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TITLE 34PUBLIC FINANCE
PART 1COMPTROLLER OF PUBLIC ACCOUNTS
CHAPTER 3TAX ADMINISTRATION
SUBCHAPTER OSTATE SALES AND USE TAX
RULE §3.293Food; Food Products; Meals; Food Service

(a) Definitions. The following words and terms, when used in this section, shall have the following meanings, unless the context clearly indicates otherwise.

  (1) Bakery items--Baked goods typically made by bakeries including bread, rolls, buns, biscuits, bagels, croissants, pastries, doughnuts, Danishes, cakes, tortes, pies, tarts, muffins, bars such as lemon bars, cookies, large pretzels, and tortillas. The term does not include candy; snack items including chips, small pretzels, or crackers; sandwiches; tacos; or pizzas.

  (2) Bulk vending machine--A device that contains unsorted items and randomly dispenses goods in approximately equal amounts without selection of a particular item or type of item by the customer.

  (3) Candy--A confection made of natural or artificial sweeteners and includes bars, gum, drops, taffy, and chocolate, yogurt or caramel coated nuts, popcorn, raisins, and other fruits. The term does not include products used exclusively for cooking, such as chocolate bits and cake sprinkles.

  (4) Combine--To combine two or more food products until the products do not separate (e.g., salsa, pesto, dip, and hummus).

  (5) Eating facilities--Tables, benches, booths, chairs, or other facilities that allow customers to eat either on or adjacent to the seller's premises. For example, a food seller located adjacent to the food court in a shopping mall is considered to have eating facilities.

  (6) Eating utensils--Eating utensils include trays, plates, knives, forks, spoons, glasses, cups, or straws.

  (7) Food and food ingredients--Substances, whether in liquid, concentrated, solid, frozen, dried, or dehydrated form, that are sold for ingestion or chewing by humans and are consumed for taste, aroma, or nutritional value.

    (A) Food and food ingredients include food products intended for human consumption, such as the following: cereal and cereal products; milk and milk products, including ice cream, butter, and yogurt; meat and meat products; poultry products; fish and fish products; eggs and egg products; vegetables and vegetable products; fruit and fruit products; spices, condiments, and salt; sugar products; coffee and coffee substitutes; tea; juice (if more than 50% fruit or vegetable juice by volume); cocoa and cocoa products; canned foods; or any combination of these.

    (B) Food products do not include:

      (i) alcoholic beverages;

      (ii) cigarettes, tobacco, or tobacco products;

      (iii) candy;

      (iv) ice;

      (v) water; or

      (vi) drugs, medicines, tonics, vitamins, dietary supplements, and medicinal preparations in any form. For further information about drugs, medicines, and dietary supplements, see §3.284 of this title (relating to Drugs, Medicines, Medical Equipment and Devices).

  (8) Food ready for immediate consumption--Food, drinks, or meals prepared, served, or sold by restaurants, lunch counters, hotels, cafeterias, or other like places of business, that, when sold, require no further preparation by the purchaser prior to consumption, and food sold through vending machines.

  (9) Food sold through vending machines--Food dispensed from a machine or other mechanical device that accepts payment.

  (10) Individual-sized packages--Bottles or cartons of milk, juice, and tea of a half-pint or less (8 ounces or less) are individual-sized. Packages or bags of snacks such as chips, pretzels and crackers are individual-sized if less than 5 ounces.

  (11) Mix--To blend two or more food items together into a single item that is more or less a uniform whole, but each ingredient may or may not retain its identity (e.g., potato salad, coleslaw or seafood salad).

  (12) Mobile vendor--A person who sells food from a motor vehicle, push cart, or any other form of vehicle.

  (13) Prepared food--Prepared food means:

    (A) food ready for immediate consumption;

    (B) food sold in a heated state or heated by the seller;

    (C) food sold with eating utensils provided by the seller; or

    (D) two or more food ingredients mixed or combined by the seller for sale as a single item, including items that are sold by weight or volume as a single item, but does not include food that is prepared at an off-site location, refrigerated food that is typically reheated prior to eating, or food that is only cut, repackaged, or pasteurized by the seller.

