(a)
Definitions. The
following words and terms, when used in this section, have the following
meanings, unless the context clearly indicates otherwise:
Candy and gum-The term candy refers to
all types of preparations commonly referred to as candy, including hard candy,
caramel, chocolate candy, licorice, fudge, cotton candy, caramel coated
popcorn, chocolate coated granola bars and similar items. The term gum refers
to preparations commonly referred to as gum, including chewing gum, bubble gum
and similar items.
Caterer-A business engaged in the
service of providing prepared or ready-to-eat food and beverages for immediate
consumption at a specific meal, affair or social function, usually at the
premises of one other than the caterer, and normally including eating and
drinking utensils.
Eating establishment-A business, or an
identifiable location within a business, which advertises or holds itself out
to the public as being engaged in the sale of prepared or ready-to-eat food or
beverages, to customers for their immediate consumption on or off the premises.
An eating establishment may be mobile or immobile and may or may not provide
seating accommodations for its customers. The following are examples of eating
establishments: restaurants, cafes, lunch counters, private and social clubs,
taverns, dining cars, hotels, night clubs, fast food operations, honor boxes,
pizzerias, fairs, carnivals, lunch carts, ice cream stands, snack bars, lunch
trucks, cafeterias, employe cafeterias, theaters, stadiums, arenas, amusement
parks, juice stands, carry out shops, coffee shops, popcorn stands, automats,
vending machines and similar establishments.
Food and beverages-Includes items for
human consumption, regardless of quantity. Examples are sandwiches, hot pizza,
salad bar items, crackers, cakes, ice cream, baked goods, potato chips, yogurt,
hot or cold drinks, milk, natural fruit or vegetable juices, cocoa, soft
drinks, candy, gum and other similar items whether or not the item is
individually packaged in a sealed wrapper. The term does not include water or
ice, malt or brewed alcoholic beverages or spirituous and vinous
liquors.
Food retailer-A business, or an
identifiable location within a business, which is engaged in the sale of
grocery type items for other than immediate consumption. The following are
examples of food retailers: bakeries, pastry shops, doughnut shops,
delicatessens, grocery stores, supermarkets, farm markets, convenience stores
and similar businesses.
Gratuity-A voluntary payment by the
purchaser or a reasonable mandatory charge by the vendor, in lieu of the
voluntary payment, which is billed to the purchaser for services rendered in
connection with the purchase of food or beverages or hotel or motel
accommodations.
Grocery type items-Includes baked goods
such as pies, cakes, bread and similar items; produce such as fresh fruit and
vegetables; canned goods; meat and cheese by the pound; milk in pint, quart,
1/2 gallon or gallon quantities; prepackaged ice cream products such as ice
cream by the pint, quart, 1/2 gallon or gallon quantities; ice cream cakes and
pies; frozen foods; unprepared fish and seafood; bottled honey; bottled syrup;
jam; jelly and similar items.
Nonfood retailer-A business engaged in
the sale of nonfood items. The following are examples of nonfood retailers:
department stores, service stations, clothing stores, book stores and similar
businesses.
Selected food and beverage items-Soft
drinks; meals; sandwiches, including hoagies, hot dogs, hamburgers and similar
sandwiches; food from salad bars; hand-dipped or hand-served ice-based
products, including, ice cream, yogurt, frozen water-based products and similar
items; hot soup; hot pizza, either whole or by the slice; other hot food items
such as chicken, pork ribs, macaroni and cheese and similar items and hot
drinks such as coffee, tea, cocoa and similar items.
Soft drink-A nonalcoholic beverage, in
either powder or liquid form, whether or not carbonated, such as soda water,
ginger ale, colas, root beer, flavored water, artificially carbonated water,
orangeade, lemonade, juice drinks containing less than 25% by volume of natural
fruit or vegetable juices, and similar drinks. The term does not include fruit
and vegetable juices containing at least 25% by volume of natural fruit or
vegetable juice. The term does not include coffee, coffee substitutes, tea,
cocoa and milk or noncarbonated drinks made from milk derivatives.
Vending machine-A device which
mechanically dispenses tangible personal property for a purchase price.
(b)
Scope.
(1)
General. The term food
and beverages includes all forms of food and beverages for human consumption.
