SALT Report 3104 – The Minnesota Department of Revenue updated a sales tax fact sheet that discusses the taxability of prepared foods. Generally, prepared foods or drinks are subject to the 6.875% state sales tax rate, in addition to any local taxes, if they meet the following conditions:
- The food is sold in a heated state or was heated by the seller
- The food includes two or more food ingredients that are mixed or combined by the seller and sold as a single item
- The food is sold with eating utensils provided by the seller such as plates, bowls, knives, forks, spoons, glasses, cups, napkins, or straws
The following items are not considered prepared foods unless they are sold with eating utensils provided by the seller:
- Bakery items, such as bread, rolls, buns, biscuits, bagels, croissants, pastries, donuts, Danish, cakes, tortes, pies, tarts, muffins, bars, cookies, and tortillas
- Ready-to-eat meat and seafood sold by weight and in an unheated state
- Raw eggs, fish, meat, or poultry, and foods that contain any of these raw animal products
- Food that is only sliced, repackaged, or pasteurized by the seller
If the seller makes eating utensils available on a counter or in a service area the food is considered taxable prepared food when the total sales of all prepared foods are more than 75% of the seller’s total sales food and food ingredients.
Therefore, sellers who make eating utensils available to their customers must calculate the percentage of prepared foods sold each year. If the seller has multiple locations, the seller must calculate a single prepared food percentage for all establishments located in the State.
The fact sheet provides additional guidance regarding the application of tax to the above items; combination packages that include taxable and nontaxable food items; what qualifies as ready-to-eat-foods; applying the 75% calculation method; and definitions.
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