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Taxing Take-n-Bake Pizza Is Not Simple


 To bake or not to bake? To tax or not to tax?

Update, 5.15.14: An amendment to the Streamlined Sales and Use Tax Agreement definition of "prepared foods" was approved during the spring governing board meeting, which took place this week.

According to Tax Analysts, the list of enumerated items allowed "to be taxed differently than 'prepared foods' and each other" was expanded to include, "Food sold that ordinarily requires additional cooking or baking (as opposed to just reheating) by the consumer prior to consumption."

This amendment should allow SST states to exempt take-n-bake pizza without changing their laws, as discussed below.

There’s more to take-n-bake pizza than dough, sauce, cheese and your topping of choice. In fact, take-n-bake pizza has sparked a controversy in multiple states. It was triggered by a simple question asked by the Wisconsin Department of Revenue: is take-n-bake pizza a prepared food, or is it not?

Wisconsin is a Streamlined Sales Tax state, meaning that its tax laws, regulations and policies comply with the Streamlined Sales and Use Tax Agreement. It was therefore standard procedure for the Wisconsin Department of Revenue (DOR) to ask the Streamline Sales Tax Compliance Review and Interpretations Committee (CRIC) “to determine whether take-n-bake pizzas meet the definition of ‘prepared food’ based on the specific facts submitted.”

The 30-day public comment period revealed that quite a few people are interested in the taxation of take-n-bake pizza, although most of them have a vested interested in the answer. Owners of take-n-bake pizza businesses commented, as did a number of consumers. One point frequently raised was that many customers purchase the pizzas with food stamps, and food stamps may not be used to purchase “prepared food.”

The Wisconsin DOR was seeking a ruling that yes, take and bake pizzas are “prepared food,” noting that there is “no exclusion from the definition of prepared food for additional preparation required by the purchaser.” Furthermore, a take and bake pizza “does not require cooking per the food code since it contains no egg or raw meat or seafood.”  A “yes” ruling would make the cold pizzas subject to sales tax.

Another interested party requested a ruling that take-n-bake pizzas do not meet the definition of “prepared food,” noting that baking is required prior to consumption. Such a ruling would exempt the pizzas from sales tax.

After deliberation, the CRIC decided in a 6 to 1 vote that “take and bake pizzas as specifically described in this request meet the definition of ‘prepared food.” The fact that baking is required doesn’t alter that classification, and the fact that they may qualify for purchase with federal food stamps was “not a factor in determining whether the pizzas meet the definition of ‘prepared food’” (CRIC Interpretive Opinion).

Having received the opinion, the Wisconsin Department of Revenue addressed the taxation of take and bake pizza in its January 2014 Tax Bulletin. It reads:

“Sales of take and bake pizzas made by a retailer are subject to Wisconsin sales tax because the pizzas are prepared food. Prepared food includes 2 or more food ingredients mixed or combined by a retailer for sale as a single item.”

However, it allowed an exception for:

  • “Pizzas sold unheated by volume or weight; and
  • Pizzas, no part of which was previously heated by the retailer, that are sold unheated, contain meat, fish, egg, or poultry in raw form, and that require cooking by the consumer, as recommended by the Food and Drug Administration… to prevent food borne illnesses.”

The take and bake pizzas described above may be sold tax-free by a retailer.

Simple, right?

Streamlined Sales Tax (SST) was created to “assist states as they administer a simpler and more uniform sales and use tax system.” Whether or not Wisconsin’s take-n-bake pizza tax policy is simpler now than it was prior to asking SST for an opinion is unclear.

Moreover, we have not seen the last of the pizza debate. In a December Executive Committee Meeting, Executive Director Craig Johnson reported “that he has been contacted by some state people and also members of the business community regarding the Take-N-Bake Pizza interpretation.” The possibility of creating a toggle to the “prepared food” definition has been raised.

A concern that the “ready to eat” interpretation by the CRIC could create a dilemma for states and require them to “have a law change” was also raised. Therefore, the take and bake pizza discussion will continue at the Spring Governing Board meeting, in May.

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photo credit: amanky via photopin cc


Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.