Navigating the world of Texas sales tax can be tricky, especially when it comes to groceries. While many food items are tax-exempt, some are not. This guide will clarify which food items are taxed in Texas and why. We’ll cover everything from bakery goods to beverages, helping you understand the nuances of Texas sales tax on food.
Food and Beverages: What’s Taxable and What’s Not
Grocery and convenience stores sell a variety of items, some of which are taxable, and others that are not. Understanding these distinctions can save you from unexpected tax charges.
Bakery Items – Taxable and Nontaxable
The tax status of bakery items depends on where they are sold and how they are sold.
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Nontaxable: If a business qualifies as a bakery (more than 50% of sales are bakery items sold from a display case or counter and consumed off the premises), bakery items are generally not taxable.
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Taxable: If a business doesn’t qualify as a bakery, bakery items are taxable when sold with eating utensils or when heated.
Examples of bakery items include bagels, bread, cakes, cookies, croissants, cupcakes, Danish pastries, doughnuts, kolaches, muffins, pies, scones, strudels, and tortillas.
Baking Products – Nontaxable
Ingredients used for baking at home are not taxable. This includes items like baking chips, baking mixes, cake sprinkles, edible decorations, and icing.
Beer and Wine – Taxable
All sales of beer and wine are taxable in Texas.
Beverages and Water – Taxable and Nontaxable
Beverage taxability depends on the type of drink.
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Taxable: Soft drinks, including carbonated and non-carbonated beverages with natural or artificial sweeteners, canned, bottled, frozen, or powdered drinks and drink mixes, “-ades” and punches (50% or less fruit juice), flavored water, and sports drinks are taxable. Energy drinks and electrolyte drinks with sweeteners are also taxable unless they have a “Supplement Facts” panel, contain milk/substitutes, or have more than 50% fruit juice.
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Nontaxable: Beverages containing milk, milk products, milk substitutes, or juice with more than 50% fruit or vegetable juice, and plain water (unflavored, mineral, spring, or sparkling) are not taxable.
Candy and Gum – Taxable
Candy and gum, including bars, drops, taffy, and nuts or fruits coated with sweeteners, chocolate, yogurt, or caramel, are taxable.
Coffee and Tea – Taxable and Nontaxable
The tax status of coffee and tea hinges on how they’re sold.
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Taxable: Bottled or canned coffee and tea containing sweeteners, and coffee/tea sold hot or with a cup, glass, or straw are taxable.
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Nontaxable: Bottled or canned coffee and tea (unsweetened), coffee beans, ground coffee, coffee/tea pods, instant coffee/tea, tea bags, and loose tea are not taxable.
Food Products – Nontaxable
Basic food products are not taxable. This includes flour, sugar, bread, milk, eggs, fruits, and vegetables. Food that is typically reheated before eating or simply repackaged (like fruit or cheese trays) is also nontaxable. If a store provides a microwave for customers to reheat food, the food remains nontaxable.
Ice and Dry Ice – Taxable
Both ice and dry ice are taxable in Texas.
Prepared Food – Taxable
Prepared food is generally taxable. This includes:
- Hot food (pizza, fried chicken, soup, heated burritos).
- Hot drinks (cocoa, coffee, tea).
- Cold drinks sold with meals or eating utensils.
- Any food sold with eating utensils (trays, plates, cutlery, cups, straws). Note that napkins, wax paper, and clamshells are not considered eating utensils.
- Sandwiches (unless frozen and requiring thawing/heating by the customer).
- Food/drinks ready to eat without further preparation, sold by restaurants, delis, or similar locations within a store.
- Food/drinks from vending machines.
- Food created at a store by combining two or more ingredients (salad, salsa, pesto, hummus).
If a store (other than a bakery) provides utensils or heats bakery items, those bakery items become taxable.
Snack Items – Taxable and Nontaxable
Snack items have varying tax statuses based on portion size.
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Taxable: Individual-sized portions (less than 2.5 ounces or labeled as one serving) or items from vending machines are taxable.
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Nontaxable: Snack items in prepackaged units containing more than one individual-sized package are not taxable, unless sold as part of a meal.
Snack items include breakfast bars, granola bars, nutrition bars, sports bars, protein bars, yogurt bars, chips, crackers, hard pretzels, pork rinds, corn nuts, ice cream, sherbet, frozen yogurt, ice pops, juice pops, sorbet, nuts (except pine nuts or candy-coated nuts), popcorn, snack mix, trail mix, sunflower seeds, and pumpkin seeds.
Other Considerations
Discounts, Coupons, Gift Certificates, and Rebates
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Discounts & Coupons: Tax is due on the final discounted price.
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Gift Cards: Purchasing a gift card is not taxable, but redeeming it for taxable items is.
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Rebates: Manufacturer mail-in rebates do not lower the taxable price. Instant manufacturer rebates are treated as cash discounts. Retailer mail-in rebates require the store to refund the tax on the rebate amount.
SNAP Benefits
Taxable items purchased with Supplemental Nutrition Assistance Program (SNAP) benefits are exempt.
Non-Food Items: A Quick Overview
Many non-food items sold in grocery and convenience stores are taxable. Examples include:
- Books, comics, and magazines
- Cigarettes, cigars, and tobacco products
- Prepaid wireless telecommunications service cards
- Telephone calling cards
However, newspapers that meet specific criteria are nontaxable.
Conclusion
Understanding Texas sales tax on food can be complicated, but by knowing the rules and exceptions, you can avoid surprises at the checkout. Remember that the taxability of food items often depends on factors like preparation, location of sale, and whether eating utensils are provided. Always refer to the Texas Comptroller’s website for the most up-to-date information and specific situations.
Additional Resources
- Texas Comptroller’s Office: Sales and Use Tax
- Publication 96-280 (03/2024)
