A recent comment on this post (can be found below) that pointed out an error in one of my calculations as to what was taxable and what was not has led to this new post as their comment was correct. I’ve been reading this law for over 2 hours now and a breakdown of the relevant subsections of Regulation 1603 is below.
So is it possible to order a coffee without paying tax? Yes, but…only if it has a separate price on the receipt (was not part of a “combo”), it was ordered “to-go” and comes in a “to-go” cup, and was not purchased in a drive-thru or from within a place that charges admission.
Another example…any food that is served hot, or was supposed to be served hot, or part of it is hot, is taxable regardless of ordering it “to-go” or not. The same is true for cold food, unless the retailer can segregate “to-go” sales from “for-here” sales, unless you buy it in a “drive-thru.” The convolutions are mind-numbing. I’d appreciate any other comments that help clarify this law, not just for me but anyone else reading this post.
- Regulation (a)
- This regulation is mostly about the taxation of food related to hotels, boarding houses and caterers. What is considered food sold for re-sale and what is not. Tax as it relates to free meals or free drinks that are part of the room charge, etc…
- Regulation (b)
- Tax applies to food you buy from a “drive-thru” location even though you are not eating it at the establishment and the food is prepared “to-go.” It is still subject to taxation.
- An exemption is made for buying something in “bulk” form which means it’s more than you would eat on the premises (like a tub of ice cream) and it was not given to you with utensils, dishes or trays which would suggest that you could potentially eat it on the premises which would then make it taxable. Lastly, you can not actually eat any of the “bulk” item on the premises because then it is taxable, as stated in (b) “and not consumed on the retailer’s premises….”
- If the retailer does sell something to you in bulk that is not meant to be eaten on the premises that you should not pay tax on, they have to have a line printed on the receipt that says something to the effect that “the merchandise purchased is not to be consumed on or near the location at which parking facilities are provided by the retailer.”
- Tax applies to food you buy from a “drive-thru” location even though you are not eating it at the establishment and the food is prepared “to-go.” It is still subject to taxation.
- Regulation (c)
- Tax applies to cold prepared food that is suitable for consumption on the premises, even if you get the food “to-go.” In other words, if it is possible for you to eat it at the premises, regardless of your intent not to do so, it’s still taxable since the possibilityof eating it there exists, unless…
- The seller has been able to setup his retail system so that cold food products that are “to-go” can be recorded as such and be distinguishable from cold food products sold “for here.” In other words, if the retailer can show evidence of how much he sold “to-go” versus “for here” then he does not have to charge tax on cold food products “to-go” because he will be exempt from paying tax on them too.
- Regulations (a), (b), (e) and (f) still apply though, so if the food meets any of those regulations, it’s still taxable.
- Tax applies to cold prepared food that is suitable for consumption on the premises, even if you get the food “to-go.” In other words, if it is possible for you to eat it at the premises, regardless of your intent not to do so, it’s still taxable since the possibilityof eating it there exists, unless…
- Regulation (d)
- Tax applies to food sold within a location that charges admission, like a theme park or movie theater, with a couple of exceptions.
- Regulation (e)
- Tax applies to all sales of hot prepared food products, this even includes if you prepare a “cold” sandwich but dip the bun in hot gravy, or if a hot sandwich got cold while you waited to pay for it. The keyword here is that the sandwich is supposed to be “hot” when you get it, so toasting bread for a tuna sandwich is not considered a “hot prepared food product” because traditionally the toast can be cold when you eat a tuna sandwich. They define “hot” as above room temperature. Also, if you buy a “combo” meal and everything in the meal is cold, but a hot coffee or even one item in the combo is a “hot prepared food” item then the entire combo is taxable even if they break out the items individually on the receipt.
- Regulation (f)
- “Tax applies to sales of sandwiches, ice cream, and other foods sold in a form for consumption at tables, chairs, or counters or from trays, glasses, dishes, or other tableware provided by the retailer or by a person with whom the retailer contracts to furnish, prepare, or serve food products to others.”
- This is badly worded. It could mean if the retailer has tables and chairs, it’s taxable but I don’t think that is what they meant. I think what they mean is that if the food is served in such a way that you would have to use their tables and chairs and utensils, such as food served on a ceramic plate or in a ceramic mug, or with metal utensils or served in containers you would not take outside of the location, then it is all taxable.
- “Tax applies to sales of sandwiches, ice cream, and other foods sold in a form for consumption at tables, chairs, or counters or from trays, glasses, dishes, or other tableware provided by the retailer or by a person with whom the retailer contracts to furnish, prepare, or serve food products to others.”
- Lastly…
- “Except as otherwise provided in (b), (c), (d) or (f) of this regulation, or in Regulation 1574 (sales from Vending Machines), tax does not apply to the sale for a separate price of bakery goods, beverages classed as food products, or cold or frozen food products. Hot bakery goods and hot beverages such as coffee are hot prepared food products (Regulation (e) above) but their sale for a separate price is exempt unless taxable as provided in (b), (c), (d) or (f) of this regulation, or in Regulation 1574. Tax does apply if a hot beverage and a bakery product or cold food product are sold as a combination for a single price (like a combo meal).” (Italics mine)
Categories: Government Failures, Personal Economics, Taxes
Angrywoodchuck's Blog 
I’ll have to inform my guests of these “special” requests…I’m sure they’ll be thrilled about it and throw the hot/cold turkey sandwich back in my face…
“A chief event of life is the day [Aug. 23, 2001] in which we have encountered a mind that startled us.” Ralph Waldo Emerson
The Federal Government tax policies has nothing to do with State and Local government tax policies. If the state decides not to tax people, then they don’t – has nothing to do with the Federal level tax policies. Two different tax policies. We are being taxed up the rear for the people that are running the government’s incompetent to govern. We should all be able to fire them if they don’t do the job they were hired for. This includes the police. Ever noticed that police stations are always located in safe areas. I’ve never seen a police station in a troubled area. If people behave themselves, there is no need to have any police around. People that work for the government feel like they are entitled to something – they forget they work there to run the government for us.
Ben – I agree that federal, state and local tax policies are independent of each other. I was trying to convey that tax policies at all three levels are similar in one respect…they all have many innocuous “fees” and “surcharges” and taxes that act like parasites on the economy where every one of us is paying these little taxes and fees everyday, but the amounts are so small it’s not enough for us to get upset about. Like a parasite that sucks just enough blood from its host to stay alive, without killing the host. The government does the same. If they want to create a new billion dollar welfare system, they add a penny to some tax on pizza boxes or windshield wipers or blueberry muffins, or whatever.
The sandwich tax is one such parasitic tax, as is the CRV tax on glass and plastic bottles and the gas taxes, and on and on and on. If we had to write a check on Dec 31 to pay for our taxes, that included all of these parasitic taxes, our income tax and our sales tax…there would be an armed revolt on Jan 1. I just want people to wake up and realize that $0.01 cent is not a lot, but $0.01 cent on 100 different things adds up, especially when the Federal, State, County, and City government all add their own $0.01 tax on those 100 different things.
“A cold turkey sub sandwich when the bread is not toasted, is not taxable, but if you buy a hot coffee with the sandwich then both the hot beverage and the sandwich are taxable.”
This is not correct. Each is taxable if sold “for here”, neither is taxable if sold “to go”.
Thank you for the correction. I went and re-visited the regulation and need several Tylenol right now.
I could only add, and correct me if I am wrong, that if the food in that example was sold as a combo (to-go) then both are taxable or if the retailer was unable to break-out each item individually on the receipt (still as a to-go) but I imagine that’s pretty rare.