California Food Sales Tax Rules Are Madness

We have invested a fair amount of time to try to get sales tax treatment on food items in our California stores correct.  But the rules are insane.   Beyond all the crazy rules (e.g. if a customer buys a refrigerated burrito it may be non-taxable, but if he puts it in the microwave in the store to heat it up it becomes taxable for sure) is the fact that sometimes customer intent matters (e.g. will they consume it at one of the picnic tables on site, or take it back to their home or camp site)

When searching for more resources on the topic, I found this flow chart on deciding if CA sales tax applies to food

click to enlarge

Here is more, from the same article

Under California law, foods eaten on the premise of an eatery is taxed while the same item taken to go is not: "Sales of food for human consumption are generally exempt from tax unless sold in a heated condition (except hot bakery items or hot beverages, such as coffee, sold for a separate price), served as meals, consumed at or on the seller's facilities, ordinarily sold for consumption on or near the seller's parking facility, or sold for consumption where there is an admission charge." Exactly which type of foods do and do not fall under the scope of this provision is the frustrating devil in the detail.

Eskenazi notes a few of the ridiculous results of drawing an artificial distinction between hot and cold foods. "A hot sandwich to go would be taxable," for example, "While a prepackaged, cold one would not -- but a cold sandwich becomes taxable if it has hot gravy poured onto it. Cold foods to go are generally not taxable -- but hot foods that have cooled are taxable (meaning a cold sandwich slathered in "hot" gravy that has cooled to room temperature is taxable)."

 

  • Nehemiah

    These are great rules. They insure that any vendor sales tax audit will find taxes due with interest and penalties. No need to raise the rate and irritate taxpayers. Extract the money out of vendors who cannot possibly comply. Brilliant!

  • jimkimmons

    Just leave CA alone, and within a decade they'll be bankrupt and in chaos. The problem is that they'll get bailed out with our tax dollars. There is no consequence for stupidity in government.

  • http://EasyOpinions.blogspot.com/ Andrew_M_Garland

    I'll guess that these rules are the result of the restaurant association angling to apply sales tax to food that might be competitive to restaurants. They can't stop convenience stores and supermarkets from selling food, but they can apply any complication to keep a hot sandwich from being 3% cheaper across the street.

    A Whole Foods store in MA has seating to eat casually from the food bar. Any purchase of less than 6 bagels carries 6% tax, being presumed to be consumed on site. For 6 or more, the state kindly allows for the fact that you don't intend to eat 6 bagels before you leave the store.

  • Matthew Slyfield

    "The problem is that they'll get bailed out with our tax dollars."

    There is an active movement among Latinos in CA to have the state secede from the US and rejoin Mexico. Let Mexico have CA back, then the US tax payers will be off the hook for CA's bailout.

  • jimkimmons

    Matthew, I like your solution. I think the current residents of CA will have a really difficult time learning to speak Spanish though. The old saying "as goes CA goes the nation" is a very scary thing.

  • Philip Ngai

    CA sales tax is almost 10% in my area.

  • obloodyhell

    }}} if a customer buys a refrigerated burrito it may be non-taxable, but if he puts it in the microwave in the store to heat it up it becomes taxable for sure)

    LOL, so I can save myself the tax just by using the microwave AFTER purchase?

    "BRILLIANT!!"

  • obloodyhell

    }}} Let Mexico have CA back

    Just let them have the bottom half -- San Fran out to the Pacific side of the SJ valley, and down to LA and across to Arizona(?) That gets rid of all the true loonies anyway..

  • marque2

    Most places I go to just charge the tax period. As long as they fork it over to the state no one complains

  • TJSawyer

    Which brings up the old Minnesota question:
    Q. Why is a KitKat Bar not taxable like other candy bars?
    A. Because it contains flour (A favorably treated commodity in "The Mill City" of Minneapolis)

    I quote from the Minnesota Sales Tax guidance: "Examples of items that contain flour that are not taxable include Kit Kats, Twix, Reese-Sticks, and licorice." See:
    http://www.revenue.state.mn.us/businesses/sut/factsheets/FS102B.pdf
    if you think I am making this up!

  • TJSawyer

    The establishment of specialized exemptions for sales tax in construction makes That parody chart seem tame. Minnesota also has 48 current subdivisions to its contractor sales tax rules. See
    https://www.revisor.mn.gov/statutes/?id=297A.71

    Here is part of one:

    CONSTRUCTION EXEMPTIONS. ... Building materials and supplies for constructing a new facility in Minnesota for providing Federal Communications Commission licensed direct satellite broadcasting services using direct broadcast satellites operating in the 12-GHz. band or fixed satellite regional or national program services, as defined in section 272.02, subdivision 16, are exempt if construction of the facility was commenced after June 30, 1993.

    I wonder how much the new DBS operator was required to contribute to legislative campaigns during the preceding year's election.

  • marque2

    Not sure if that is the case since sandwich shops like subway can forgo sales tax in cold to go items

  • Matthew Slyfield

    Sure, but if you use the store's microwave, you just turned the store owner into a criminal.

  • Benjamin Cole

    Some time (when you have a lot of time) take a look at the incredible rules that apply to liquor distributors in Florida.