Texas imposes a maximum of 8.25 percent sales tax on the sale of tangible personal property. Merchants who sell tangible personal property must impose the tax on each transaction and remit the taxes to the Texas Comptroller of Public Accounts, which is the state’s taxing agency. However, special rules apply to food sales. The Texas Administrative Code Rule 3.293 and Section 151.314 of the Texas Tax Code govern Texas food sales and tax laws. The Comptroller of Public Accounts enforces these laws and regulations.
In general, Texas taxes the sale of tangible personal property at a rate of 8.25 percent. In addition, local city and county governments have the option to impose additional local sales taxes to generate revenue for appropriate purposes. The Comptroller of Public Accounts requires licensed businesses file monthly, quarterly or annual sales tax returns and remit the sales taxes they have collected on behalf of the state. The Comptroller of Public Accounts issues sales tax permits to qualified businesses. However, certain food sales are exempt from the state’s sales tax.
The Texas Tax Code generally states that “food products for human consumption” are exempt from the state’s sales tax. The Texas Tax Code specifically designates cereals, poultry, milk, fish, vegetables, spices, condiments, fruits, sugars, salts, coffees and teas as exempt food. In addition to those foods, it exempts products derived from those items listed. For example, tomato sauce is exempt as a vegetable product. Any combination of the specifically mentioned foods is exempt from the state’s sales tax. Baked goods like pastries and donuts are exempt. In addition, meals prepared for school lunches, churches, hospitals and retirement homes are exempt.
The Texas Tax Code specifically places certain items outside of the exemption. These products include drugs, vitamins, medicines, soft drinks, candy, ice and artificial sweeteners. In addition, the sale of all food products prepared at restaurants, vending machines, cafeterias or other similar businesses does not enjoy the sales tax exemption. The exemption does not apply to food sales in prisons operated by or under contract with the state.
Contact a qualified attorney or tax professional licensed to practice in Texas to find out what obligations, if any, you have with regard to Texas food sales and tax laws, which are subject to change.