Sales & Use Tax Reduction on Food & Food Ingredients

Due to legislative actions, tax laws may change frequently. The following information is not all-inclusive and should not be used as a legal reference; it is provided as a reference tool for general guidance.

Applicable Legislation

General Session – H.B. 109, Sales and Use Tax, Food and Food Ingredients

Third Special Session – H.B. 3004, Sales and Use Tax Relating to Food

Background

2006 H.B. 109 and H.B. 3004 reduced the state sales and use tax rate on grocery food (food and food ingredients) from 4.75 percent to 2.75 percent. The reduction went into effect on January 1, 2007.

2007 S.B. 223 reduced the statewide sales and use tax rate on grocery food to 3.00 percent (reduced state rate of 1.75 percent, local rate of 1.00 percent, and county option rate of .25 percent).  The change went into effect on January 1, 2008.

Top of Page

Flow Chart - Is it taxed at the lower rate or the full rate?

Use this flow chart to help determine whether an item should be taxed at the full or reduced rate.

Top of Page

Product List: Food versus Non-Food Matrix
Product Description	Food	Non-Food/ Prepared Food	Comments
Breath Mints	x		Nutrition fact box is food vs. Drug fact box is not food
Chicken meal deal		x	8 pieces/salad/rolls
Deli meats by weight	x		Cut and repackaged by seller
Deli salad by size or weight	x		If utensils* are not available in the area
Deli salsa by size or weight	x		Made in the store
Deli sandwich by weight		x	If made by seller
Donuts without utensils*	x		If utensils* are not available in the area
Hot French bread	x
Ice, block		x	Ice sold in blocks or dry ice is used for cooling and is not food
Ice, crushed	x		Ice sold by a food retailer in cubes or crushed can be ingested for taste
Ice, dry		x	Ice sold in blocks or dry ice is used for cooling and is not food
Meat/cheese platter, set price		x
Meat/cheese platter, sold by weight		x
MEDICATIONS, over-the-counter
Antacids		x	Drug fact box is not food vs. Nutrition fact box is food
Anti-diarrhea		x	Drug fact box is not food vs. Nutrition fact box is food
Anti-gas		x	Drug fact box is not food vs. Nutrition fact box is food
Anti-smoking patches		x	Drug fact box is not food vs. Nutrition fact box is food
Breath sprays		x	Drug fact box is not food vs. Nutrition fact box is food
Breath strips		x	Drug fact box is not food vs. Nutrition fact box is food
Cough drops		x	Drug fact box is not food vs. Nutrition fact box is food
Ear drops		x	Drug fact box is not food vs. Nutrition fact box is food
Epson salts		x
Eye drops		x	Drug fact box is not food vs. Nutrition fact box is food
Laxatives		x	Drug fact box is not food vs. Nutrition fact box is food
Medication for hair loss		x	Drug fact box is not food vs. Nutrition fact box is food
Motion sickness		x	Drug fact box is not food vs. Nutrition fact box is food
Nasal sprays		x	Drug fact box is not food vs. Nutrition fact box is food
Oral antismoking		x	Drug fact box is not food vs. Nutrition fact box is food
Pain/headache		x	Drug fact box is not food vs. Nutrition fact box is food
Sleep aid		x	Drug fact box is not food vs. Nutrition fact box is food
Throat sprays		x	Drug fact box is not food vs. Nutrition fact box is food
Mixed fruit tray, price per tray		x
Mixed fruit tray, sold by weight		x
Nutritional supplements	x		Nutrition fact box is food vs. Drug fact box is not food
Pam (non-stick spray for pans)	x
Pet food		x
Produce plastic bags or mesh bags with twist ties	x		Retailer buys tax exempt and builds into price of product
Pumpkin seeds	x		If packaged for eating
Rock salt		x	Rock salt is less pure and is commonly used for ice cream making
Salad bar sold by weight	x		If utensils* are not available in the area
Self-serve fountain drinks		x	16, 32, 48 oz. cups
Shiskabobs made in store	x		Raw meat
Store-dyed Easter eggs	x
Sunflower seeds	x		If packaged for eating
Toothpaste		x	Drug fact box is not food vs. Nutrition fact box is food
Vaporizer/humidifier		x	Drug fact box is not food vs. Nutrition fact box is food
Vegetable garden seeds		x
Vitamins	x		Nutrition fact box is food vs. Drug fact box is not food
Vitamins for hair loss	x		Nutrition fact box is food vs. Drug fact box is not food
Water, bottled	x
Water, distilled	x
Water, flavored bottled	x

*Utah Code 59-12-102(66) defines utensils as a plate, knife, fork, spoon, glass, cup, napkin or straw.

