In the June 1991 issue of the California Taxletter, we ran an article that highlighted the seemingly arbitrary rules that determined whether a food was taxable. The article stated that (at the time) sales tax applied to certain foods based on random quantity, depending on what the BOE determined was a “suitable” amount for consumption. For example, a pint of ice cream was not considered a suitable amount for consumption so no tax applied, but a one-half pint was suitable and so tax applied. (This anonymous author can eat a whole pint, no problem, and will pay the tax to prove it.)
The issue stemmed from language in 18 Cal. Code Regs. §1603: “… tax applies to sales of cold food products … in a form suitable for consumption on the seller’s premises [emphasis added].”
However, the current version of §1603(c) now includes a clarifying definition:
(A) For purposes of this subdivision (c), the term “suitable for consumption on the seller’s premises” means food products furnished:
- In a form which requires no further processing by the purchaser, including but not limited to cooking, heating, thawing, or slicing, and
- In a size which ordinarily may be immediately consumed by one person such as a large milk shake, a pint of ice cream, a pint of milk, or a slice of pie. Cold food products (excluding milk shakes and similar milk products) furnished in containers larger in size than a pint are considered to be in a form not suitable for immediate consumption.
Note the somewhat subjective terms “large milkshake” and “a slice of pie.”
Sales tax oddities as related to food continue to this day. A favorite is hot food versus cold food:
- The mere heating of a food product constitutes preparation of a hot prepared food product (e.g., grilling a sandwich, dipping a sandwich bun in hot gravy, using infrared lights, using steam tables, etc.).
- On the other hand, the sale of a toasted sandwich, which is not intended to be in a heated condition when sold, such as a cold tuna sandwich on toast, is not a sale of a hot prepared food product.1
Sales of food products are considered taxable sales of hot food items when a seller’s premises includes microwave ovens accessible only to the seller. If the microwave ovens are accessible to the public, the sales are generally nontaxable because the customers are buying the food cold and heating it themselves.2