“For here or to go?” is one of those ubiquitous questions we tend to take for granted. If the answer is “for here” a tray appears. Say “to go” and get a bag. Many people don’t realize that the question is also a function of sales tax. Many businesses that offer both eat in and dine out options must be able to handle completely different tax scenarios. In this post, I’ll explore state specific examples to show how this works.
In some places like Ohio, sales tax is not charged on hot prepared food sold to go, while a sit-down meal calls for tax. Some clever consumers may take advantage of this fact, say “to go,” pocket some extra coins, then “change their minds,” immediately taking a seat to enjoy their delicious hot meal on the premises. It’s unlikely that an auditor will accost your sneaky customer for taking advantage of sales tax specifics, but it is highly likely that if you run a business where customers have the option of sitting down to eat, auditors are paying attention to whether you’re asking the question.
This issue may be particularly hard to address in grocery stores and gas stations that provide dining areas for their customers. It’s safe to say that most of the hot food purchased in such locations will be eaten elsewhere, but the setting may determine the tax. In Connecticut, grocery stores are not considered sellers of meals, which means that while most prepared foods are taxed when sold as meals in a restaurant or even at a lunch truck, they are exempt when sold at a grocery store. The exemption doesn’t apply to catering, food intended to be eaten in-house, sandwiches, grinders, coffee, or tea. A hot meal from a buffet style bar brought home to your family is no more taxed than the groceries you would buy to prepare it from scratch.
There are a few different ways to handle these tax variations depending on the way that your cash registers are set up. In some cases, the tax may be automatically charged with a manual override option for non-taxable sales. If there are tables on premises and the salesperson isn’t asking, then the register should be taxing. It’s not necessary to police your customers, making sure that they eat in the right spot, but it’s crucial to make sure that you are charging the right rate based on how they answer the question: “For here or to go?”