Did bulk takeout sales of croissants and sandwich fillings count the same way under California's 80/80 food rule?

Plain-English summary

A retailer argued that bulk takeout sales should reduce the percentage of taxable food used in California's 80/80 analysis. Counsel split the products by whether they were in a form suitable for consumption at the retailer's facilities.

A bag of individual doughnuts, muffins, or croissants was suitable for consumption there because a customer could remove and eat one item before taking the rest away. Those bulk croissant sales were already taxable under the facilities rule and counted toward the taxable-food percentage.

Bulk sandwich fillings were different. They were not suitable for consumption at the retailer's facilities and therefore did not count as taxable on that basis. Even after excluding them, counsel calculated that 84.1% of the client's food-product sales were independently taxable, so the 80/80 threshold remained satisfied and the cold takeout sales were taxable.

Common questions

Did selling several croissants in one bag make the sale exempt bulk food?

No. The source treated the individual items as suitable for consumption at the retailer's facilities.

Were sandwich fillings treated the same way?

No. The fillings were not suitable for consumption at the facilities and were excluded from the independently taxable percentage.

Did that exclusion change the final 80/80 result?

No. The opinion calculated that 84.1% of food sales were still taxable without using the 80/80 rule, so the threshold was met.

Citations and references

• California Revenue and Taxation Code section 6596 (as cited)
• California Sales and Use Tax Regulation 1603(c) and (f) (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/550-0345.pdf

Original ruling text

550.0345

STATE OF CALIFORNIA

STATE BOARD OF EQUALIZATION
LEGAL DIVISION (MIC:82)

MEMBER
First District
BRAD SHERMAN
Second District, Los Angeles

450 N STREET, SACRAMENTO, CALIFORNIA
(P.O. BOX 942879, SACRAMENTO, CALIFORNIA 94279-0001)
(916) 324-3828

ERNEST J. DRONENBURG, JR.
Third District, San Diego
MATTHEW K. FONG
Fourth District, Los Angeles

April 15, 1994

GRAY DAVIS
Controller, Sacramento

BURTON W. OLIVER
Executive Director

Mr. R--- P---, CPA
XXXX --- Drive
P.O. Box XXX
--- ---, California XXXXX
Re:

[No Permit Number]
Taxable Food Sales

Dear Mr. P---:
I am answering your letters to me dated March 7 and 9, 1994, following up on mine to you dated March 4, 1994. In my letter, In concluded, based on the information contained in your letter to me of December 21, 1993, your client's sales of cold food to go were subject to tax pursuant to Regulation 1603(c) ("the 80/80 rule"). You ask if my conclusion would be different taking into account your client's bulk sales of croissants and sales of sandwich fillings, both on a to-go basis. Again, as you did not identify the taxpayer this letter does not constitute specific written advice to the taxpayer under Revenue and Taxation Code Section 6596. Rather, it constitutes general comments regarding the applicability of California Sales and Use Tax Law to a set of hypothetical facts. Attached to your letter of March 9, 1994, was a copy of your December letter attached to which is a schedule entitled "Sales Breakdown - In Percentages" showing what you believed to be the taxable and exempt sales, based on your review of the tax law and Regulation 1603. Togo sales of croissants, which I assume are the bulk sales, constitute 19.66% of total sales and those of the sandwich fillings constitute 17.06% of total sales. I calculated in my previous letter that your client's food sales were 93.24% of the total. I calculate that the bulk sales of croissants and the sales of sandwich fillings constitute 18.33% and 15.9%, respectively, of your client's sales of food products. OPINION To review, a retailer's sales of cold food sold on a to-go basis are subject to tax (1) it has facilities at which its customers may consume its food products; (2) its sells food products in a form for consumption at those facilities; (3) more than 80% of its total sales are of food products; and (4) more than 80% of its sales of food products are taxable under Regulation 1603(a), (b),

Mr. R--- A. P---, CPA

-2-

April 15, 1994
550.0345

(e), or (f), without reference to the operation of the 80/80 rule. Under sub-division (f), sales of food in a form suitable for consumption at the facilities of the retailer are subject to tax. We have previously determined that bulk sales of individual items - e.g., a bag of doughnuts, muffins, or croissants - is in a form suitable for consumption at the facilities of the retailer. While the purchaser might not be able to eat a bag of croissants, he can pull out one and eat it at the restaurant before taking the rest away. To conclude otherwise would be to provide an avenue for wholesale evasion of the rule. Therefore, the bulk sales of croissants are already taxable under Regulation 1603(f). We agree, however, that the sales of sandwich fillings are sales of food products not suitable for consumption at the retailer's facilities. Since I calculate those sales to be 15.9% of your client's total food sales, that means that 84.1% of those sales are subject to tax without reference to the 80/80 rule. Therefore I confirm my previous opinion that your client's sales of food to-go are subject to tax. I hope this discussion has answered your question. If you need anything further, please do not hesitate to write again. Sincerely,

John L. Waid
Tax Counsel
JLW:es
cc:

-- District Administrator