The term includes selected food items, candy and gum and grocery type items.
The term does not include water, ice, malt or brewed and alcoholic beverages or
spirituous and vinous liquors. The sale of water and ice are exempt from tax.
The sale of malt or brewed alcoholic beverages and spirituous and vinous
liquors are taxed in a different manner than the sale of food and beverages.
Under the provisions of the sales and use tax law, the sale of food or
beverages may be taxable or exempt depending upon the type of food or beverage
or upon the basis of the location from which the food or beverage is sold. This
is illustrated by the following:
(i) The sale
of food and beverages by an eating establishment or a caterer is subject to
tax. However, if an eating establishment operates a separate department from
which grocery type items are sold, the sale of the grocery type items is exempt
from tax if the eating establishment fulfills the requirements in this
section.
(ii) The sale of selected
food items is subject to tax, whether or not the selected food items are sold
by an eating establishment, caterer, food retailer or nonfood retailer.
However, the sale of selected food items is exempt from tax when made by a
school or church in the ordinary course of its activities, by a business
located on the premises of the school or church in the ordinary course of its
activities, by a business located on the premises of the school or church and
the sale is in the ordinary course of the activities of the school or church or
by a nonprofit association which supports sports programs and which operates at
fixed locations on public property.
(iii) The remaining provisions of this
subsection address various situations under which the sale of food and
beverages is exempt or is subject to tax.
(2)
Malt or brewed alcoholic
beverages and spirituous and vinous liquors.
(i) The sale of malt or brewed alcoholic
beverages by a distributor to a retail dispenser, liquor licensee or the public
is subject to tax. However, the sale of malt or brewed alcoholic beverages by a
retail dispenser or a liquor licensee is not subject to tax.
(ii) The sale of spirituous and vinous liquor
by the Liquor Control Board, a winery or other vendor authorized by the Liquor
Control Board is subject to tax. However, the sale of spirituous and vinous
liquor by a liquor licensee is not subject to tax.
(3)
Sale of food and beverages by
eating establishments. With the exception of sales qualifying for
exclusion from tax under subparagraphs (i) and (ii), the sale of food and
beverages, including candy and gum, by an eating establishment is subject to
tax, whether or not the food or beverages are prepared or consumed on or off
the premises. Tax is imposed upon the total purchase price billed to the
purchaser for the food or beverages, including an amount billed for delivery
but excluding a separately stated amount representing a gratuity.
(i)
Sale of grocery type items by a
food retailer. An eating establishment may also operate as a food
retailer. An eating establishment failing to qualify as a food retailer, is
required to collect tax upon its sale of items of food or beverages including
grocery type items. To qualify as a food retailer, the eating establishment is
required to satisfy the following requirements. The eating establishment shall
maintain:
(A) A separate department or
identifiable location from which grocery type sales are made.
(B) Separate records, such as a separate cash
register or cash register key, for the sale of grocery type items.
(ii)
Sale of candy, gum
and prepackaged frozen items from vending machines. The sale of candy,
gum and prepackaged frozen milk or frozen water-based products from a vending
machine prior to October 1, 1991, and on or after December 13, 1991, is not
subject to tax. However, the sale of these items from October 1, 1991, through
and including December 12, 1991, is subject to tax.
(iii)
Examples.
(A) "P" pizzeria sells whole pizzas, pizza by
the slice and soft drinks. "P" has no eating facilities on its premises. "P"
sells its food and beverages at its premises or delivers to its customers. The
sale of whole pizza, pizza by the slice and soft drinks by "P" is subject to
tax. If "P" makes a charge for delivery, the delivery charge is also subject to
tax.
(B) "I" ice cream parlor sells
hand-dipped ice cream products by the cone, dish, pint, quart and 1/2 gallon.
"I" also sells ice cream cakes, pies and prepackaged ice cream sundaes from a
separate department and maintains separate sales records. The sale of ice cream
cakes, pies and prepackaged ice cream sundaes by "I" would not be subject to
tax. The sale of hand-dipped ice cream in any quantity is taxable because
hand-dipped ice cream qualifies as a selected food item.