Top of Page

Examples

Example #1:

A customer purchases milk and bread. These items are grocery food (and food ingredients). During check-out, the seller will collect the reduced statewide grocery food sales tax rate of 3.00 percent.

Example #2:

A customer purchases milk, bread and clothing in one transaction. The milk and bread are grocery food (food and food ingredients); the clothing is not food. The seller will collect the reduced statewide grocery food sales tax rate of 3.00 percent on grocery food items and the combined sales tax rate on the clothing purchase based on the seller's location.

For instance, the combined sales tax rate in Cedar City is 6.00 percent. In this example, the statewide sales tax rate for a purchase of milk and bread would be 3.00 percent and the combined sales tax rate for the clothing would be 6.00 percent. The Cedar City seller will collect 3.00 percent sales tax on the milk and bread and 6.00 percent sales tax on the clothing from the customer.

Example #3:

A customer purchases a fruit basket prepared by the seller that includes a variety of fruit in a wicker basket. The fruit is a grocery food (food and food ingredient), but the wicker basket is not food. The fruit basket is sold as one item by the seller. A sale that combines grocery food and non-food elements into an item sold for one price is a bundled transaction. During check-out, the seller will collect the full combined sales tax rate on the fruit basket purchase based on the seller's point of sale location.

For instance, the combined sales tax rate in Weber County is 6.80 percent. In this example, the seller will collect 6.80 percent sales tax from the customer for this bundled transaction.

Example #4:

A customer purchases a combo meal that includes a sandwich, chips and drink. The combo meal is prepared food sold for one price as a bundled transaction. During check-out, the seller will collect the full combined sales tax rate, plus the restaurant tax if applicable, on the combo meal transaction based on the seller's point of sale location.

For instance, the combined sales tax rate in Logan city is 6.55 percent and the restaurant tax is 1.00 percent. In this example, the Logan city seller will collect the combined sales tax rate of 6.55 percent plus the restaurant tax of 1.00 percent, for a total sales tax rate of 7.55 percent on the transaction.

Top of Page

Industry-Specific Examples

Bakery Items

Bakeries and tortilla manufacturing facilities are specifically identified in the prepared food definition. In part, the definition states that prepared food does not include the following if sold without eating utensils provided by the seller:

• Food and food ingredients sold in an unheated state by weight or volume and as a single item, or a bakery item, including a bagel, bar, biscuit, bread, bun, cake, cookie, croissant, danish, donut, muffin, pastry, pie, roll, tart, torte or tortilla.

For example:

• A customer goes to a bakery that sells donuts and buys one donut or one dozen donuts - no utensils; this is food taxed at the reduced rate.



• While dining in a restaurant, a customer wants to purchase some of the restaurant’s rolls. Whether the customer purchases one roll or several, this is a food item. Because the transaction occurs in a restaurant, tourism tax applies on the transaction. If the restaurant sells the rolls with utensils, the rolls are prepared food taxed at the full combined rate plus tourism (restaurant) tax. If the restaurant sells the rolls without utensils, the purchased rolls are grocery food taxed at the lower statewide rate plus tourism (restaurant) tax.

Deli Inside Another Store

Prepared food does not include grocery food sold in an unheated state by weight or volume and sold as a single item.

For example, if a customer shopping at a store:

• Goes to the self-serve salad bar, creates a salad, then has it weighed and priced at the cash register and no utensils are provided at the salad bar. This is a grocery food item sold at the lower statewide rate because it is unheated and sold by weight. However, it is a prepared food at the full rate if utensils are provided at the salad bar.



• Goes to the deli and buys fried chicken and a pound of sliced cheese. The fried chicken is a prepared food taxed at the full rate and the sliced cheese is food taxed at the lower rate (the cheese was only cut and repackaged).



• Purchases one pound of potato salad from the deli or pre-packaged potato salad prepared by the deli from the display case. If utensils are made available by the seller, the potato salad is a prepared food taxed at the full rate. If no utensils are available, it is a grocery food ingredient at the reduced rate.

