If I sell food items, are they tax-exempt?
Food tax rules vary by state, and prepared foods are often treated differently than groceries.
The Narrative
The Empathy
You hear that groceries can be tax-exempt, but you are not sure if your baked goods or preserves qualify. It is hard to keep up with the rules.
The Education
Many states exempt certain grocery items but tax prepared foods, hot foods, or beverages. Farmer’s market rules can also vary by county. The only reliable answer is to check your state tax authority’s guidance for food sellers and confirm your product category.
The Solution
Identify your product type (shelf-stable, prepared, hot, or beverage) and verify the applicable tax treatment. Set your POS to charge tax where required, and keep a note of the guidance you used. When in doubt, ask the tax agency for written clarification.
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