TPS-TIE

Use tax is a tax imposed on the use of tangible personal property in Washington when sales tax has not been paid. It is computed at the same rate as the sales tax. Unless specifically exempt by law, all tangible personal property purchased or used in this state is subject to either the sales tax or use tax, but not both, regardless of where or from whom the property is purchased.

There are many instances where sales tax is not paid to the seller. The following are examples of transactions where use tax would be due if sales tax wasn’t paid on the acquisition of these items:

Generally restaurants and the like predominately sell prepared food (see discussion under Tax Information for Retailers of Prepared Food); therefore they must collect retail sales tax on the sales of all food and food ingredients sold by them.

Generally items sold by bakeries (see Bakery Items, below) are exempt from retail sales tax; unless the item is sold with a utensil. However the charges for the nontaxable bakery items must be properly segregated from the charge for any taxable items, such as a cup of coffee. Otherwise, the entire un-segregated charge is subject to retail sales tax.

Are caterers required to collect sales tax?

Caterers must collect retail sales tax on their total charge to customers for catering services. This includes the charge for meals, equipment, decorations, as well as the catering service.

The caterer must collect sales tax based on the location where the meals are served.

What is a combination business?

A “combination business” is a business that sells both taxable and nontaxable goods at one location.

Sellers operating a combination business must collect sales tax on all their sales unless the seller properly segregates taxable and nontaxable sales.

A cash register or electronic checking machine that is programmed to identify and separately tax sales of taxable goods is sufficient segregation.

Personal chefs are independent persons (not employees) that prepare and serve food in private homes for consumption by household members and their guest. Occasionally, personal chefs prepare meals for social events, such as dinner parties, cocktail parties, engagement parties, weddings, and receptions. Some personal chefs also shop for groceries, purchase beverages, hire service people, rent equipment, and order flowers for events.

This information explains a change in the taxability of food items when sold by businesses that make eating utensils available to customers. A business must collect retail sales tax on all food item sales if its sales of “prepared foods” make up more than 75 percent of its annual sales of food and food ingredients.

Sellers may elect to collect sales tax on all sales, whether or not sales of prepared foods make up more than 75 percent of the seller’s annual sales of food and food ingredients.

Sellers of prepared food that make utensils available must calculate their percentage of prepared food sales.

Formula

Percentage of prepared food equals n/d
Numerator (n) represents prepared food
Denominator (d) represents all food sales

Numerator
The numerator includes sales of the following prepared foods:

Example 1

Tiny Town Theater operates a concession stand at their theater. The concession stand has utensils on the counter for the customers to use (i.e. napkins, lids, plastic ware, straws, etc.).

In 2017, Tiny Town Theater made the following sales:

Example 2

Jan and Joe’s deli is a quick food and deli café. The deli has utensils on the counter for the customers to use (i.e. napkins, cup, lids, etc.) The deli sells the following combination meals: