Sales, Use and International Tax Activity Update - March 2010

Indiana Feasts on Food & Beverage Taxability

Introduction
This directive is aimed towards retail merchants responsible for collecting the various county and municipal food and beverage taxes.

The purpose of this directive is to assist retail merchants in the proper application of the food and beverage tax. In counties or municipalities that adopt a food and beverage tax, the rate is 1% of the gross retail income received from taxable food and beverage transactions.

In some instances where both a county and municipality within the county have adopted the food and beverage tax, the total tax rate for a taxable transaction inside the municipality is 2%.

I. Location of Transaction
The food and beverage tax applies only to transactions that take place in a county or municipality that adopts the tax. A retail merchant that caters in counties that have not adopted the tax will not collect the tax on transactions in those counties.

II. Transactions Subject to Tax
The food and beverage tax applies to any transaction in which food or beverage is furnished, prepared, or served by a retail merchant for consumption at a location or on equipment provided by the retail merchant in a county or municipality that adopts the tax.

For purposes of the food and beverage tax, consumption at a location or on equipment provided by the retail merchant includes food or beverage that is served by a retail merchant off the retail merchant's premises. This includes food sold and served by a retail merchant that is performing catering activities.

The transaction is taxable if the food is sold in a heated state or heated by the retail merchant. This includes food sold at a deli counter in a grocery store that is cooked or heated on the premises of the retail merchant.

Food or beverages sold by a retail merchant where the seller provides eating utensils, including plates, knives, forks, spoons, glasses, cups, napkins, or straws, results in a taxable transaction.
Food sold by a retail merchant where two or more food ingredients are mixed or combined by the retail merchant for sale as a single item results in a taxable transaction. This does not include food that is only cut, repackaged, or pasteurized by the seller or eggs, fish, meat, and poultry requiring cooking by the consumer.

III. Exempt Transactions
The food and beverage tax does not apply to the sale of food and beverages if the transaction is exempt from the sales tax.

The Commissioner’s Directive No. 30 can be viewed on the IN.gov Web site.

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