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Indiana Sales Tax Update: Food Taxability

  • Dec 16, 2011 | Susan McLain

Indiana has pushed out a bulletin that clarifies changes to food taxability within the state. The bulletin information becomes effective January 1, 2012. These changes maintain Indiana’s compliance with the Streamlined Sales and Use Tax Agreement (SSUTA) and are approved by the Streamlined Sales Tax Governing Board.

According to the bulletin, “generally, the sale of food and food ingredients for human consumption is exempt from Indiana sales tax.” This exemption is usually “…limited to the sale of food…commonly referred to as ‘grocery’ food.”

The definition of food excludes tobacco, alcoholic beverages, candy, dietary supplements and soft drinks. The non-taxable food list includes items that are sold “…unheated and without eating utensils provided by the seller.” The non-taxable list includes items such as:

  • Bakery items
  • Baking chocolate
  • BBQ potato chips
  • Frozen juice bars
  • Gluten-free non-candy products
  • Honey
  • Ice cream, jams and jellies
  • Olive oil
  • Popsicles
  • Trail mix
  • Water

The taxable items list includes:

  • Cake decorations
  • Dietary supplements
  • Cracker Jacks
  • Flaked coconut with sweetener
  • Gluten-free candy products
  • Honey-roasted peanuts
  • Marshmallows
  • Nestle Crunch bars
  • Pixie Stix
  • Tonics
  • Toothpaste and mouthwash
  • Vitamins

These are just a sampling of the list of items provided by Sales Tax Information Bulletin #29. In addition to the list, which is not all-inclusive, “Food sold in a heated state or heated by the seller is taxable,” and “two or more food ingredients mixed or combined by the seller for sale as a single item are taxable.”

Definitions are provided for candy, soft drinks, dietary supplements and prepared foods.

How a transaction is processed is relevant as well. According to the bulletin, “when a taxable item is sold with a non-taxable food item where the food item is less than 50 percent of the total price, the entire purchase amount is subject to sales tax. If such items are separately priced and charged on the receipt, only the amount charged for the taxable item is subject to sales tax.”

To read the bulletin in full, click here… To read additional commentary and information, visit Avalara.com and read Erin Wiggins' blog....click here.

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Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Avalara Author
Susan McLain
Avalara Author Susan McLain
Susan McLain began her career as a technical writer in technology industries such as satellite networking and medical devices. Her skills encompass technical and marketing writing, usability engineering, verification and validation testing and protocol writing, requirements development, business analysis, technical illustration/graphic design and marketing. She has owned her own business providing service to small to medium sized business and in other positions, she has been in project management, documentation and marketing. She is currently the content specialist for Avalara helping to “make sales tax less taxing.”