  (14) Retirement facility--A facility that provides permanent housing and residence to individuals, a majority of whom are 60 years of age or older.

  (15) Soft drinks--Carbonated and non-carbonated non-alcoholic beverages that contain natural or artificial sweeteners. The term does not include beverages that contain milk or milk products, soy, rice, or similar milk substitutes, or juices that contain more than 50% vegetable or fruit juice by volume.

(b) Sales of exempt food products or water. Food and food ingredients are exempt from sales tax unless otherwise taxable under subsection (c) of this section. Water is exempt as explained in §3.318 of this title (relating to Water-Related Exemptions). Heated and unheated bakery items are exempt regardless of size or quantity unless sold with plates or other eating utensils provided by the seller. Separately stated charges for bakery items sold by caterers, mobile vendors, or by restaurants, fast food outlets, lunch counters, cafeterias, hotels, and other similar places of business, are taxable if sold in conjunction with taxable meals in which plates or other eating utensils are provided. For example, a roll served in a restaurant with a meal is taxable even if the roll is served rolled up in a napkin rather than directly on the plate. However, the restaurant is not required to collect sales tax on bakery items purchased without utensils from its bakery.

(c) Taxable sales. The following are subject to sales tax:

  (1) sales of soft drinks;

  (2) sales of candy;

  (3) sales of ice;

  (4) sales of beer, wine, and other alcoholic beverages unless subject to mixed beverage gross receipts tax under Tax Code, Chapter 183;

  (5) sales of cigarettes and other tobacco products;

  (6) vending machine sales of food, soft drinks, and candy as explained in subsection (d) of this section;

  (7) sales of prepared food as defined in subsection (a)(13) of this section, including:

    (A) all food ready for immediate consumption, except bakery items, sold by caterers, mobile vendors, or by restaurants, fast food outlets, lunch counters, cafeterias, hotels, and other similar types of places;

    (B) all sandwiches ready for immediate consumption, including refrigerated triangle-type sandwiches such as ham, cheese, tuna, egg salad, or chicken salad, but not sales of sandwiches that are frozen or partially frozen and that require thawing or heating by the customer prior to consumption;

    (C) all individual ice cream sundries, including ice cream served on cones, in cups or in dishes, ice cream sandwiches, bars, sticks, specialties, or similar ice cream sundries. It does not include ice cream sundries sold in prepackaged units containing multiple sundries or in cartons of ice cream greater than a half-pint. Popsicles are taxable regardless of the quantity in a package unless the popsicles are more than 50% juice;

    (D) all individual-sized packages of food sold by a business that has eating facilities (e.g., a deli section of a grocery store with seating, or a convenience store, bakery, or doughnut shop with seating). For example, a half-pint carton of milk is taxable when sold in a convenience store with eating facilities but is exempt if sold in a convenience store without eating facilities; or

  (8) sales of bakery items sold with plates or other eating utensils provided by the seller.

(d) Vending machine sales. Food, candy, and soft drinks sold through vending machines are taxable. The sales tax is determined as follows:

  (1) Soft drink and candy vending machine sales. The vending machine operator must remit sales tax on the total gross receipts from sales of soft drinks and candy without any deduction for spoilage, waste, or other losses.

  (2) Food product vending machine sales. The vending machine operator must remit sales tax on 50% of the total gross receipts from sales of food products without any deduction for spoilage, waste, or other losses. Examples of food products include chips, crackers, pretzels, milk, tea, coffee, and juice if more than 50% vegetable or fruit juice by volume.

  (3) Water, including bottled water, spring water, sparkling water, or mineral water, is exempt from sales tax. A vending machine operator is not required to remit sales tax on the receipts from sales of water. Flavored water (carbonated or non-carbonated) is a soft drink and a vending machine operator must remit tax on the total gross receipts for vending machines sales of flavored water.