(C) "R" restaurant sells prepared food and
beverages. At the same location, but within a separately identified department,
"R" operates a bakery from which baked goods, such as bread, cakes, doughnuts
and cookies are sold and recorded on a separate cash register. The sale of food
and beverages, including baked goods from "R's" restaurant operation is subject
to tax. Baked goods sold from "R's" bakery operation are exempt from
tax.
(D) "L" lunch counter sells
quick lunches including hot and cold beverages, sandwiches and similar items.
"L" has no tables or chairs for its customers. The sale of food and beverages
by "L" is subject to tax.
(E) "T"
tavern sells alcoholic and nonalcoholic beverages, sandwiches, popcorn,
peanuts, crackers and similar items. "T" also sells prepared seafood such as
lobsters, clams and crabs which may be purchased for consumption on or off the
premises. "T" maintains separate sales records and a separate department from
which unprepared lobsters, clams and crabs may be purchased. The sale of food
and beverages, other than alcoholic beverages, including prepared lobsters,
clams and crabs for consumption on or off the premises, is subject to tax. The
sale of unprepared lobsters, clams and crabs from the separate department is
not subject to tax.
(F) "V" vending
machine operator, on or after December 13, 1991, sells hot and cold drinks,
prepackaged crackers, pretzels, candy, gum, prepackaged frozen milk and frozen
water-based products through vending machines. The sale of hot and cold drinks
and prepackaged crackers and pretzels is subject to tax. However, the sale of
candy, gum and prepackaged frozen milk and frozen water-based products is
exempt from tax.
(4)
Sale of food and beverages by
caterers. The sale of food and beverages, including candy and gum, by
a caterer is subject to tax. The tax is imposed upon the total purchase price
billed to the purchaser including separately stated charges for tables, chairs,
decorations, utensils, bartenders, food servers and similar charges. Since the
caterer is required to pay tax at the time of the purchase of malt or brewed
beverages and spirituous and vinous liquors, separately stated charges by the
caterer to the customer for these items are not subject to tax.
Example:
"C" caterer caters a meal for a customer and issues the
following billing:
Food @ $8/person $400
Room 100
Liquor 60
Floral Decorations 75
50 Settings, @ $2/setting 100
5 Waiters @ $25 125
1 Bartender @ $35 35
5 tables @ $5 25
50 chairs @ $2.50 125
Service charge 100
Gratuity 172
SUBTOTAL $1,317
Sales Tax 65.10
TOTAL $1,382.10
"C's" separately stated charge for liquor and the
reasonable gratuity are not taxable. The service charge, which is not in lieu
of the gratuity, is taxable. The amount of $1,085, therefore, is subject to
tax.
(5)
Sale of
food and beverages by food retailers and nonfood retailers. Generally,
the sale of food and beverages, including candy and gum, by a food retailer or
a nonfood retailer is not subject to tax. However, the sale of selected food or
beverage items, as defined in this section, by a food retailer or a nonfood
retailer is subject to tax. If a food retailer or a nonfood retailer operates
an eating establishment, the sale of food and beverages from the eating
establishment is subject to tax.
Examples:
(i)
"B" bakery sells baked goods, soft drinks, coffee, prepackaged and hand-dipped
ice cream. The sale of baked goods and prepackaged ice cream by "B" is not
subject to tax. However, the sale of soft drinks, coffee and hand-dipped ice
cream by "B" is subject to tax.
(ii) "D" delicatessen sells meat and cheese
by the pound, hoagies, sandwiches, prepared cold salads, hot beans, hot
macaroni and cheese, cold hard-boiled eggs and hot barbecued chicken. The sale
of meat and cheese by the pound, prepared cold salads and cold hard-boiled eggs
by "D" is not subject to tax. The sale of hoagies, sandwiches, hot beans, hot
macaroni and cheese and hot barbecued chicken by "D" is subject to
tax.
(iii) "S" service station
sells frozen ice cream products, small bags of potato chips, candy and heated
sandwiches. The sales are not made from a vending machine. The sale of frozen
ice cream products, bags of potato chips and candy by "S" is not subject to
tax. The sale of heated sandwiches by "S" is subject to tax.
(iv) "C" candy store sells candy products.
