Current through Vol. 42, No. 1, September 16, 2024
(A)
General provisions. All sellers with prepared food sales greater than 75% of their total food sales and utensils are made available by way of a self-serve station or otherwise, are required to collect state sales tax on all food sales, unless the item meets the serving-size exception in subsection (c). Examples of sellers that usually exceed the 75% rule include, but are not limited to:
(1) Cafes
(2) Restaurants
(3) Fast food restaurants
(4) Food court restaurants
(5) Diners
(6) Delicatessens
(7) Food trucks
(8) Concession stands
(9) Cafeterias
(10) Coffee shops
(11) Sports/entertainment arena sellers
(12) Hot dog stands
(13) Juice bars
(14) Popcorn/Kettle corn sellers
(15) Sandwich shops
(16) Ice cream shops
(17) Sushi bars
(18) Taverns, bars, and grills
(19) Donut shops
(B)
Calculation of PFS%. All sellers that primarily sell prepared food and food sold with eating utensils provided by the seller shall annually calculate their PFS%.
(1) If a seller has a PFS% of greater than 75%, food and food ingredients, bottled water, candy, and soft drinks are taxed at the state sales tax rate of 4.5%.
(2) If a seller has a PFS% of 75% or less, food and food ingredients, bottled water, candy, and soft drinks are subject to the state sales tax rate of 0%. All sales of prepared food are taxed at the state sales tax rate of 4.5%.
(3) The 75% test is determined in the following manner:
(A) The numerator is the total sales of prepared food as defined in Section 710:65-13-570.
(B) The denominator is the total sales of food, food ingredients, prepared food, bottled water, candy, and soft drinks.
(C) Exclude sales of alcoholic beverages, tobacco, motor vehicle fuels, and all other non-food sales from both the numerator and the denominator.
(4) On or before January 31 of each calendar year, sellers must calculate a PFS% using data from the prior year to calculate the PFS% for the current year. Sellers with multiple locations will only calculate one PFS%. New businesses shall make a good faith estimate of a PFS% for the first year. The good-faith estimate shall be reviewed after three months and adjusted, if appropriate.
(5) The Tax Commission may request documentation from sellers to substantiate the PFS% calculation.
(C)
Exception to the 75% rule. Even if more than 75% of the sales of food by the seller are sales of prepared food, sales of food or food ingredients are subject to the state sales tax rate of 0% if:
(1) The food item contains four or more servings packaged as one item for a single price;
(2) The food item has not been made or heated by the seller; and
(3) Eating utensils are made available to the buyer. However, if the seller's customary practice is to physically hand or otherwise deliver a utensil to the customer as part of the sales transaction, the food item is taxed at the state sales tax rate of 4.5%.
(D)
Serving size determination. To determine the number of servings in the food item, use the information on the product label. If there is no product label, the seller can make a reasonable determination as to the number of servings in the food item. If the transaction is for less than four servings, or the seller does not maintain adequate records of these sales, these food sales are taxed at the state sales tax rate of 4.5%.