  (4) A vending machine operator must place a sign on the vending machine stating that the vended price includes sales tax. If sales tax is included in the price of the taxable item, the vending machine operator may back out the amount of the tax before reporting the taxable sales on his sales tax return. See §3.328 of this title (relating to Optional Reporting Methods for Grocers and Other Vendors).

(e) Bulk vending machine sales. Food, gum, candy, and toys sold for $0.50 or less from a bulk vending machine, as defined in subsection (a)(2) of this section, are exempt from sales tax. A bulk vending machine operator that has only exempt bulk vending machine sales may choose to obtain a sales tax permit and file sales tax returns so that the operator is able to purchase the gum, candy, or toys tax free for resale by giving the supplier a properly completed resale certificate. If a vending machine operator has both taxable vending machine receipts as explained in subsection (d) of this section, and exempt bulk vending machine sales as explained in this subsection, the operator must keep detailed records showing which items are dispensed from the bulk vending machines.

(f) Food stamp purchases. Food, candy, and soft drinks are exempt if purchased with food stamps (including a Texas Lone Star debit card) under the food stamp program (7 U.S.C. Chapter 51) if the item can legally be purchased with food stamps. A seller should apply the amount of food stamps against the purchase of qualifying taxable items first so that the individual receives the best possible benefit from the food stamp exemption.

(g) Food sale exemptions. Certain organizations may sell prepared food, candy, and soft drinks tax-free. These tax-free sales are not counted against the two one-day, tax-free sales allowed to certain exempt nonprofit organizations under §3.322 of this title (relating to Exempt Organizations). Tax is due on sales of alcoholic beverages.

  (1) Sales of food, prepared food, soft drinks, or candy by a church or at a function of the church are exempt.

  (2) Sales of food, prepared food, soft drinks, or candy sold or served by public or private elementary or secondary schools, school districts, bona fide student organizations, or parent-teacher organizations and associations are exempt if the items are sold or served during a regular school day pursuant to an agreement with the proper school authorities. This exemption includes food, soft drinks, and candy sold through vending machines.

  (3) Sales of food, prepared food, soft drinks, or candy by a parent-teacher organization or association during a fund-raising sale are exempt if the proceeds do not go to the benefit of an individual.

  (4) Sales of food, prepared food, soft drinks, or candy by a group associated with a private or public elementary or secondary school are exempt if the sale is part of a fund-raising drive sponsored by the organization for its exclusive use.

  (5) Sales of food, prepared food, soft drinks, or candy by a member or volunteer for a nonprofit organization devoted to the exclusive purpose of education or religious or physical training of persons under 19 years of age are exempt if the sale is part of a fund-raising drive sponsored by the organization for its exclusive use.

  (6) Sales of food, prepared food, soft drinks, or candy served by hospitals, day care centers, summer camps, or other institutions licensed by the state for the care of humans are exempt if sold or served to the patients, children, students, or residents of the facility. Sales of prepared food, soft drinks and candy to visitors or employees of the facility are taxable. Persons confined in correctional facilities operated under the authority, jurisdiction, or under a contract with the State of Texas or its political subdivisions are not exempt and must pay sales tax when they purchase taxable items such as prepared food, candy, soft drinks, and taxable items sold from vending machines. Meals and beverages served without charge to inmates confined in correctional facilities are not taxable.

  (7) Food, prepared food, soft drinks, or candy sold or served by a retirement facility to its permanent residents are exempt. Sales of taxable items to visitors or employees of the facility are taxable.

(h) Responsibilities of sellers of taxable food and beverages.

  (1) A seller must collect sales tax on all taxable sales. The seller is required to obtain a sales tax permit, file sales tax returns and remit the tax to the comptroller. See §3.286 of this title (relating to Seller's and Purchaser's Responsibilities).

Cont'd...

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