"C" also sells ice cream products such as hand-dipped ice cream by the cone,
dish, pint or quart as well as coffee, milk shakes and ice cream sodas. The
sale of candy by "C" is exempt from tax. However, the sale of coffee and
hand-dipped ice cream products, such as cones, dishes, pints, quarts, milk
shakes and ice cream sodas is subject to tax.
(v) "D" department store, a nonfood retailer,
operates a restaurant located on its premises. The restaurant menu includes
appetizers, salads, entrees, side dishes, desserts and beverages. The sale of
food or beverage items by "D" from the restaurant is subject to tax.
(6)
Sale of food and
beverages at or from a school or church.
(i)
Schools and churches.
Generally, the sale of food or beverages by a school or church is exempt from
tax, if the sales are in the ordinary course of the activities of the school or
church. For example, the preparation and sale of a dinner to church members by
a church organization in connection with a church function would be in the
ordinary course of the activities of the church. However, if a school or church
sells selected food or beverage items to the public or operates an eating
establishment from which food or beverages are sold to the public in
competition with other organizations or businesses selling similar taxable
items, the school or church is deemed to be operating an unrelated trade or
business with respect to the sales and is required to collect tax.
Examples:
(A)
"S" public school prepares lunch at the school cafeteria which it sells to its
students. The sale of the lunch by "S" would not be subject to tax since the
sale of the lunch to the students is in the ordinary course of the activities
of the school.
(B) "C" church
operates a hoagie stand at the annual Farm Show. There are other vendors
located at the Farm Show selling taxable sandwiches, coffee and soft drinks.
The sale of hoagies by "C" is subject to tax since "C" is operating an
unrelated trade or business.
(C)
"U" university operates a restaurant on university property. The restaurant
holds itself out to and primarily sells meals to the public, rather than the
students and faculty. The operation of the restaurant by "U" is not in the
ordinary course of its school activities. The sale of food and beverages by the
restaurant is subject to tax.
(D)
"C" church offers catered meals to the public on a regular basis. The meals may
be served on or off the church premises. The business of providing the catered
meals is an unrelated trade or business of the church. The sale of food and
beverages by the church is subject to tax.
(E) "C" church caters wedding receptions,
funeral luncheons and anniversary dinners at the church in connection with
member and nonmember church weddings, funerals and anniversaries. The business
of providing catered receptions, luncheons and dinners is an unrelated trade or
business of the church. The sale of food and beverages is subject to
tax.
(ii)
Businesses located on the premises of a school or church.
Generally, the sale of food or beverages by a business located on the premises
of a school or church is exempt from tax, if the sale is in the ordinary course
of the activities of the school or church. For example, the sale of lunch to
students at a public school by a business would be in the ordinary course of
the activities of a school. However, if the business sells selected food or
beverage items to the public or operates an eating establishment from which
food or beverages are sold to the public in competition with other businesses
selling similar items, the business is required to collect tax upon its sale of
food and beverages to the public whether or not they are consumed on or off the
premises of the school or church.
Examples:
(A)
"V" vending machine sales company, a private business, operates vending
machines at various locations at "H" college from which food and beverages,
including selected food and beverage items, are sold. The vending machines have
been installed for the primary use by students and faculty of "H." The sale of
food and beverages from the vending machines by "V" is exempt from
tax.
(B) "P" pizzeria, a private
business, operates a pizza shop near the premises of "C" college. "P" delivers
the pizza it sells to its customers. The sale of pizza by "P" to students and
faculty located on the premises of "C" is subject to tax, whether or not the
pizza is delivered to the customer on school premises.
(C) "R" restaurant, a private business,
operates an eating establishment on the premises of "C" college primarily for
"C" college students. The public is also permitted to utilize "R's" restaurant
facilities and purchase meals from "R." The sale of food and beverages by "R"
to the public is not in the ordinary course of the activities of "C" college.
"R" need not collect sales tax upon food and beverages sold to students and
faculty. However, the food or beverages sold to the public is subject to
tax.
(7)
Sale of food and beverages by an exempt organization other than a
school or church. Generally, the sale of food or beverages by an
exempt organization, as defined at §
32.1 (relating to definitions), to
the members of the organization in connection with an organizational activity
is exempt from tax. However, if the organization sells selected food or
beverage items to the public or operates an eating establishment from which
food or beverages are sold to the public, the sale is subject to tax as an
unrelated trade or business, unless the sale qualifies as an isolated sale as
defined at §
32.1.
