Susan Combs, Texas Comptroller of Public Accounts OCTOBER 2007

For more information, visit our Web sitewww.window.state.tx.usReceive tax help via e-mail at tax.help@cpa.state.tx.us.

Grocery and Convenience Stores: Taxable and Nontaxable Sales

Fast FoodCollect tax on all food (except bakery items sold without eating utensils) kept hot, such as barbecued beef, chicken, chili and soups.

Collect tax on all food sold with plates and eating utensils.

Collect tax on sandwiches (unless sold frozen).

Collect sales tax if you mix two or more food ingredients on your retail premises for sale by weight or volume (salad, for example) as a single item. Do not collect sales tax, however, if the item is typically reheated prior to eating (e.g. macaroni and cheese). And don’t collect tax on food that you merely cut, repackaged or pasteurized.

Photo ProcessingCollect tax on film processing, negatives, prints, pictures-on-disk and slides.

RentalsCollect tax on DVDs, videos, VCRs, floor-cleaning equipment or any other property you rent to your customers.

Cigarettes and Tobacco ProductsCollect tax on

cigarettes, cigars and all other tobacco products.

MagazinesCollect tax on magazines.

Phone CardsCollect tax on phone cards.

CouponsA coupon is a cash discount. Subtract the value of the coupon from the sales price and collect tax on the resulting cost to the customer if the product sold is taxable.

Tax RatesRetailers must collect state sales tax on all taxable items. Depending on your location, you may also be required to collect local tax for cities, counties, special purpose districts or transit authorities. Our brochure Texas Sales and Use Tax Rates (www.window.state.tx.us/taxinfo/local) lists the correct tax rates for cities and counties in Texas.

PermitsYou must display a sales tax permit at each store you operate. If you need a permit, call us toll free at (800)252-5555 or download the application from our Web site at www.window.state.tx.us/taxinfo/taxforms/01-forms.html.

Wrapping and PackagingRetailers must pay tax on all boxes, sacks and coverings used to package or repackage items for sale. These materials are exempt from tax if used to wrap cooked foods in a store’s deli, cakes in a bakery, meats in a store’s in-house meat department or other such items in a similar processing environment.

Dining AreaIf your store has a dining area, collect sales tax on individual-sized packages of such items as chips, crackers, and peanuts when sold at the same register with ready-to-eat food or beverages. For example, a grocery store that sells hot barbecue in an area with tables and chairs should collect tax on individual-sized bags of chips sold in the dining area. Bakery goods such as doughnuts and cookies are only taxable if sold with a plate or eating utensils.

If your store doesn’t have eating facilities, do not collect sales tax on chips, crackers, peanuts and similar items, even if sold in individual-sized packages.

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• adhesivetape• alarmclocks• ale• aluminumfoil• ammonia• ammunition• appliances• automotiveitems(oil,

transmission fluid, antifreeze, etc.)

• babycareproducts(oil,lotion, powder, etc.)**

• babyclothing• bags• baskets• batteries• beautysupplies• beer• birdseed(exceptwild

birdseed)• bleach• books• breathmints• brooms• brushes• bubblebath• calendars• cameras• candles• candy*• canningsupplies• carbonatedbeverages*• cards• cassettetapes• charcoalbriquettes• charcoallighterfluid• Christmastreesand

decorations• cigarettes• cigarettelighters• cleaners• clothespins• clothing• coffeepots• cologne• cosmetics• costumes• coughdrops**• dentalfloss• detergent• deodorant(notincluding

antiperspirant)• deodorizers• diapers• dilutedjuices(50%orlessfruitjuice)*

• dishclothsandtowels• dishes• disinfectant• distilledspirits

• drinks(softdrinks–canned, bottled, frozen, or powdered, including all ades and punches)*

• dye• eatingutensils• electricalsupplies• electronicequipment• eyeglasses• fabricsofteners• fertilizer• film• fishingtackle• firearms• flashlights• floorwax• flowerseeds• flowers• flyswatters• freezerpaperandtape• furniture

• fuses• garbagebags• gardensupplies• giftwrap• glassware• gum• haircareproducts

(shampoo, spray, conditioner, etc.)