Vending Machine Sales

To determine the sales tax rate for a vended item, look at four issues:

1. What is the item? Vended items that cannot be ingested (nail clippers, combs, toys, etc.) are taxed at full rate.



2. Is the item heated by the seller? In part, the definition for prepared food states that it is “sold in a heated state or heated by a seller.” If heated, the vended item is prepared food and taxed at the full rate.



3. Does the seller make utensils available to the buyer? A purchase is considered prepared food taxed at the full rate if the seller provides tables & chairs, condiments, a microwave, or utensils (plate, knife, fork, spoon, glass, cup, napkin, or straw) in the area near the vending machines.



4. Does the item have two or more food ingredients mixed by the seller? In part, the definition for prepared food states that it is sold “with two or more food ingredients mixed or combined by the seller.”

For example:

• Pack of gum from a vending machine – grocery food taxed at lower statewide rate
• Bag of chips or can of soda – grocery food taxed at lower statewide rate
• Pre-mixed cup of hot chocolate – prepared food taxed at full rate
• Slice of pizza heated by seller – prepared food taxed at full rate
• Slice of pizza heated by buyer – prepared food (two or more ingredients mixed by the seller) taxed at full rate
• Sandwich – prepared food (two or more ingredients mixed by the seller) taxed at full rate

Vendors may use the 150% alternate method of reporting vending machine sales of food, food ingredients and prepared food items. (Vending machine operators who sell vended food, beverage, and dairy products for under $1 may report an amount equal to 150 percent of the cost of items as goods consumed.)

Vitamins and Food Supplements

Vitamins and food supplements are grocery food taxed at the lower statewide rate.

Sales Tax: Full Rate and Reduced Rate Industry Chart Effective January 1, 2007
Seller	Item	Sales Tax Rate	Restaurant Tax4
Grocery Store	Grocery food	Reduced	No
	Non-food items	Full	No
	Salads prepared by seller	Full1	No
	Salad bar with utensils	Full1	No
	Salad bar, no utensils	Reduced3	No
	Deli items (meat, salad) with utensils	Full1	No
	Deli items (meat, salad) no utensils	Reduced3	No
	Bakery items with utensils	Full1	No
	Bakery items no utensils	Reduced3	No
	Rotisserie items	Full1	No
	Restaurant inside grocery store	Full1,2	Yes
	Food court inside store	Full1,2	Yes
Restaurant, stand alone	Prepared food	Full1,2	Yes
	Grocery food	Reduced3	Yes
	Candy bars, etc.	Reduced3	Yes
Edible Items Purchased in Restaurants	Purchase a pie, muffins, rolls, etc. from restaurant no utensils	Reduced3	Yes
	Purchase a pie, muffins, rolls, etc. from restaurant with utensils	Full1	Yes
Bagel/Donut Shop	Bagels, donuts with napkin	Full2	Yes
	Prepackaged container of cream cheese, milk or juice with utensils	Full1	Yes
	Prepackaged container of cream cheese, milk or juice no utensils	Reduced3	Yes
Convenience Store	Soft drinks in cooler	Reduced3	No
	Soft drinks from fountain	Full1,2	No
	In-store restaurant (sandwich shop, etc.)	Full1,2	Yes
	Grocery food	Reduced3	No
	Hot dogs, burritos, etc.	Full1	No
Pizza	Delivered to customer's location	Full1	Yes
	Consumed at pizza restaurant	Full1,2	Yes
	"Take & bake" cooked at home	Full1,2	No
Dinner Theater	All	Full1,2	Yes
Movie Theater	Fountain drinks	Full1,2	No
	Candy bars	Reduced	No
	Popcorn, etc.	Full1,2	No
Bakery, traditional	Grocery food	Reduced3	No
Medications	Non-prescription over-the-counter items such as aspirin, cough drops, etc. that are ingested or chewed. Please see Product Matrix.	Full	No
	Prescription items that qualify as a drug	Tax exempt	No

1	Taxed at full rate because items are mixed or combined by seller and/or heated by seller, or utensils are provided.
2	Taxed at full rate because items are sold with utensils (plate, knife, fork, spoon, glass, cup, napkin or straw).
3	Assumes items are sold without utensils (plate, knife, fork, spoon, glass, cup, napkin or straw).
4	Restaurant tax of up to 1.00 percent where imposed. As of July 2008, imposed by all counties except Emery, Millard, Piute and San Juan Counties.

Top of Page

Reporting and Remitting

The reduced statewide sales tax rate on grocery food transactions went into effect on January 1, 2008. Affected sellers will report the full and reduced rate on form TC-62S or TC-62M, Sales and Use Tax Return.

