Each state taxes food items, but all states do so differently. Texas Administrative Code Rule 3.293 and Texas Tax Code Section 151.314 govern the sale of food in the Lone Star State's retail establishments, including grocery stores, restaurants, convenience stores and bakeries. Texas has a 6.25% sales and use tax on all retail sales, but there are some tax exemptions when it comes to food. Cities, counties, transit authorities and special purpose districts can also impose their own sales and use tax at a maximum of 2% for a combined rate of 8.25%.
Grocery Sales Tax in Texas State
Grocery items like bread, milk, meats and produce are exempt from taxes. Cut-up, pasteurized or repackaged consumables, including fruits, vegetables and cheese trays, are also exempt from the Texas food tax, as are foods that consumers must heat themselves before eating. For example, if a grocery store has a microwave that someone can use to reheat a hot dog or burrito, there is no tax.
This is not the case for all retail store foods. Snacks are taxable items if sold individually, come less than 2.5 ounces a serving, or when sold through a vending machine like gum and candy. But they are exempt when sold prepackaged in a container with more than one individual-sized item, such as a larger bag of chips with six smaller bags inside. Taxable snacks can include, but are not limited to:
- Breakfast bars, yogurt bars, nutrition bars, sports bars, protein bars and granola bars.
- Hard pretzels, chips, crackers, pork rinds and corn nuts.
- Sherbet, ice cream and frozen yogurt.
- Juice or ice pops, sorbet and frozen fruit items with less than 50% fruit juice by volume.
- Nuts, except candy-coated or pine nuts.
- Popcorn of any kind.
- Snack or trail mixes.
- Sunflower or pumpkin seeds.
Bakery Products and Texas Sales Tax
Texas defines a bakery as a retail establishment where more than half the sales consist of baked goods that are not consumed at the location and are sold from a counter or display case. Bakery items sold under this definition are not taxable. These can include, but are not limited, to:
- Danish pastry.
- Food products used for baking, such as baking chips and mixes, icing, sprinkles and other edible decorations.
There are some exceptions to this rule. If someone sells any of these baked goods with eating utensils, those items are taxable. It doesn't matter if they are individual or whole portions – utensils change their definition to prepared food. Texas defines utensils as knives, forks, spoons, trays, plates, glasses, cups, straws and chopsticks. It does not consider napkins, plastic clam shells, foam containers or wax paper to be utensils.
Taxable and Nontaxable Soft Drinks
Texas taxes a variety of soft drinks, including:
- Non-carbonated and carbonated nonalcoholic beverages with natural or artificial sweeteners.
- Powdered drinks and drink mixes that come canned, bottled or frozen, or powdered drinks and drink mixes.
- Punches and "ades," such as lemonade, with less than 50% fruit or vegetable juice by volume.
- Flavored water and sports drinks like Gatorade or Powerade.
These beverages are exempt if they contain a "Supplement Facts" panel from the Food and Drug Administration (FDA) on their packaging; if they contain milk, milk substitutes like plant-based milk, and other milk products; or if they contain more than 50% vegetable or fruit juice by volume. Water products, including mineral, spring and sparkling waters, are tax exempt.
Coffee and Tea Taxes in Texas
Coffee and tea are both taxable and nontaxable, depending on their packaging and consumption. They are taxable as bottled or canned items containing natural or artificial sweeteners; when they are sold heated; or when they are sold in a glass or cup with a straw.
Nontaxable coffee and tea beverages in Texas include:
- Coffee and tea unsweetened in bottles or cans.
- Coffee and tea pods.
- Instant coffee or tea.
- Coffee beans or ground coffee.
- Teabags and loose teas.
Prepared Food Taxes in Texas
Texas considers most prepared food to be taxable, such as hot consumables sold after the seller heats them. Examples include pizza, burgers, burritos, soup, and frozen or cold foods heated by the establishment. Sandwiches are taxable, unless they are sold frozen or partially frozen, and the customer is the person who thaws or heats them. The state also charges taxes for food and beverages that a customer can eat immediately from a deli, lunch counter or location such as a grocery or convenience store, as well as prepared foods sold from vending machines.
Food that combines two or more ingredients sold as one item – for example, a salad – and made in-store is taxable. Hot drinks are taxable, as are cold drinks sold with meals or utensils.
Restaurant Food Taxes and Discounts
Texas considers ready-to-eat food from restaurants as taxable, even if the establishment sells it to go. If the restaurant gives customers complimentary meals, they are not taxable. However, their ingredients may be taxable, if the state taxed those individually in the first place – for example, raw meat and vegetables used for the meal are exempt from taxes, but the soft drinks that come with a meal are taxable, even if they are are given away.
Texas establishments that sell two meals for the price of one can tax only the one that the customer pays for – the "free" meal is exempt. The state treats coupons as discounts if the restaurant owner is not reimbursed for the discounted amount. For example, if the establishment owner publishes a $5 coupon, and a customer uses it toward a $15 meal, the tax applies to only $10.
A hot meal purchased with a Lone Star Card (Texas EBT card) is also exempt, if the establishment is authorized to accept the card from homeless, disabled or elderly people through the Supplemental Nutrition Assistance Program (SNAP), a federal nutrition assistance program.
Employee Gratuities and Meals
No tax is due on any voluntary tip that the customer pays in addition to their meal price. Tax is also not due on mandatory gratuities of 20% or less if it is clearly labeled with the words "tip" or "gratuity" on the bill, and distributed only to restaurant workers who provide regular service. Mandatory gratuities that are over 20% are taxable.
Meals furnished to restaurant employees immediately before, during or after a work shift are exempt from taxes. However, this is only the case if the restaurant provides these meals for the owner's convenience, and the employees are involved in preparing and serving the food.
- Texas State Comptroller: Sales and Use Tax
- Texas Legislature: Texas Administrative Code Section 3.292 State and Local Sales and Use Taxes
- Find Law: Texas Tax Code - TAX Section 151.314 Food and Food Products
- Texas State Comptroller: Grocery and Convenience Stores
- Texas State Comptroller: Restaurants and the Texas Sales Tax
- EBTCardBalance: What You Can Buy With Your Texas Lone Star Card
Michelle Nati is an associate editor and writer who has reported on legal, criminal and government news for PasadenaNow.com and Complex Media. She holds a B.A. in Communications and English from Niagara University.