Food Sales Tax for Missouri Retailers: Which Items Qualify for the Reduction?
- November 14, 2015 | Stephanie Faris
Depending where a taxpayer lives, there may or may not be sales tax on food. States like Arizona, North Dakota, and Indiana charge no sales tax on groceries, while states like New York and Colorado exempt certain groceries but not others.
In some states, customers pay sales tax on groceries but that tax is a reduced rate from the regular sales tax rate. Missouri is one of those states. In 1997, the state reduced its tax rate on groceries to 1 percent. All of the taxes collected are directed to the school district trust fund, where they are distributed as state aid based on a school’s attendance rates.
But like many states, Missouri grapples with the issue of reducing sales tax on foods that might not be healthy for consumers. As a result, the state has very strict restrictions when it comes to which foods are tax exempt and which aren’t.
The Food Stamp Connection
To ensure all essential food items receive the discount, Missouri limits the eligible items to those that can be purchased under the state’s food stamps program, called SNAP. This program includes many of the food items customers purchase on a weekly basis, with very few limitations. In Missouri, consumers can purchase the following items and pay only 1 percent sales tax:
- Breads and cereals
- Fruits and vegetables
- Meats, fish, and poultry
- Dairy products
- Seeds and plants that produce food for a household
However, the state does include junk food under its SNAP program, which means items like soda, candy, cookies, and ice cream all qualify for the sales tax discount. Bakery cakes and other specialty items also qualify for SNAP and are therefore eligible. However, if a person is buying a decorated bakery item, non-food decorations must be less than 50 percent of the sales price of the item.
There are exceptions under the SNAP program that also apply to the sales tax reduction in Missouri. Alcoholic beverages, tobacco items, items purchased to be eaten in the store, and food items that are made in the store and picked up to take home, known as “hot foods,” must be taxed at the full sales tax rate. Energy drinks qualify for the 1 percent rate as long as they have a nutrition label. If an energy drink has a supplement facts label, it is considered a supplement rather than food and doesn’t qualify for the discount.
In the fall, retailers must pay particular attention to the sale of pumpkins. If pumpkins are sold to be consumed as food, they qualify for the 1 percent rate. However, if the same pumpkins are sold as decorations with the intention they’ll be carved or displayed, they must be taxed at the full rate.
For Missouri retailers, the reduced sales tax on food can make the purchase process confusing. But the Missouri government tries to make it easier by separating qualifying and non-qualifying items based on the items that qualify for SNAP. Since many grocery retailers already have this set up in the system, extending this difference to the sales tax calculation process is fairly easy.