Food tax in Texas and the sale of consumables are governed according to Texas Administrative Code Rule 3.293 and Texas Tax Code Section 151.314. These rules dictate what is subject to tax when it comes to the sale of food products. If you are a vendor of food products in Texas, it’s essential that you abide by these laws. As a consumer, it’s also important to understand when you will and will not be taxed.
Food Tax in Texas
According to Texas Tax Code Section 151.314, food products that will be consumed by humans are exempted from tax. The code defines food products as cereals and cereal products, milk and milk products, margarine, meat, poultry, fish, eggs, vegetables, fruits, spices, condiments, salt, sugar, coffee, tea, cocoa products and snacks. This nontaxable items list for Texas is consistent regardless of the retailer at which of these items are purchased. Note that soft drinks, ice and candy are not considered food products in this context, and therefore will be taxed.
Restaurant tax in Texas is treated a bit differently. Ready-to-eat food is taxable in Texas even if it is sold as takeout or to-go. Therefore, if you are dining at a restaurant, expect to pay sales tax on your bill. Bakery items sold without plates or eating utensils are not taxable, however. This is true regardless of their size. For instance, a whole cake and a slice of cake are treated the same way.
Grocery Tax in Texas
In the state of Texas, food products like flour, sugar, bread, milk or produce are not taxable. However, other items that you might purchase at the grocery store, such as paper products, pet food, shampoo or greeting cards are subject to sales tax. Alcoholic beverages like beer and wine are also taxable. Depending on the location of the store, it’s also possible that local sales tax for cities, counties or special districts may apply.
When you are shopping for groceries, discounts received as a result of sales or coupons will impact the amount of tax due. Tax is owed only on the final discounted price of a taxable item in Texas.
When it comes to prepared foods purchased at a grocery or convenience store, the Texas laws become complicated. Any food that is made by combining two or more ingredients and is sold by weight or volume as a single item, such as salad, pesto or hummus, is subject to tax. However, food that is typically reheated prior to eating such as macaroni and cheese, or food that has been cut or repackaged like produce trays, are not taxable. If you are purchasing fried or rotisserie chicken, French fries, chili, soup or other foods that the store has heated for you, sales tax will be due. This includes any food that is stored cold that the seller heats before you take it off the premises.