Was Texas sales tax due on soft drinks, chips, novelty ice cream, or other items bought with food stamps, including mixed-payment purchases?

Plain-English summary

The Comptroller said sales tax was not due on soft drinks, chips, novelty ice cream, or any other item purchased with food stamps.

When a customer used both food stamps and money to buy taxable and nontaxable items, the retailer was instructed to apply the food stamps first to the taxable items, making those items nontaxable, and then to nontaxable food products.

The attached federal notice said the Food Security Act of 1985 barred state and local sales taxes on eligible food purchased with food-stamp coupons and that Texas would implement the change on October 1, 1987.

What this means for you

Under this historical procedure, the payment method determined which eligible items escaped tax. In a mixed purchase, applying food stamps to taxable items first reduced the taxable cash-paid portion.

Common questions

Were soft drinks, chips, and novelty ice cream taxed when bought with food stamps? No under the letter.

How were food stamps allocated in a mixed purchase? First to taxable items, then to nontaxable food products.

What did the attached federal notice say? States could not collect state or local sales tax on eligible food bought with food-stamp coupons.

Citations and references

• Food Security Act of 1985
• Food Stamp Program regulation § 272.1(b), "No Sales Taxes on Food Stamp Purchases"
• Food Stamp Program regulation § 271.2, definition of eligible food referenced by § 272.1(b)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8710L0834D08

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

October 12, 1987

Dear ***:

Thank you for your note concerning food stamp purchases.

Tax is not due on soft drinks, chips, novelty ice cream, or any other
item
purchased with food stamps.

If taxable and nontaxable items are purchased with a combination of food
stamps and money, the food stamps should first be applied to the taxable
items (making them nontaxable) and then to the nontaxable food products.

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 me at
1-800-252-5555 toll free from anywhere in Texas. The regular number is
512/463-4600. You may write me at the Tax Policy Division.

Sincerely,
Adina Whittemore
Tax Policy Division

United States Food and 3101 Park Center Drive
Department of Nutrition Alexandria, VA 22302
Agriculture Service

Important Food Stamp Program Information

Part of the Food Security Act of 1985, passed by Congress in
December 1985, prohibits States from collecting state or local
sales taxes on purchases made with food stamps.

The program regulation implementing this provision is as follows:

Section 272.1 (b) No Sales Taxes on Food Stamp Purchases. A
State shall not participate in the Food Stamp Program if
State or local sales taxes or other taxes or fees, are
collected within the State on purchases made with food stamp
coupons. "Purchases made with food coupons" for purposes of
this provision shall refer to purchases of "eligible foods"
as defined in Sec. 271.2.

The effective date for this law varied among states because
implementation was dependent on the timing of State legislative
sessions. However, the State in which your store is located will
be implementing this change on October 1, 1987. Beginning on
that date you may no longer charge state or local sales tax on
eligible items purchased with food stamps.

If you have questions concerning this new procedure, please
contact your State Department of Taxation or the USDA, Food and
Nutrition Service Field Office serving your area.