Were salads, dressing, and soup sold from an in-store salad bar taxable in Texas?

Plain-English summary

The Comptroller said the store's salads, salad dressing, and soup were taxable. Food sold with plates, spoons, forks, or other eating utensils was treated as ready for immediate consumption, and food served or kept heated was also taxable.

The store could buy disposable items used in its food-service operation tax free by giving an exemption certificate.

Because the retailer operated both grocery and food-service activities, it had to keep separate, auditable records distinguishing each operation's sales. The letter warned that without those records the retailer would lose its identity as a grocery store and all individual food and drink items sold in the store would be taxable.

Common questions

Why were the salad-bar items taxable? The letter treated food sold with eating utensils, or served or maintained heated, as taxable food ready for immediate consumption.

Could disposable food-service items be bought tax free? Yes, under an exemption certificate.

How could the retailer separate the two operations? Through separate cash registers or another accurate accounting procedure that could be verified by audit.

Citations and references

• 34 Tex. Admin. Code Rule 3.293 — food rule enclosed with the letter.
• 34 Tex. Admin. Code Rule 3.328 — grocers rule enclosed with the letter.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8604L0719E01

Original ruling text

April 15, 1986

Dear ***:

Thank you for your letter concerning the taxability of items offered in
your salad bars located inside your stores.

Food sold with eating utensils provided, such as plates, spoons and
forks, is considered ready for immediate consumption and taxable. Food
served or maintained in a heated state is also taxable. Therefore, the
charge for your salads, salad dressing, and soup is taxable.

You may purchase all disposable items used in the food service operation
tax free under an exemption certificate.

Also, when a retailer elects to operate a dual operation, it must assume
the responsibility of keeping separate records to clearly identify and
distinguish the sales for each operation. This can be accomplished through
separate cash registers or an accurate accounting procedure which can be verified
by audit. Unless such records are kept, the retailer losses its identity
as a grocery store and all individual food and drink items sold in the store
will be taxable.

I have enclosed our rules on Food (3.293) and grocers (3.328) for your
inspection.

This opinion is based on the facts presented. If there are additional or
different facts, the opinion may change.

If you have any questions or need more information, please call us at
1-800-252-5555 toll free from anywhere in Texas. You may write us at the
Tax Administration Division.

Sincerely,

Tax Policy Section
Tax Administration Division