• haircoloring• hairpinsandaccessories• hammers• hardware• housewares• ice• icechests• icecreamsalt• icecreamsundries(sold

individually; not taxable

when sold in packages of two or more)

• insecticides• irons• jars• jewelry• keys• kitchenware• laundrydetergentand

additives• lawnchairs• lightbulbs• liquor• lotions**• lubricants• lye• matches• magazines• mops,mophandles,and

mop heads• mothballsandspray

• motoroil• mousetraps• movies• nails• notebooks• nuts(candy-coated)*• nurserystock(except

annual vegetable plants)• paperitems(all)• paraffin• peatmoss• pencilsandpens• perfume• petfood• petsupplies• photoprocessing• picturesandframes• pipes• plasticitems

• poisons• polish• popsicles• popcorn(whencandy-

coated or hot in the store) • potsandpans• powder(face,body,and

cleaning)• prophylactics**• razorsandblades• rentalitems• ribbons• sandwiches(exceptfrozen)• sandwichbags• schoolsupplies• scouringpads• shavingcreamandlotion• shampooandrinses• shoelaces• silverware• snuff• socks• soapanddetergent• softdrinks(carbonated

and non-carbonated)*• sponges• sportsequipment• sprays• starch• stationeryandcards• sunglasses• tape(packaging)• taperecorders• threadandsundries• toilettissue• tools• toothbrushes• toothpaste• toothpicks• toys• tobaccoproducts• towels• videotape(salesand

rentals)

• watchesandclocks• watersofteners• watersoftenersalt• waxremovers• whiskbrooms• wine• wire• water(whenflavored)

* Unless purchased with food stamps or the Lone Star Card.

** Unless medicated.

Grocery and Convenience Stores: Taxable and Nontaxable Sales

Examples of Taxable Items

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Baby Products• electrolytereplacements• babyfood–canned,

packaged, etc.• milk–canned,dry,etc.• formula• medicatedproductsBakery Items - fresh, canned, or frozen• biscuits• bread• cakes• cookies• croutons(plainand

seasoned)• dinnerrolls• doughnuts• pies• pizzacrusts• tortillasBaking Supplies• almondpaste,marzipan• bakingchocolate(blocks

and chips)• cakemixes• cannedfillings• cookiemixes• cookingoils,shortening,

and lard• cornmeal• driedfruits• ediblecakedecorations

(sprinkles, confetti, etc.)• flour• foodcoloring(liquid,gel,

and powdered)• icingandicingmixes

• leaveningagents(baking powder, baking soda, yeast)

• marshmallows• molasses• muffinmixes• nuts(notcandy-coated)• seasonings(salt,pepper,

herbs, spices, etc.)• spices• sugar• sugarsubstitutes• syrupsCondiments• catsup• herbs• mayonnaise• mustard• picklerelish

• pickles• saladdressings(mixesor

bottled)• salsas,cannedandfresh• saucesandliquid

seasonings (fresh, canned, and bottled)

• spices• vinegarDairy Products• butterandmargarine• cheeseandcheesefoods,

including cottage cheese, cream cheese

• cream(whipping,halfandhalf, heavy, etc.)

• creamers• lactose-reducedmilksand

dairy products

• milkandmilksubstitutes(canned and dry)

• sourcream• yogurtBeverages• coffee(beans,ground,and

instant)• coffeeflavorings

(powdered and liquid)• fruitandvegetablejuices(morethan50%fruitorvegetablejuice,canned,bottled, or frozen)

• mealreplacements• tea(includingherbalteas)• water(carbonatedornon-

carbonated, non-flavored)Drugs and Medicines• acnetreatmentproducts• allergytreatmentproducts• antibiotics• anti-fungalproducts• antisepticsprays,creams,

and lozenges • coldremedies• coughsuppressants• expectorants• headlicetreatments• hemorrhoidtreatments• insectbitetreatments• laxatives• medicatedprophylactics• painrelievers(e.g.,aspirin,

ibuprofen, acetaminophen)

NontaxableWhilethelistbelowisnotall-inclusive,itillustratesthetypesofproductsthatarenotsubjecttosalestax.

Grocery and Convenience Stores: Taxable and Nontaxable Sales

NewspapersTo be nontaxable, newspapers must be printed on newsprint, be distributed at short intervals of four weeks or less, be sold for an average price of $1.50 or less over a 30-day period, and disseminate general interest news and advertisements.

Lone Star Card – Food StampsAnything that can be bought legally with the Lone Star Card is not taxable. For example, candy, soft drinks and ice are usually taxable, but are nontaxable if bought using the Lone

Star Card. If a customer buys milk, fruit, bread, soft drinks and candy and pays with the Lone Star Card and cash, the Lone Star Card should first be used to pay for the soft drinks and candy. In other words, do not collect sales tax on the candy and soft drinks as long as they are purchased with the Lone Star Card.