Seller Discount

A seller that files monthly may retain 1.31 percent of state and local taxes due to the Tax Commission. This includes transactions for grocery food. In the case of grocery food sold at the 3.00 percent statewide rate, the seller discount will be calculated as if the grocery food had been sold at the full rate.

Top of Page

Additional Information

For additional information, call the Tax Commission at (801) 297-7705 or toll free at 1-800-662-4335 ext. 7705 or email to taxmaster@utah.gov.

Top of Page

Definitions

Grocery food (food and food ingredients) are substances regardless of whether in liquid, concentrated, solid, frozen, dried, or dehydrated form; and that are sold for ingestion or chewing by humans and consumed for the substance's taste or nutritional value. Food and food ingredients do not include an alcoholic beverage, tobacco or prepared food.

---

Prepared food means food sold in a heated state or heated by a seller with two or more food ingredients mixed or combined by the seller for sale as a single item; or food sold with an eating utensil provided by the seller, including a plate, knife, fork, spoon, glass, cup, napkin, or straw.

Prepared food does not include:

• food that a seller only cuts, repackages, or pasteurizes, or
• raw eggs, raw fish, raw meat, raw poultry, or
• a food containing an item described below and recommended by the Food and Drug Administration (FDA) in Chapter 3, Part 401.11 of the FDA Food Code that a consumer cook the items to prevent food borne illness, or
• the following if sold without eating utensils provided by the seller:
• food and food ingredients sold by a seller if the seller's proper primary classification under the 2002 North American Industry Classification System is manufacturing in Sector 311, Food Manufacturing, except for Subsector 3118, Bakeries and Tortilla Manufacturing;
• food and food ingredients sold in an unheated state by weight or volume and as a single item, or a bakery item, including a bagel, bar, biscuit, bread, bun, cake, cookie, croissant, danish, donut, muffin, pastry, pie, roll, tart, torte or tortilla.

An eating utensil provided by the seller does not include a container or packaging used to transport the food.

---

Bundled transactions are the sale of two or more items of tangible personal property (TPP) if one or more items of TPP is grocery food and the items of TPP are distinct and identifiable, and sold for one price that is not itemized. Bundled transaction does not include the sale of TPP if the sales price varies or is negotiable on the basis of selection by the purchaser of the items of TPP included in the transaction.

For purposes of this definition, TPP that is distinct and identifiable does not include:

• packaging that accompanies the sale and is incidental or immaterial to the sale of the TPP;
• TPP provided free of charge with the purchase of another item of TPP; or
• an item of TPP included in the definition of purchase price.

An item of TPP is provided free of charge with the purchase of another item of TPP if the sales price of the purchased item does not vary depending on the inclusion of the TPP provided free of charge.

---

Purchase price and sales price mean the total amount of consideration valued in money and for which tangible personal property or services are sold, leased or rented. Purchase price and sales price include:

• the seller's cost of the tangible personal property or services sold;
• expenses of the seller, including:
• the cost of materials used;
• a labor cost;
• a service cost;
• interest;
• a loss;
• the cost of transportation to the seller; or
• a tax imposed on the seller; or
• a charge by the seller for any service necessary to complete the sale.
  

Purchase price and sales price do not include:

• a discount (cash, term or coupon) allowed by a seller, taken by a purchaser on a sale and that is not reimbursed by a third party; or
• the following if separately stated on an invoice, bill of sale, or similar document provided to the purchaser:
• the amount of a trade-in;
• interest, financing or carrying charges if from credit extended on the sale of tangible personal property or services;
• a tax or fee legally imposed directly on the consumer;
• a delivery charge; or
• an installation charge.

Drug means a compound, substance, or preparation, or a component of a compound, substance, or preparation that is recognized in the:

• official U.S. Pharmacopoeia, official Homeopathic Pharmacopoeia of the U.S., official National Formulary, or a supplement to these publications;

and intended for use in the diagnosis, cure, mitigation, treatment, or prevention of disease; or intended to affect the structure or any function of the human body.

---

Restaurant includes any coffee shop, cafeteria, luncheonette, soda fountain, or fast-food service where food is prepared for immediate consumption. Restaurant does not include:

• any retail establishment whose primary business or function is the sale of fuel or food items for off-premise, but not immediate, consumption; and
• a theater that sells food items, but not a dinner theater.

---

Top of Page