Food, Non-Qualifying Food, and Prepaid Meal Plans

Food

For purposes of sales and use tax, food is defined as substances that are sold for ingestion or chewing by humans and are consumed for their taste or nutritional value. The substances may be in liquid, concentrated, solid, frozen, dried, or dehydrated form.

Food does not include an alcoholic beverage or a tobacco product.

Qualifying Food

Qualifying food includes all food except for the following:

• Candy.
• Soft drinks.
• Prepared food, other than bakery items sold without eating utensils by an artisan bakery.
• Dietary supplements.
• Food sold through a vending machine.
• Prepaid meal plans.

A 2.00% local rate of sales and use tax applies to the sales price qualifying food. If the correct amount of tax is not paid at the time of sale, consumer use tax is due. The tax on qualifying food is reported on the “2% Food Rate” line of Form E-500, Sales and Use Tax Return.

The state, transit, and other local rates of tax do not apply to qualifying food. 

Non-Qualifying Food

The general state and applicable local and transit rates of sales and use tax apply to the sales price of non-qualifying food. If the correct amount of sales tax has not been paid on taxable tangible personal property, use tax is due.

Candy

Candy is a preparation of sugar, honey, or other natural or artificial sweeteners in combination with chocolate, fruits, nuts, or other ingredients or flavorings in the form of bars, drops, or pieces that do not require refrigeration.

Candy does not include any preparation that contains flour.

Soft Drinks

A soft drink is a nonalcoholic beverage that contains natural or artificial sweeteners. The term does not include beverages that contain one or more of the following:

• Milk or milk products.
• Soy, rice, or similar milk substitutes.

Prepared Food

Prepared food is food that meets at least one of the following conditions:

• It is sold in a heated state, or it is heated by the retailer.
• It consists of two or more foods mixed or combined by the retailer for sale as a single item. This does not include:
  • Food containing raw eggs, fish, meat, or poultry that requires cooking by the consumer as recommended by the Food and Drug Administration in chapter 3, part 401.11 of its Food Code so as to prevent foodborne illnesses.
  • Food that is only sliced, repackaged, or pasteurized by the retailer.
• It is sold with eating utensils provided by the retailer, such as plates, knives, forks, spoons, glasses, cups, napkins, and straws. A plate does not include a container or packaging used to transport the food. An eating utensil placed in a package with the food items by a person other than the retailer, if that other person's NAICS classification code is that of a manufacturer, sector 311, is not treated as an eating utensil provided by the retailer. For a packager with any other NAICS classification code, the retailer is considered to have provided the eating utensil.

For additional information including when items are sold with eating utensils review the Sales and Use Tax Bulletin 32.

Dietary Supplements

A dietary supplement is a product that is intended to supplement the diet of humans and is required to be labeled as a dietary supplement under federal law, identifiable by the "Supplement Facts" box found on the label.

Food Sold through a Vending Machine

Food is sold through a vending machine is dispensed from a machine or another mechanical device that accepts payment.

Prepaid Meal Plans

A prepaid meal plan is defined as a plan offered by an institution of higher education that meets all of the following requirements:

• Entitles a person to food or prepared food.
• Must be billed or paid for in advance.
• Provides for predetermined units or unlimited access to food or prepared food but does not include a dollar value that declines with use.