales tax on beverages, food and groceries
Here is a breakdown of states that have a sales tax on groceries. All information is current(June 2011). Many states in recent years have eliminated or reduced the sales tax for groceries. States that tax food/groceries may provide exclusions, income rebates or credits to qualified, low-income households.
1. Alabama: 4%.
2. Arizona: There is no state sales tax on groceries. Cities can assess a sales tax on food for home consumption.
3. Arkansas: 2% (local sales taxes may also apply).
4. Idaho: General sales tax 6%.
5. Illinois: 1%.
6. Kansas: 6.3%.
7. Mississippi: 7%.
8. Missouri: 1.225%.
9. North Carolina: 2% generally. There may be an exception on certain food items.
10. Oklahoma: 4.5%.
11. South Dakota: 4%.
12. Tennessee: 5.5% (local sales taxes may apply).
13. Utah: 4% (counties and cities can also charge a sales tax).
14. Virginia: 2.5% (1% local tax may apply).
15. West Virginia 3%.
But what about all the hot and prepared foods served in supermarkets or delicatessens? How does the sales tax apply to prepared food?
Every state which taxes beverages and prepared food (meals) has a strict definition and interpretation of “food and food ingredients”, “prepared food”, ready-to-eat food and tax-exempt food intended for human consumption. The myriad of rules and guidelines are extremely complex and detailed, taking into account a broad range of circumstances pertaining to the process of food preparation and cooking, packaging and/or presentation, distribution, manner of sales, service and consumption. Different stipulations in accordance to the state’s sales tax guidelines may apply to the sale of bakery items, beverages, frozen foods, sandwiches and food purchased from carry-out restaurants, concession stands, delicatessens and supermarkets. Depending on the state, packaged sandwiches may be subject to a sales tax. Many states which tax prepared food generally define sandwiches made to order at a delicatessen to be a “prepared food” which is ready for immediate consumption and therefore, taxable.
The state’s guidelines pertaining to sales tax on beverages and prepared food also defines and lists the types of eating and drinking establishments that qualify. These can include everything from hot dog street vendors to upscale restaurants. Eating establishments may be defined as: bakeries and confectioneries, bars, grills, lounges and taverns, bowling alleys (that have a designated dining area), cafes and diners, cafeterias and dining rooms, caterers, coffee shops, concessions at sporting and entertainment events, drive-in food service, drugstores (that sell food for immediate consumption on or off-the-premises) fast food chains, food courts, hotel restaurants, ice-cream stores, juice bars, mobile food vendors, pizzerias, pretzel stands, snack bars and food concessions, private, social and recreation clubs, sandwich shops, restaurants/eateries, retail stores with a food counter or sit-down dining area, supermarkets/grocers and vending machines (price limit may apply). Some states exclude sales tax on food sold through vending machines.
Here are some interesting comparisons of state sales tax on beverages and prepared food:
1. Connecticut: 6% sales tax. Food that is defined as a meal is taxable.
2. District Of Columbia: General sales tax 6%. The sales tax is 10% on prepared food/restaurant meals.
3. Florida: General sales tax 6%. However, counties and cities can also charge a sales tax on prepared food/meals.
4. Kentucky: General 6% sales tax.
5. Maine: 7% tax on prepared food.
6. Massachusetts: 6.25% sales tax. The sales tax on prepared food is 7%.
7. Michigan: 6% sales tax.
8. Minnesota: General sales tax 6.875%. Local governments can also impose a food and beverage sales tax.
9. New Hampshire: 9% sales tax on prepared food and restaurant meals.
10. New York: 4% sales tax (additional local taxes may be applicable). Sales tax is assessed on prepared food/meals.
11. North Carolina: 5.75% sales tax. Additional taxes may also apply. Counties and cities can charge a sales tax on beverages and prepared food. Depending on the locality, the additional tax on prepared food and beverages can vary from 1 to 2%. Maximum rate 9.25%.
12. Rhode Island: 7% sales tax (additional 1% local sales tax may apply).
13. South Carolina: General 6% sales tax. 2% tax on prepared food and beverages. Additional taxes may apply. Maximum sales tax is 10.5%.
14. Vermont: 9% on prepared meals. An additional 1% tax can be charged by local jurisdictions.
15. West Virginia: General 6 % sales tax.
For informational purposes only. Tax rates subject to change. Every attempt is made at accuracy, however, the author does not claim that the content is free of factual errors. Information current at time of publication.