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Grocery stores often contract with other businesses and allow them to prepare and sell food on their premises.
For example, a grocery store contracts with a sushi vendor to prepare and sell sushi on-premises. In this example, the customer pays the grocery store – not the food vendor – for the prepared food. The grocery store is then responsible to collect and pay the sales tax due for these prepared food sales.
How to report sales if you are a food vendor
B&O tax
Report your gross sales, including amounts the grocery store withheld, under the retailing business and occupation (B&O) tax classification. You may qualify for the small business B&O tax credit, which can reduce all or some of your B&O tax liability.
Retail Sales tax
Report your gross sales, including amounts the grocery store withheld, under the retail sales tax classification. Use the gross sales collected by facilitator deduction when the grocery store collects and pays the retail sales tax to the department. You can find more information in our online article about marketplace sellers.
Litter tax
Report your gross sales, including amounts the grocery store withheld, of food for human consumption and prepared food sold to go under litter tax classification.
Example
An independent sushi business displays and sells their sushi products in a local grocery store. Under their agreement, the store collects the sale price of the sushi at their checkout. The store makes a 10 percent commission on each sale.
The store rings up a $9 sushi sale and collects retail sales tax. The store pays the sales tax they collect with their excise tax return. The store keeps their 10 percent commission of $.90 and pays the balance of the sale to the sushi business ($8.10).
The sushi business reports $9 under both the retailing B&O tax and retail sales tax. The sushi business takes a gross sales collected by facilitator deduction under the retail sales tax with the following explanation: sales tax collected and paid by consignee. The sushi business also reports the $9 sale under litter tax.
How to report sales if you are a grocery store
B&O tax
Report your Washington sales under the retailing B&O tax classification, and claim a deduction for other. The explanation for the other deduction should be third-party sales. Your store does not owe retailing B&O tax for these sales.
Report the state portion of the sales tax under the retail sales tax classification and the local portion under the local sales tax classification. The store location determines the sales tax rate and four-digit location code used to report local sales.
You must report commissions and fees that you withhold under the service and other activities classification.
Retail sales tax
Report gross sales of the prepared food products, without the deduction for amounts your store withholds as its fee or commission, under the retail sales tax classification. The law considers grocery stores marketplace facilitators under these circumstances. Therefore, they are required to collect retail sales tax for marketplace sellers (i.e., the independent sushi preparers).
