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Taxes off Grandma’s meatloaf – Wacky Tax Wednesday

  • Jun 15, 2016 | Gail Cole

Those of us who live independently generally have three options when it comes to feeding ourselves: we can dine out, take food away to eat at home, or cook for ourselves. How our meals our taxed depends on the choice. Tax laws tend to smile upon food purchased to be prepared at home:  fresh fruits and vegetables and dry rice and pasta are often exempt or subject to a reduced rate, while most states tax take-away food and restaurant meals at the general rate. Perhaps this harkens back to a pre-fast food time, when dining out was more of a luxury that entailed deeper pockets.

My husband and I don’t usually think about sales tax when considering how to feed the family. We tend to cook, but sometimes the unfortunate combination of poor planning and hectic schedules necessitates another option. Oh, what I would give to live somewhere with cheap take-out Chinese food at such times.

Chinese food aside, we have options when we lack the time or will to cook. But dining choices tend to narrow for people living in retirement communities. Residents of these and similar facilities may have a difficult time preparing their own meals, either for health reasons or for lack of a kitchen. They may lack transportation. For many, the meals served in the facility are their only option.

These meals are served to residents at their home but are prepared by someone else, as at a restaurant. So how should they be taxed?

Would you tax Grandma’s meatloaf?

If Grandma lives in a retirement community in Colorado, you most certainly would. Under current Colorado law, meals sold to residents of retirement communities are subject to sales tax. But because it just seems wrong to tax anyone’s grandma’s meatloaf, those meals will be exempt beginning July 1, 2016.

Under Colorado House Bill 16-1187, billed by its sponsor as the Don’t Tax Grandma’s Meatloaf bill, the following are exempt:

  • All sales of food, food products, snacks, beverages, and meals provided for consumption by residents on the premises of a retirement community.
    • All sales to a retirement community of the above.
  • All sales of any container, bag, or article used by or furnished to a consumer for the purpose of packaging, bagging, or use with food, food products, snacks, beverages, and meals for consumption by residents on the premises of a retirement community.
    • All sales to a retirement community of the above.

The bill also provides definitions of “food” and “retirement community.” For this particular sales and use tax exemption, “food” includes packaged and unpackaged cold sandwiches, prepared salads, and salad bars.

A word of caution: The measure specifically exempts the meals, snacks, and beverages of residents. Guests who dine with residents will continue to be charged tax on their meals after the exemption takes effect.

Visit your grandparents

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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
Gail Cole
Avalara Author Gail Cole
Gail Cole is a Senior Writer at Avalara. She’s on a mission to uncover unusual tax facts and make complex laws and legislation more digestible for accounting and business professionals.