Sales Tax Oddities - Food

A recent ruling in Florida is a reminder of the lack of logic and transparency in some of the special rules and exemptions common in sales tax laws. The question asked of the Florida Department of Revenue was when salad bar items and baked goods would and would not be subject to sales tax.

In Florida, as well as several states, if the food item is prepared for consumption on the premises (such as at a restaurant), sales tax applies. So, what about when your grocery store has a salad bar? Does it matter if a customer eats it in store, in the parking lot, at home?  Not really. It depends on whether the person could eat it in the store, such as because there are tables and chairs by the salad bar. Does it matter if the store also gives you a fork?

Well, if you could eat your salad at the store, sales tax must be charged. Per the ruling:

"Taxpayer’s sales of salad bar items are taxable at the two stores that have tables and chairs because these items are prepared foods sold for immediate consumption. Sales of salad bar items at the store that does not have tables and chairs are exempt when packaged without eating utensils."

And here are the rulings regarding deli items prepared on the premises as well as baked goods:

"Deli Salads. Taxpayer’s sale of deli salads (i.e., chicken, tuna, egg, and potato) is taxable because the salads are not prepared off the premises and sold in the original sealed container. The exception for prepared food sliced into smaller portions provided in s. 212.08(1)(c)9., F.S., does not apply because the repackaging of the deli salads by store employees does not involve slicing."

"Bakery Products. Taxpayer’s sales of the bakery products are exempt, since they are packaged in a manner consistent with an intention by the customer to consume the products off the seller’s premises."

It would be much easier and more transparent* to either tax all food or none of it. When there are exceptions and special rules, then the tax agency needs to define the exemptions, issue rulings and publications, and confirm compliance via audits. And, taxpayers are confused because it seems that the end result is the same whether or not there are tables, chairs or a packaged fork - they get to consume the salad.

* transparency - when taxes apply and how they apply should be clear. No hidden taxes.

For the ruling, see FL Technical Assistance Advisement – TAA 12A-021 (9/13/12).

What do you think?