New Jersey Administrative Code
Title 18 - TREASURY - TAXATION
Chapter 24 - SALES AND USE TAX ACT
Subchapter 12 - RECEIPTS FROM THE SALE OF FOOD, FOOD INGREDIENTS AND PREPARED FOOD
Section 18:24-12.2A - Threshold test for determining whether utensils are provided by seller
Universal Citation: NJ Admin Code 18:24-12.2A
Current through Register Vol. 56, No. 18, September 16, 2024
(a) Food sold with eating utensils provided by the seller is subject to sales tax as prepared food.
(b) The threshold test for determining whether eating utensils have been provided by the seller is as follows:
1. Whether eating utensils are deemed to be
provided by the seller depends on whether the seller's annual sales of certain types
of prepared food make up more than 75 percent of its total sales of food and food
ingredients (excluding alcoholic beverages). The 75 percent threshold is calculated
as follows:
i. First, calculate the percentage of
food provided by the seller as follows:
(1)
Determine the numerator, which is made up of the total dollar value of sales of
prepared food that is either sold in a heated state or heated by the seller; plus
sales of prepared food made up of two or more food ingredients mixed or combined by
the seller for sale as a single item; plus sales of food that cannot be transferred
to the purchaser without plates, bowls, glasses, cups or other utensils (for
example, fountain beverages, salad bar); then
(2) Divide the numerator determined in (a)1i(1)
above by the total dollar value of all sales of food and food ingredients, including
prepared food, candy, dietary supplements, and soft drinks, but not including
alcoholic beverages. Application of the threshold test will depend upon whether the
result of that calculation is more than .75 (more than 75 percent) or .75 or less
(75 percent or less); and
ii.
Second, calculate the annual percentage of utensil usage as follows:
(1) The prepared food sales percentage will be
calculated by the seller for each tax year or business fiscal year, based on the
seller's data from the prior tax year or business fiscal year, as soon as possible
after accounting records are available, but not later than 90 days after the
beginning of the tax or business fiscal year;
(2) A single prepared food sales percentage will
be determined annually, for all of the seller's establishments in the State;
and
(3) A new business will make a good
faith estimate of its prepared food sales percentage for its first year. A new
business should adjust its good faith estimate prospectively after the first three
months of operation if actual prepared food sales percentages materially affect the
75 percent threshold test.
2. Application of the 75 percent threshold test
follows:
i. For sellers with a sales percentage of
75 percent or less, utensils are considered to be provided by the seller if the
seller's practice for the item (as represented by the seller) is to physically give
or hand the utensil to the purchaser, except that plates, bowls, glasses, or cups
necessary for the purchaser to receive the food (for example, fountain beverages,
dispensed milk, or salad bar) need only be made available.
ii. For sellers with a sales percentage greater
than 75 percent, utensils are considered to be provided by the seller if they are
merely made available to purchasers. Thus, utensils at a kiosk or common area are
treated as utensils provided by the seller.
(1)
For sellers who sell items that contain four or more servings packaged as one item
and sold for a single price, an item does not become prepared food based on the
seller having utensils available. However, if the seller physically gives or hands a
utensil to the purchaser, or plates, bowls, glasses, or cups are necessary for the
purchaser to receive the food, then the item is considered prepared food.
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