Additional information for restaurants – COVID-19

In light of the Governor’s recent “Stay Home – Stay Safe” proclamation, the Department of Revenue is providing the following additional tax guidance to restaurants and other similar businesses. For questions, call the department’s Telephone Information Center at 360-705-6705.

Sales of meals to Red Cross, U.S. Government, first responders, local and state governments, etc.

Sales of meals made directly to the American Red Cross or U.S. Government are exempt from retail sales tax. In order to qualify for this exemption, you must maintain documentation showing that the purchases were made directly by the Red Cross or the U.S. Government (e.g. U.S. Government credit card, U.S. Government check, checks from the Red Cross, etc.) For additional information, please see ETA 3175.2018 & WAC 458-20-190. Such sales remain subject to business and occupation (B&O) tax under the Retailing classification.

Sales made to employees of the Red Cross or U.S. Government (e.g. members of the military) are not exempt from retail sales tax. Therefore, you must collect sales tax when making sales to members or employees of the Red Cross or the U.S. government.

Generally, sales of meals to local and state governments (including the National Guard), first responders, and others are not exempt from sales tax. Therefore, you must collect sales tax on such sales. However, in limited circumstances when the buyer is reselling the purchased meals, you may accept a reseller permit from the buyer. In such situations, you do not have to collect retail sales tax, but the income you receive from such sales is subject to B&O tax under the Wholesaling classification.

Free meals

If a restaurant or other similar business provides a free meal to a person other than an employee, the meal is not subject to retail sales tax or use tax. However, if soft drinks or beer/wine are given away, the restaurant or other similar business owes use tax on the value of these items.
 
Note: Meals provided to employees are presumed to be in exchange for services and are not considered free meals. See the Employee meals webpage for more information.

Curbside sales and delivery of spirits

For information on the application of taxes to sales of spirits in full bottles by restaurants and similar businesses during the time that the Liquor and Cannabis Board (LCB) allows such sales during the Governor’s “Stay Home – Stay Safe” proclamation, please visit our Curbside and delivery sales of spirits webpage.

Delivery of meals

Except where exempt as discussed above, the sales tax rate is based on where the customer receives the meal. Therefore, if you deliver meals to your customer, you must collect sales tax based on the rate in effect at the location where the customer receives the meal. For assistance in determining the correct sales tax rate, please visit our Sales and use tax webpage.

Sales tax applies to the total amount charged, which includes amounts charged for delivery and any other mandatory tips or fees. However, sales tax does not apply to tips that are clearly voluntary. Additionally, sales of delivered meals are subject to B&O tax under the Retailing classification and litter tax.

Sales of uncooked meal kits

Generally, sales of uncooked meal kits by restaurants are subject to retail sales tax based on where the customer receives the meal kit. Typically, this is because more than 75% of restaurants’ sales are prepared food and they provide utensils to their customers (WAC 458-20-244). However, restaurants are not required to collect sales tax on sales of meal kits that meet all of the following requirements:

• The meal kits being sold contain eggs, fish, meat, or poultry, in a raw or undercooked state requiring cooking as recommended by the Federal Food and Drug Administration in chapter 3, part 401.11 of The Food Code, published by the Food and Drug Administration, as amended or renumbered as of January 1, 2003, so as to prevent foodborne illness.
• The meal kits contain four or more servings packaged for sale as a single item and sold for a single price. Because these meal kits are being assembled on-site and there are likely no labels available, the seller must reasonably determine the number of servings.
• The seller does not provide the buyer with any utensils, which includes plates, knives, forks, spoons, glasses, cups, napkins, and straws. Utensils do not include a container or packaging used to transport the food. 

If a restaurant makes sales that are exempt from sales tax as described above, it will need to keep accurate and detailed records that show which sales are exempt from sales tax and why. When reporting such exempt sales of uncooked meal kits on its excise tax returns, the restaurant should take a deduction under the Retail Sales tax classification for “exempt food sales.” Such sales remain subject to B&O tax under the Retailing classification and litter tax must be reported on all sales to customers who will consume the products off premises.