Minnesota: Eating Utensils Impact Taxability
- Oct 24, 2013 | Gail Cole
Knives have been used to cut and serve for thousands of years. The fork, a relative latecomer, caused a stir in 9th century Persia and 11th century Byzantine Empire. Studying the history of eating utensils is fun and leads to an altogether different question: how do eating utensils impact taxability?
The answer: in a big way.
The Department of Revenue got to thinking about this very question and provided updated information on the topic on its website.
If eating utensils are available where prepared foods are sold, those prepared foods are subject to sales tax. The assumption is the food is being purchased for immediate, or immediate enough, consumption, like food at a restaurant. Restaurant meals in Minnesota are subject to sales tax.
Some businesses have both a dine-in restaurant and a to-go counter. In such establishments, food sold at the to-go counter is subject to sales tax when:
- Customers at the counter have access to utensils when they purchase food (utensils are “made available”); or
- The seller includes utensils with food purchased at the counter (utensils are “provided by the seller”).
The fact that utensils are provided to customers in the restaurant section of the restaurant doesn’t count.
What about finger food?
Lots of foods require utensils in these dainty modern times--just imagine eating noodles without a fork or chopsticks. However, even the daintiest of diners may shirk knife and fork when consuming pizza or sizzling chunks of fried chicken.
The Minnesota Department of Revenue does not address fried chicken or pizza on its “Prepared Food- Eating Utensils” page. It does, however, provide the following example, which is illustrative:
“A business operates a restaurant and bakery in the same establishment. It sells single-serving bakery items at the to-go counter…. There are no utensils (such as knives, forks, plates or napkins) on the counter for customers to take with them. The business does not typically include utensils in the bag with bakery items.”
According to the DOR, “Purchases at this counter are not taxable as prepared food… .” However, were the business to place paper plates and napkins on the counter or include utensils in the bag with the baked goods, the sales would be subject to sales tax.
A closer look at pizza
Another Minnesota fact sheet explains that take-and-bake pizzas are “not ready-to-eat at the time of sale” and are therefore not considered prepared foods and are therefore exempt from sales tax.
The Streamlined Sales and Use Tax Agreement (SST), which was created to “find solutions for the complexity in state sales tax systems….” has weighed in on the matter. The SST Compliance Review and Interpretation Committee has been deliberating whether or not take-n-bake pizzas should be exempt like most unprepared food or taxed as prepared food. The decision has not yet been made public. Once made, it may well impact all states with sales tax, even those not affiliated with the SST.
For regular old pizza places in Minnesota, the rule of thumb holds true. If utensils are made available to customers or provided by the seller, the pizza is subject to sales tax.
Before stepping out for a slice, consider switching to an automated sales tax solution.
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