Thursday, October 29, 2009

Is food really exempt?

I've seen this now a few times. So I thought it would be worthwhile whispering in your ears.

Grocery store food is exempt from tax in many states, and taxed at a lower rate in even more. The official wording is usually something like "food sold for off-premises consumption." But you and I know that basically means the kind of food you buy off the shelves at the Safeway.

I've now seen a couple of states that restrict the food exemption to individuals or for home consumption. In other words, if a business buys food, say for a company picnic or for the company lunchroom, the food was NOT exempt.

Obviously the grocery store isn't going to differentiate. Food's exempt as far as they're concerned. But your business may get nicked for use taxes on that food. So, if you're in a state that exempts food to some extent, make certain that there isn't an extra sentence that excludes businesses from the benefit of the exemption.

Otherwise, you'll get a surprise during the audit.

Sales Tax Guy

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