Prepared food is generally subject to retail sales tax, however, the law provides an exception for bakery items.
Bakery items are exempt from retail sales tax, unless the seller provides the buyer with an eating utensil or the 75% rule applies (See our article titled Is Prepared Food More Than 75% of Your Total Food Sales?
The charge for nontaxable bakery items must be properly segregated from the charge for any taxable items, such as a cup of coffee. Otherwise, the entire charge is subject to sales tax.
Bakery items include bread, rolls, buns, biscuits, bagels, croissants, pastries, donuts, Danish, cakes, tortes, pies, tarts, muffins, bars, cookies, and tortillas.
Eating utensils include plates, knives, forks, spoons, glasses, cups, napkins, and straws. Utensils do not include bags, boxes, and other containers or packaging used to transport bakery items.
Sold with eating utensils means when the seller physically includes the utensils with the bakery item. For example, the seller may serve the bakery item on a plate or place napkins in a bag with the bakery item.
However, merely making utensils available for the customer to take at the customer’s discretion does not constitute “sold with eating utensils.” For example, bakery items are not “sold with eating utensils” when the seller has merely placed a napkin dispenser on the counter or has set up a utensil “island” for customers in the store.
What are exempt bakery items?
Exempt items are those that a typical bakery would sell. It does not include savory baked goods that include additional toppings and fillings that could be consumed as a meal. Sales tax exempt bakery items include stand alone:
- Cake slices
- Dessert pie slices
What are taxable baked goods?
Generally, savory baked goods do not qualify for the sales tax exemption. Taxable baked goods usually include meat, cheese, and/or vegetable filled foods, such as:
- Meat pies
- Hum Bao
- Other baked goods consumed as a meal
What if I can't determine if a bakery item is taxable or not?
Request a ruling from the Department of Revenue.