(1)
Purpose.
This Rule addresses the application of sales and use tax to purchases
and sales made by establishments that sell prepared food. Such establishments
are generally referred to as restaurants and include but are not limited to
coffee shops, cafeterias, short order cafes, luncheonettes, taverns,
lunchrooms, soda fountains, food carts, food trucks, itinerant restaurants,
catering establishments, and similar facilities.
(2)
Definitions. The terms
defined in Rule
560-12-2-.104 entitled "Food
Exemptions" apply to this Rule. In addition, the following definitions apply:
(a) "Food packaging" means tangible personal
property that is used to contain food or beverages. "Food packaging" includes
but is not limited to containers, boxes, wrappers, cups, dinner plates, trays,
platters, and the accompanying lids.
(b)
"Premises" means the total
space and facilities in or on which the seller conducts business, including but
not limited to parking areas for the convenience of in-car consumption, counter
space, indoor or outdoor tables, chairs, benches, and similar
conveniences.
(3)
Sales of food. Pursuant to O.C.G.A. §
48-8-3(57), certain food items are exempt from state sales tax. Rule
560-12-2-.104 addresses the
taxation of food and is summarized as follows:
(a)
Prepared food. "Prepared
food" is subject to both state and local sales and use tax. The term "prepared
food" generally includes meals sold by a restaurant but does not include food
items entirely prepared off the seller's premises. "Prepared food" includes the
following:
1. Food sold in a heated state or
heated by the seller at the seller's location. This includes food heated by the
seller at any time before the sale, even if the item is in an unheated state at
the time of sale.
2. Food with two
or more food ingredients mixed or combined at the seller's location by the
seller for sale as a single item.
3. Food sold with eating utensils provided by
the seller. Food is considered to be sold with eating utensils provided by the
seller when the food is customarily intended for consumption with the utensils
provided. The presence of self-service utensils in a restaurant does not make
otherwise exempt food taxable unless it is customarily intended that the food
be consumed with those utensils.
Example 1: Seller purchases tea prepared
off-site and sells the tea in cups. The seller does not add any ingredients and
does not heat the tea. The tea is subject to both state and local tax because
the cup is a "utensil" according to Rule
560-12-2-.104.
Example 2: The seller purchases and subsequently
sells single-serving size bottled beverages. Utensils are not customarily used
to consume single-serving bottled beverages; therefore, single-serving bottled
beverages sold for off-premises consumption are subject only to local
tax.
Example 3: The seller sells bottles of barbecue
sauce prepared off-site. The seller neither heats nor adds ingredients to the
sauce. Utensils are not customarily used to consume barbecue sauce; therefore,
bottles of barbecue sauce sold for off-premises consumption are subject only to
local tax.
(b)
Food and food ingredients. "Food and food ingredients" sold to
natural persons for consumption off premises is not subject to state sales and
use tax, but is subject to local sales and use tax.
1. For purposes of the food exemption in
O.C.G.A. §
48-8-3(57), "food
and food ingredients" does not include prepared food, alcoholic beverages,
dietary supplements, tobacco, and items ingested or chewed primarily for
medical or hygiene purposes, such as cough drops, throat lozenges, breath
strips, and over-the-counter medications.
2. The term "food and food ingredients"
includes food that is prepared off-premises. For example, if sold for
off-premises consumption without utensils, cakes prepared off-premises are
exempt from state sales and use tax, but are subject to local sales and use
tax. However, if utensils customarily intended to be used to consume the cake
are provided or made available by the seller, the cake is subject to both state
and local sales and use tax as "prepared food."
3. "Food and food ingredients" sold for
on-premises consumption is subject to both state and local sales and use tax.
Thus, a bag of chips sold by a restaurant for on-premises consumption is
subject to state and local sales and use tax.
4. The state sales and use tax exemption for
"food and food ingredients" is not available to businesses purchasing food and
food ingredients. Unless another exemption applies, business entities,
including nonprofit organizations, must pay both state and local sales and use
tax on all purchases of food and food ingredients.
(c)
Food sold in bulk. Food
sold in bulk is not afforded special tax treatment, but is taxed in accordance
with the rules set forth in this paragraph (3).
Example 1: Seller purchases cole slaw prepared
off-site in bulk. Without heating or adding ingredients to the cole slaw, the
seller then resells the cole slaw in a bulk size (multi-serving) package for
off-premises consumption. The seller makes forks available at no charge. The
cole slaw is prepared food since it is sold with utensils and is thus subject
to both state and local tax.
Example 2: Assume the same facts as Example 1,
except the seller makes no utensils available. The cole slaw is exempt from
state tax.
Example 3: Seller purchases tea prepared
off-site in bulk. Seller then sells the tea in gallon jugs. The seller does not
add any ingredients and does not heat the tea. The seller makes cups available
at no charge. The tea is subject to both state and local tax.
Example 4: Same facts as in Example 3; but
instead of cups, the seller makes straws available at no charge. The tea is
exempt from state tax because gallon jugs of tea are not customarily consumed
with straws.
Example 5: Same facts as in Example 3, but the
seller makes no utensils available. The tea is exempt from state tax.
Example 6: The seller sells 10-pound bags of ice
prepared off-premises. The seller makes cups available at no charge. The ice is
subject to both state and local tax.
Example 7: Same facts as in Example 6, but the
seller makes no utensils available. The ice is exempt from state tax.
Example 8: The seller makes ice on-site and
sells it in 10-pound bags. The seller makes no utensils available. The ice is
exempt from state tax because making ice involves neither mixing nor heating
ingredients.
(d)
Combination meals. If the sales price of a combination meal is
attributable to products that are subject to tax at different tax rates, the
total price must be treated as attributable to the products subject to tax at
the highest tax rate unless the seller can identify, by reasonable and
verifiable standards from the seller's books and records that are kept in the
regular course of business for other purposes, including nontax purposes, the
portion of the sales price attributable to the products subject to tax at the
lower tax rate.
For example, a lunch consisting of hot chicken (subject to
state and local tax because it is sold heated) and a bag of chips is sold for
off-premises consumption for a single price of $3.95. No eating utensils are
provided by the seller. The seller must charge both state and local sales tax
on the entire sales price of the meal. However, the seller may instead charge
state and local sales tax for the chicken and only local sales tax for the bag
of chips if the seller can demonstrate with its books and records the portion
of the total sales price attributable to the chips, that the chips were not
prepared by the seller on premises, that the chips were sold without utensils
customarily used to consume chips, and that the chips were sold for
off-premises consumption.
(4)
Employee meals. Rule
560-12-2-.65 addresses employee
meals and is summarized as follows:
(a) The
sale of food and beverages by an employer to an employee is subject to sales
tax on the total sales price charged to the employee.
(b) Food and beverages provided by an
employer without charge to an employee are taxable to the employer. The
employer must remit use tax on the cost of the food and beverages as shown in
the employer's books and records. In the event that the exact cost of the
employee's food and beverages is not represented in the employer's records, the
cost shall be deemed to be fifty percent (50%) of the retail sales price of the
food and beverages.
(5)
Gratuities.
(a) An amount,
whether designated as a tip, gratuity, or service charge, is mandatory and
subject to tax when
1. negotiated between the
seller and the customer in advance of a meal or event;
2. unilaterally added to the bill by the
seller; or
3. added to the bill by
the customer pursuant to a statement printed on a menu, sign, advertisement, or
brochure indicating that tips, gratuities, or service charges are
mandatory.
(b)
Notwithstanding subparagraph (a)2, when a tip, gratuity, or service charge is
added unilaterally to the bill by the seller, the amount added is optional and
not subject to tax when the seller clearly and conspicuously states on the
bill, menu, or signage located in an area visible to customers that tips,
gratuities, and service charges are optional and may be removed from the bill
at the customer's discretion.
