When did an Illinois gift basket containing coffee, candy, and other food qualify for the lower food tax rate?

Plain-English summary

A coffee seller planned holiday gift boxes containing roughly 80% coffee and 20% coffee-flavored confections by weight, with coffee representing more than 90% of the value. Some confections met the candy definition; flour-containing malted milk balls were treated as food.

IDOR explained two levels of analysis.

First, the seller's type of establishment mattered. Food for off-premises consumption generally received the lower 1% state rate plus local taxes, except alcohol, candy, soft drinks, and food prepared for immediate consumption. If more than half of all the seller's food sales were bulk rather than food it prepared for immediate consumption, the low rate generally applied to food sales other than the listed high-rate categories. On-premises dining could change that result unless physically separated with separately recorded receipts.

Second, the gift basket as a whole followed a more-than-50%-of-value test:

• If more than 50% of the basket's value came from qualifying food, the basket was treated as food and, under the letter's assumptions, received the low rate.
• If more than 50% came from nonfood or high-rate items—such as the basket itself, alcoholic beverages, or candy—the whole basket received the general-merchandise rate.

With coffee accounting for over 90% of the stated value, the requester's basket would fall on the qualifying-food side if the letter's establishment and dining assumptions were satisfied.

Common questions

Was the basket classified by weight? No. The gift-basket rule used value.

What threshold controlled? More than 50% of the basket's value.

Could the seller's business setup change the rate? Yes. Its overall food-sales mix and dining facilities mattered.

Citations and references

• 86 Ill. Adm. Code 130.310
• 35 ILCS 120/2-10

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2012.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2012/st-12-0063.pdf

Original ruling text

ST 12-0063-GIL 12/21/2012 FOOD
This letter concerns the sale of gift baskets. See 86 Ill. Adm. Code 130.310. (This is a
GIL.)
December 21, 2012
Dear:
This letter is in response to your letter dated October 23, 2012, in which you request information.
The Department issues two types of letter rulings. Private Letter Rulings (“PLRs”) are issued by the
Department in response to specific taxpayer inquiries concerning the application of a tax statute or
rule to a particular fact situation. A PLR is binding on the Department, but only as to the taxpayer
who is the subject of the request for ruling and only to the extent the facts recited in the PLR are
correct and complete. Persons seeking PLRs must comply with the procedures for PLRs found in the
Department’s regulations at 2 Ill. Adm. Code 1200.110. The purpose of a General Information Letter
(“GIL”) is to direct taxpayers to Department regulations or other sources of information regarding the
topic about which they have inquired. A GIL is not a statement of Department policy and is not
binding on the Department. See 2 Ill. Adm. Code 1200.120. You may access our website at
www.tax.illinois.gov to review regulations, letter rulings and other types of information relevant to your
inquiry.
The nature of your inquiry and the information you have provided require that we respond with a GIL.
In your letter you have stated and made inquiry as follows:
I am requesting guidance on the tax rate to charge on holiday gift boxes our company
will prepare and sell to businesses and individuals in the next few months. These gift
boxes will primarily contain freshly roasted coffee beans along with candy-like products
infused with natural flavors from our coffee.
By weight, these boxes will include approximately 80% coffee and 20% candy-like
products. By value, they will contain over 90% coffee. The candy-like products
involved are a mixture of individually wrapped chocolates infused with coffee flavor.
Two-thirds of these confections qualify as candy under the regulations set forth in
paragraphs 10 and 11 of 35 ILCS 120, Sec. 2-10. The other one-third of these
confections (specifically malted milk balls covered in coffee-flavored chocolate) contain
wheat flour and qualify as food items.
Roasted coffee is taxed at the food rate, and 1/3 of the rest of the gift box contents are
also taxed at the food rate. Would you please provided [sic] us with guidance or a
ruling about the tax rate to charge for these holiday gift boxes as a whole?
Thank you for your attention to this matter, and best wishes during the upcoming
holiday season!
DEPARTMENT’S RESPONSE:
The Department’s regulation regarding the appropriate tax rates for food can be found at 86 Ill. Adm.
Code 130.310. Food that is to be consumed off the premises where it is sold (other than alcoholic
beverages, candy, soft drinks, and food that has been prepared for immediate consumption) is taxed
at the lower state tax rate of 1% plus applicable local taxes. Food is defined as any solid, liquid,
powder or item intended by the seller primarily for human internal consumption, whether simple,

ST 12-0063-GIL
December 21, 2012
Page 2
compound or mixed, including foods such as condiments, spices, seasonings, vitamins, bottled water
and ice. Candy is defined as a preparation of sugar, honey, or other natural or artificial sweeteners in
combination with chocolate, fruits, nuts or other ingredients or flavorings in the form of bars, drops, or
pieces. Candy does not include any preparation that contains flour or requires refrigeration.
The taxability of food items does not depend solely on the food item sold, but instead is determined
primarily by the nature of the establishment selling the food products. Your letter does not indicate
what the nature of your establishment is. The first step in determining the type of tax applicable to
your food sales is to characterize the nature of your food sales as either food primarily prepared by
you for immediate consumption or primarily "bulk" food (that is not prepared by you). To do this, you
must examine all your food sales.
The term, "food prepared for immediate consumption," means food prepared by you to be eaten
without substantial delay after the final stage of preparation. It includes all hot food items. f the
majority -- over 50 percent -- of all food sales are bulk sales, the low rate applies to all your sales of
food (except for hot food and alcoholic beverages and soft drinks). If the store provides on-premises
dining facilities, however, the store will incur the high rate on all food items (even those that are bulk)
unless the dining facilities are physically separated from the other areas and the retailer utilizes a
separate means of recording the receipts from on-premises consumption from other sales.
Assuming that over 50% of your food sales are not food prepared by you for immediate consumption,
and that you have no on-premises dining facilities, we believe that prepackaged coffee and candy-like
products that do meet the definition of candy are all taxable at the low rate of tax (1% plus any
applicable local taxes).
The taxability of the gift baskets involves application of another rule. If over 50% of the value of the
gift basket stems from the food products contained in it, the item is considered a food and will be
taxable, given the assumptions in the preceding paragraph, at the low rate of tax. If, however, over
50% of the value of the basket is derived from non-food or high-rate items (i.e., the basket itself and
non-food items in the basket such as the alcohol beverages or candy), then the basket is taxable at
the high rate established for general merchandise.
I hope this information is helpful. If you require additional information, please visit our website at
www.tax.illinois.gov or contact the Department’s Taxpayer Information Division at (217) 782-3336.

Very truly yours,

Richard S. Wolters
Associate Counsel