Under California's 80/80 rule, was a takeout pint of ice cream treated as suitable for consumption on the seller's premises?

Plain-English summary

An ice-cream-parlor operator collected tax on one- and two-scoop cups but not on takeout pints and quarts. The operator asked how the 80/80 rule applied to those package sizes.

The Board said food sold in a quantity of less than one quart—such as a pint or a cup—was furnished in a form suitable for consumption on the seller's premises, even when labeled takeout or to go. The standard applied not only to ice cream but also to items such as milk, yogurt, and salads.

On the stated 80/80-rule facts, the operator's takeout pint sales were taxable. The source does not expressly give the final treatment of a full quart or half-gallon, so this page does not infer one.

Common questions

Did calling a pint takeout make it exempt?

No. The source treated quantities under one quart as suitable for on-premises consumption despite takeout labeling.

Did the size rule apply only to ice cream?

No. The letter also named milk, yogurt, and salads as examples.

What did the letter decide about quarts and half-gallons?

It did not state their ultimate treatment. Its express conclusion was limited to quantities under one quart.

Citations and references

• California Sales and Use Tax Regulation 1603(c) (as cited)

Source

• Annotated Legal Opinions collection: https://cdtfa.ca.gov/taxes-and-fees/annotations-menu.htm
• Annotation page: https://cdtfa.ca.gov/lawguides/vol2/suta/550-0000-all.html
• Original supporting opinion: https://cdtfa.ca.gov/lawguides/annotations/550-0185.pdf

Original ruling text

550.0185

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
1020 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
(916) 324-5589

August 22, 1990

Mr. J--- R. B--President
I--- C--XXXX --- --- Avenue
---, CA XXXXX
SY -- XX-XXXXXX
Dear Mr. B---:
Your letter of May 29, 1990 to Ms. C. L. Thomas has been referred to the legal staff for reply. You have requested clarification of Ms. Thomas’ letter of May 21, 1990 regarding the correct application of tax to sales of pints, quarts and half-gallons of ice cream. As we understand it, you operate ice cream parlors in --- and --- ---. You make some sales of pints and quarts of ice cream as well as sales of one or two scoops in a cup. You have been collecting sales tax reimbursement on the cups but not on the pints and quarts. Your inquiry concerns the correct application of tax to your sales of pints and quarts. Effective January 1, 1985, the “80-80” rule was added to the Sales and Use Tax Law. This rule is clarified in Sales and Use Tax Regulation 1603(c), which provides that: “Tax applies to sales of food products such as ice cream, milk, milkshakes, hot and cold coffee, cold sandwiches, and donuts furnished in a form suitable for consumption on the seller’s premises, when sold by restaurants, fast-food establishments, concessionaires, soda fountains, and other similar establishments, even though such food products are sold on a ‘take-out’ or ‘to go’ order. Except as provided elsewhere in this regulation, tax does not apply to sales of food products which are furnished in a form not suitable for consumption on the seller’s premises. In addition, tax does not apply under this paragraph if: ((1) 80 percent or less of the seller’s gross receipts are from the sale of food products, or (2) 80 percent or less of the seller’s retail sales of food products are taxable as provided in either (a), (b), (e) or (f) of this regulation. Any seller claiming a deduction for the sale of food products which is based on either (1) or (2) above must support the deduction by complete and detailed records of sales made.”

Mr. J--- R. B---

-2-

August 22, 1990
550.0185

We have determined that items sold in a quantity of less than a quart (e.g., a pint or a cup) are considered “furnished in a form suitable for consumption on the seller’s premises” even though these products are sold on a “take-out” or “to-go” basis. This is a standard rule applicable to many items including, but not limited to, ice cream, milk, yogurt and salads. As such, your sales of a pint of ice cream on a “to-go” basis are subject to tax. If you have further questions concerning this matter, please write this office. Very truly yours,

Mary C. Armstrong
Senior Tax Counsel

MCA:wak