Take-n-Bake Pizza is exempt prepared food in Nebraska
- Sales Tax News
- Mar 16, 2016 | Gail Cole
Updated 9.2.2016: The Nebraska Department of Revenue has updated its sales and use tax guide for food and food ingredients to reflect the fact that half-baked pizzas are exempt from sales and use tax beginning October 1, 2016.
Legislation recently enacted in Nebraska clarifies the taxability of certain food in order to remain in compliance with the Streamlined Sales Tax Agreement.
The Streamlined Sales and Use Tax Agreement (SSUTA) was created in 2000 “to simplify and modernize sales and use tax administration in order to substantially reduce the burden of tax compliance” for businesses selling in multiple states. Member states strive, in part, to have uniformity of major tax base definitions.
Nebraska, one of 24 states that have adopted the simplification measures in the SSUTA, imposes sales and use tax on prepared food and food sold through vending machines. Other food (food ingredients) is not subject to Nebraska sales and use tax.
Taxable prepared food is defined in state statutes as:
- Food sold with eating utensils provided by the seller, including plates, knives, forks, spoons, glasses, cups, napkins, or straws. A plate does not include a container or packaging used to transport the food.
- Two or more food ingredients mixed or combined by the seller for sale as a single item and food sold in a heated state or heated by the seller except:
- “Food that is only cut, repackaged or pasteurized by the seller
- Eggs, fish, meat, poultry, and foods containing these raw animal foods requiring cooking… to prevent food borne illnesses
- Food sold by a seller whose proper primary North American Industry Classification System classification is manufacturing in sector 311, except subsector 3118, bakeries
- Bakery items, including bread, rolls, buns, biscuits, bagels, croissants, pastries, donuts, danish, cakes, tortes, pies, tarts, muffins, bars, cookies, and tortillas”
None of the above is changed by the new legislation (LB 776). What is new is the addition of the following to above list:
- “Food that ordinarily requires additional cooking to finish the product to its desired and final condition.”
As explained by the bill’s fiscal note, LB 776 “carves out an allowable exception to the definition of ‘prepared food’ for food that requires additional cooking.”
It’s no coincidence that take-n-bake pizza fits that definition like a glove. A few years back, SST member state Wisconsin asked to SST to clarify whether or not take-n-bake pizza was prepared food or not. The Wisconsin Department of Revenue wanted to treat it as taxable prepared food, but many sellers of take-n-bake pizza argued that it shouldn’t because it needed to be heated in order to be truly edible. Controversy raged for years.
Food that ordinarily requires additional cooking to finish the product to its desired and final condition is exempt from Nebraska sales and use tax as of October 1, 2016.
Simplify sales and use tax compliance in all states with sales tax software (SaaS). Learn how it works.