Retailers should ask themselves the following questions to determine when an item is considered “prepared food” and subject to retail sales tax.
Do I make utensils generally available to my customers; and are my prepared food sales greater than 75 percent of my overall food and food ingredients sales?
If the answer to both parts of this question is yes, then retail sales tax must be collected on all sales of food and food ingredients. The only exception is for items containing four or more servings that are packaged as a single item, sold for a single price in an unheated state, where the seller does not provide a utensil to the buyer.
If the answer is no to either part of the question, separately evaluate the taxability of each item using steps 2 through 5 below.
Is a plate, glass, cup or bowl necessary to receive the item or do I usually provide a utensil as part of the sales transaction?
If the answer to either part of this question is yes, the sale is subject to retail sales tax.
If the answer to both parts of the question is no, and the item is a bakery item, the sale is exempt from retail sales tax. If the answer to both parts of the question is no, and the item is not a bakery item, move to step 3.
Am I selling the item heated?
If the answer is yes, the sale is subject to retail sales tax. If the answer is no, move to step 4.
Did I mix or combine two or more ingredients to sell as a single item?
If the answer is no, then the item is exempt from retail sales tax. If the answer is yes, move to step 5
Ask yourself the following four questions:
- Did I only cut, repackage or pasteurize the product?
- Is the product sold by weight or volume as a single item?
- Am I a food manufacturer under NAICS, Sector 311, other than a bakery (subsector 3118)?
- Does the product contain raw eggs, fish, meat, or poultry that requires cooking by the consumer as recommended by the FDA to prevent food borne illness?
If the answer to any one of these four questions is yes, the sale is exempt from retail sales tax. If the answer to all of these questions is no, then the sales is subject to sales tax. For more detail information, please refer to WAC 458-20-244, effective June 2007.