ST 2010-01 - Sales and Use Tax: Food Service - Equipment and
Supplies Used in the Food Service Industry – Issued August
2010
The purpose of this information release is to provide
guidance to the food service industry as to the application
of Ohio sales and use tax to their equipment and supply
purchases. As a general rule, all purchases of tangible
personal property made in Ohio are subject to Ohio sales tax
and the storage, use or consumption of tangible personal
property in Ohio is subject to Ohio use tax. However, there
are several sales tax exemptions that can apply to purchases
by vendors in the food service industry. (While the remainder
of this release will address potential exemptions in terms of
sales tax, all exemptions would apply equally to use tax.)
This information release will describe the various exemptions
and provide a list of commonly purchased equipment and
supplies indicating whether those items would be taxable or
exempt.
General Exemptions
Ohio sales tax applies to all retail sales of tangible
personal property unless otherwise exempted. There are
several exemptions that can apply to purchases by vendors in
the food service industry that would also be applicable to
other types of vendors.
Resale - Ohio Revised Code (“R.C.”) section 5739.01(E)
defines a “retail sale” as, “all sales except those in which
the purpose of the consumer is to resell the thing
transferred … in the form in which the same is, or is to be,
received by the person.” Examples of this in the food
service context would be tableware, cutlery and table linens
temporarily transferred to the customer as part of the sale
of a meal. Also, purchases of items like paper napkins,
plastic spoons and forks, and drinking straws provided to
customers that purchase food or beverages would be exempt
from sales tax under the resale exemption.
Incorporation into a Product for Sale – R.C.
5739.02(B)(42)(a) provides an exemption for items that a
vendor intends to “incorporate … as a material or a part into
tangible personal property to be produced for sale by
manufacturing, assembling, processing, or refining.” This is
essentially an exemption for raw materials. In the food
service industry, this exemption would apply to purchases of
such things as drink mixes or soft drink syrup as well as the
basic food items to be prepared and sold to customers.
Manufacturing – R.C. 5739.02(B)(42)(g) provides an exemption
for items that the vendor will use “primarily in a
manufacturing operation to produce tangible personal property
for sale.” R.C. 5739.01(S) defines a “manufacturing
operation” as one “in which materials are changed, converted,
or transformed into a different state or form from which they
previously existed.” While this would include much food
preparation equipment, there is a specific exemption for such
equipment that will be discussed below. However, food service
operations often sell soft drinks or alcoholic beverages
which are not included within the definition of “food” for
sales and use tax purposes (see R.C. 5739.01(EEE)). Equipment
used to process such items, such as bar blenders and shakers,
would qualify for the manufacturing exemption.
Packaging – R.C. 5739.02(B)(15) provides an exemption for
packages purchased by a person making retail sales. In
a food service operation, this would include such items as
paper bags and cups used to package carryout purchases and
“doggie bags” for customers to take home leftover food.
Items Used Directly in Making Retail Sales – R.C.
5739.02(B)(35)(a) provides an exemption for, “Sales where the
purpose of the consumer is to use or consume the things
transferred in making retail sales and consisting of
newspaper inserts, catalogues, coupons, flyers, gift
certificates, or other advertising material which prices and
describes tangible personal property offered for retail
sale.” Pursuant to R.C. 5739.01(O) only that printed matter
which is “distributed” to the customer qualifies for this
exemption. The item in question must also both describe and
price the items offered for sale. Examples of items
entitled to this exemption would be carryout menus.
Specific Food Service Exemptions
R.C. 5739.02(B)(27) provides an exemption exclusively for the
food service industry. That section provides exemption for:
(27) Sales to persons licensed to conduct a food service
operation pursuant to section 3717.43 of the Revised Code, of
tangible personal property primarily used directly for the
following:
(a) To prepare food for human consumption for sale;
(b) To preserve food that has been or will be prepared for
human consumption for sale by the food service operator, not
including tangible personal property used to display food for
selection by the consumer;
(c) To clean tangible personal property used to prepare or
serve food for human consumption for sale.
Subdivision (a) of this section would exempt items like
stoves, ovens, cookware and utensils. Subdivision (b)
would provide exemption for items like kitchen coolers and
freezers. Note that items like coolers in an ice cream store
that display the ice cream for customers to select would not
qualify for exemption. Subdivision (c) would exempt items
like dishwashers and certain cleaning supplies for cleaning
items used to prepare and serve food (not including alcoholic
beverages or soft drinks).
The attached_list (in PDF format) is to be
used as a reference guide for taxpayers in the food service
industry and their suppliers. It is intended to be
illustrative and not to include all items that may be
purchased for use in a food service operation. The exemptions
available to persons in the food service industry are
dependent on the actual use of the item in question. The tax
determinations in the attached list assume the items in
question are used in the manner that is usual to the
industry. For example, a kitchen cooler used primarily to
hold non-food items, such as soft drinks, would not be
entitled to exemption. If an item is used in both
exempt and taxable manners, the vendor’s primary use of the
item would control its taxability.
If you have any questions regarding this information release,
please contact our Taxpayer Service Center at 1-888-405-4039,
or e-mail us through our Web site: tax.ohio.gov.
OHIO RELAY SERVICES FOR
THE HEARING OR SPEECH IMPAIRED
Phone: 1-800-750-0750