Over-the-Counter Drugs and MedicinesOver-the-counter drugs and medicines, vitamins and minerals, and nutritional supplements are not taxable.

Examples of Nontaxable Items

Eggs and Egg Substitutes• eggsubstitutes(freshand

frozen)• fresheggsGrains and Pasta• beans• cereals• granola(bulkand

packaged)• pastas(fresh,cannedand

dried)• pastamixes• rice• spaghettiIce Cream/Ice Cream Substitutes and Ice Cream Sundries • frozenyogurt• icecream(pintorlarger

containers)

• icecreamsundries(icecream bars, ice cream sandwiches, etc. sold in prepackaged units containing 2 or more sundries. Popsicles that are not ice cream sundries are taxable regardless of the quantity in a package unless the popsicles are morethan50%juice.)

• sherbetMeat, Poultry and Fish• cannedmeats• driedmeats• delimeats• freshandfrozenbeef,

poultry, pork and fish• lunchmeats• meatsubstitutes• sausagesNutritional Supplements• herbalproducts• mineralproducts• vitamins

Produce • cannedfruitsand

vegetables• driedfruitsandvegetables• freshfruitsandvegetables

(bulk, wrapped, or packaged)

• frozenfruitsandvegetables

Other Categories:• frozenmeals• mealreplacements(bars,

powders, and drinks)• packagedmixesforbeef,

fish, pork and poultry• packagedmixesfor

vegetables, beans and rice• sauces(pasta,tomatoes,

garlic)• soups(canned,drymix,or

frozen)

Snacks• breakfastbars• chips• crackers• granolabars• nuts(notcandy-coated)• popcorn• pretzels• snackmix• trailmix• yogurtbars

We’re Here To Help! Call Toll-Free!If you have questions or need information on a specific tax, please call our toll-free numbers:

(800) 252-5555911 Emergency Service/Equalization

SurchargeAutomotive Oil FeeBattery FeeBoat and Boat Motor Sales TaxCustoms BrokerFireworks TaxMixed Beverage TaxOff-Road, Heavy-Duty Diesel

Equipment SurchargeOyster FeeSales and Use TaxesTelecommunications Infrastructure

Fund

(800) 531-5441Cement TaxInheritance TaxLocal RevenueMiscellaneous Gross Receipts TaxesOil Well Servicing TaxSulphur Tax

(800) 531-5441, ext. 3-3630WebFile Help

(800) 252-1381Bank FranchiseFranchise Tax

(800) 252-7875Spanish

(800) 531-1441Fax on Demand (Most frequently

requested Sales and Franchise tax forms)

(800) 252-1382Clean Vehicle Incentive ProgramManufactured Housing TaxMotor Vehicle Sales Surcharge,

Rental and Seller Financed Sales Tax

Motor Vehicle Registration Surcharge

(800) 252-1383Fuels TaxIFTALG DecalsPetroleum Products Delivery FeeSchool Fund Benefit Fee

(800) 252-1384Coastal ProtectionCrude Oil Production TaxNatural Gas Production Tax

(800) 252-1387Insurance Tax

(800) 252-1385Coin Operated Machine TaxHotel Occupancy Tax

(800) 252-1386Certificates of Account Status/Good

StandingOfficer and Director Information

(800) 862-2260Cigarette and Tobacco

(888) 4-FILING (888-434-5464)TELEFILE: To File by Phone

(800) 252-1389GETPUB: To Order Forms and

Publications

(800) 654-FIND (800-654-3463)Treasury Find

(800) 321-2274Unclaimed Property ClaimantsUnclaimed Property HoldersUnclaimed Property Name Searches

(512) 463-3120 in Austin

(877) 44RATE4 (877-447-2834)Interest Rate

Texas Comptroller of Public AccountsPublication #96-280

Revised October 2007

For additional copies write:

Texas Comptroller of Public Accounts111 East 17th Street

Austin, Texas 78711-1440

For more information, visit our Web site

www.window.state.tx.us

Receive tax help via e-mail at

tax.help@cpa.state.tx.us

The Texas Comptroller of Public Accounts is an equal opportunity employer and does not discriminate on the basis of race, color, religion, sex, national origin, age or disability in employment or in the provision of any services, programs or activities.

In compliance with the Americans with Disabilities Act, this document may be requested in alternative formats by calling the appropriate toll-free number listed at left, or by calling:

(512) 463-4600 in Austin(512) 475-0900 (FAX).

Grocery and Convenience Stores: Taxable and Nontaxable Sales