Little known facts about Sales and Use Tax

It is vital that you look over sales and use tax laws in the state of your business as well as the states you purchase from. If you purchase out of state your states taxes will still apply. For example, if I were to purchase shirts from Delaware (a tax free state) but I live in the state of Maryland, I am still liable for Maryland’s 6% sales tax. In order to pay these types of taxes you have to fill out a Consumer Use Tax Return. If you do not pay Consumer Use Taxes you are subject to incur penalties and interest. I know it seems absurd but they best part about it is these payments are taxable deductions. In some special situations taxes may be higher or even omitted. These special situations vary by state.

Tax Dollars

Below are FAQ:

*Are sales at a bakery considered grocery or market food items?

Yes. However, when calculating if a business meets the 10 percent threshold for a substantial grocery or market business, you may not include sales of single servings, heated or prepared food or sales to be consumed on the premises.

Does “food” include everything that is edible?

No. For sales and use tax purposes, soft drinks, bottled water, alcoholic beverages, candy and confectionery are not “food.” The sale of any of these items is, therefore, not entitled to any of the exemptions for sales of food, including the exemptions for sales of food by volunteer fire companies and veterans organizations. Neither water nor ice is food, although they may be treated as food when sold as components of food.

Are caterers required to collect the tax?

Yes. A caterer serving food on a customer’s premises must collect the tax on the food sold. A caterer must collect the tax in this situation even if the caterer also conducts a substantial grocery or market business.

How are federal food stamps treated?

The tax does not apply to eligible food purchased with federal food coupons. Food stamp eligible food encompasses everything that is considered food for sales and use tax purposes, plus soft drinks, candy, confectionery, water, ice and otherwise taxable and prepared foods.

Are there any other exemptions?

Yes. Sales of food to patients in a hospital when the food charges are included in the regular room rate are exempt. Sales of food and beverages on vehicles operating in interstate commerce are exempt. In addition, the tax does not apply to a sale of crabs for consumption off the premises where sold. Sales of seafood to be consumed off the premises where sold are also exempt if the seafood is not prepared for immediate consumption.

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