(6)
Purchases by restaurants.
(a)
Food packaging. Single-use
food packaging used to contain food that is transferred to the customer is
exempt from sales and use tax pursuant to O.C.G.A. §
48-8-3(94).
(b)
Items for sale. A retailer
may purchase food items and other items of tangible personal property for
resale without payment of sales and use tax and hold such property for sale at
retail in the regular course of business. A toy sold as a component part of a
meal may be purchased tax free as an item for resale.
(c)
Single-use items provided with
meals sold. The following single-use items that are provided or made
available to restaurant customers without charge are a component part of a meal
sold to the customer and may be purchased tax free for resale: straws, swizzle
sticks, stirrers, napkins, doilies, forks, sporks, knives, spoons, toothpicks,
chopsticks, tray liners, and pre-moistened disposable cloths.
(d)
Food items provided with meals
sold. Condiments and other food items that are provided or made
available to restaurant customers without a separate charge as a component part
of a meal sold to the customer may be purchased tax free for resale.
Example 1: A restaurant places ketchup bottles
on dining tables for customers' use. The restaurant may purchase the ketchup
tax free for resale.
Example 2: A restaurant puts ketchup packets in
bags containing "to go" meals sold to customers and makes ketchup packets
available on its self-service island. It also provides ketchup in a dispenser
on the self-service island. The restaurant may purchase tax free for resale all
of the ketchup in this example.
Example 3: A restaurant provides peanuts or
tortilla chips and salsa as a complement to the sale of other food or beverage
items. The restaurant may purchase the peanuts, chips, and salsa tax free for
resale.
(e)
Items
used or consumed by the restaurant.
1.
Tangible personal property used or consumed by a restaurant is not purchased
for resale and as such is subject to tax. Such taxable property includes but is
not limited to complimentary meals furnished to employees or customers; tables,
tents, chairs, bars, linens, cloth napkins, silverware, glassware, chinaware,
serving utensils, table covers, and reusable containers; ice used to chill food
or beverages before serving; floral arrangements; and single-use items that are
not a component part of a meal sold to a customer. Examples of taxable
single-use items include paper towels, plastic serving utensils, aluminum foil
used for cooking or storage, toilet paper, plastic wrap, crayons provided for
customers' on-premises entertainment, paper placemats, and paper
menus.
2. Condiments and single-use
items served as a component part of a complimentary meal are considered used or
consumed by the restaurant and as such are subject to tax.
3. Single-use containers used to transport
complimentary meals are exempt from sales and use tax pursuant to O.C.G.A.
§
48-8-3(94).
(f) Duty to keep records. Tangible
personal property purchased for resale may be subject to tax unless the
retailer can identify, by reasonable and verifiable standards from its books
and records that are kept in the regular course of business for any purpose,
including nontax purposes, that such property has been resold or is designated
for resale.
(7)
Delivery. Delivery charges by the seller associated with the sale of food and
other taxable tangible personal property are taxable, even if such charges are
separately itemized.
(8) Other
service charges.
(a) Charges by the seller
for any services that are necessary to complete the sale of taxable tangible
personal property are taxable, even if such charges are separately itemized.
Example 1: A caterer requires customers purchasing alcohol to
purchase bartender and ID checking services. The bartender and ID checking
service charges are taxable.
Example 2: A caterer charges a fuel surcharge when delivering
food. The fuel surcharge is taxable.
(b) Charges by the seller for any services
that are not necessary to complete the sale of taxable tangible personal
property are not subject to sales or use tax if separately itemized.
Example 1: A caterer provides coat checking as
an optional add-on service to a catered event. The coat checking service is
separately itemized on the customer's bill. The service is not taxable.
Example 2: Assume the same scenario as Example
1, but the charge is not separately itemized and is instead included in the
total catering charge. The coat checking service is taxable.