Examples:
(i)
"E," an exempt charitable organization, sells hoagies to the public on three
separate Saturdays during a calendar year from a location at which no other
organizations or businesses are selling similar items. "E" makes no other
taxable sales during the calendar year. The sale by "E" qualifies as an
isolated sale under §
32.1. "E" would not be required to collect sales tax
on its sale of hoagies.
(ii) "C"
charity, an exempt organization, for the purpose of raising funds, sells
hoagies to its members and the public on the first Saturday of each month
during the calendar year. The sale by "C" does not qualify as an isolated sale
as defined by §
32.1 but constitutes an unrelated
trade or business of the organization. The sale of hoagies by "C" is subject to
tax including those sales made during the first 3 months of the calendar
year.
(iii) "F" fire company, an
exempt organization, sells fried fish dinners each Friday evening. The dinners
are consumed on the premises. "F" operates as an eating establishment. The sale
of fish dinners by "F" does not qualify as an isolated sale as defined by
§
32.1 but constitutes an unrelated
trade or business of the organization. The sale of fish dinners by "F" is
subject to tax including those sales made during the first 3 weeks of the
calendar year.
(8)
Sale of food and beverages by hospitals, nursing, retirement and
convalescent homes and summer camps. The sale of food and beverages,
including candy and gum, by hospitals, nursing, retirement and convalescent
homes and summer camps to employes, visitors, staff and the general public is
subject to tax. However, the value of furnished meals to patients, residents or
campers which is included in the total charge for resident or patient care or
camp activity is not subject to tax.
Examples:
(i)
"H" hospital operates an employe dining room at which employes, staff and their
guests may purchase food and beverages. The dining room of "H" qualifies as an
eating establishment. The sale of food and beverages by "H" is subject to
tax.
(ii) "N" nursing home operates
a dining room at which patients, employes, staff and guests may eat. The dining
room of "N" is an eating establishment. Therefore, the sale of food or
beverages by "N" to employes, staff and guests is subject to tax. However, the
value of the food provided by "N" to residents and patients which is included
in the charge for residents' or patients' care is not subject to tax.
(iii) "R" retirement facility operates a
dining room for its residents, employes, staff and guests. Residents are
required to eat one meal at the dining room each day and are automatically
billed for this meal with their other charges. Residents may eat additional
meals for which they are billed. Charges to the residents for required meals
are not taxable. The sale of meals to employes, staff and guests, including the
optional meals sold to residents is subject to tax.
(9)
Sale of food and beverages by
nonprofit associations which support sports programs. The sale of food
and beverages by a nonprofit association which supports a sports program and
which operates at a fixed location on public property is exempt from
tax.
(10)
Sale of food and
beverages at fairs and carnivals. The term eating establishment is
defined to include a fair or carnival. Therefore, the sale of food and beverage
items is subject to tax when sold at a fair or carnival. Examples of taxable
food and beverages include: coffee; french fries; candied applies; funnel
cakes; cookies; candy; cotton candy; baked potatoes; waffles; doughnuts; ice
cream by the cup, dish or cone; soup; soft drinks; yogurt; bread sticks; cider
by the cup; ice-based products such as flavored ice cones; popcorn; onion
rings; cooked chicken; cooked pork ribs; soft pretzels; hoagies; sandwiches;
nuts and similar items. The sale of grocery type items from an identifiable
location by a vendor who operates as a food retailer and maintains separate
records is exempt from tax. However, if the vendor fails to maintain a separate
identifiable location and separate records for the sale of grocery type items,
all sales are subject to tax.
Example:
"A" apple grower operates a stand at an apple festival.
"A" sells cider by the glass as well as prepackaged quarts, half-gallons and
gallons. The sale of apple cider by the glass is subject to tax. The sale of
prepackaged quarts, half-gallons and gallons of apple cider is exempt if the
sale is made from an identifiable location and "A" maintains separate records.
If the sale is not made from an identifiable location and "A" fails to maintain
separate records, all sales are subject to tax.
