Tax Education

Food Service Industry

The career path in the food service industry falls under the Ohio Department of Taxation’s category of a “retail sales”.  This area can lead you to a career as a chef, hostess, restaurant manager, or coffee shop owner, just to name a few.  Along with a Vendor’s License issued by Ohio Department of Taxation, if you have employees you will need an Employer Withholding account, and depending upon your business you may also be required to have a Commercial Activity Tax account. 

Food Service Industry – Retail Sale – Ohio Revised Code

The Ohio Revised Code Section 5739.02 imposes sales tax “on each retail sale made in the state”.  In general, food consumed on premises (“for here” or “dine in”) is subject to sales tax paid by the customer.  Food not consumed on premises (“to go” or “take out”) is exempt from sales tax.  However, a soft drink is always taxable, no matter where the beverage is consumed. 

To properly comply with sales tax law, restaurateurs need to consider the following:

  • What is considered food?
  • Are certain beverages considered food?
  • What is considered premises?

The Ohio Revised Code Section 5739.01 (EEE)(1) defines food as follows: substances, whether in liquid, concentrated, solid, frozen, dried, or dehydrated form, that are sold for ingestion by humans for taste or nutritional value is food.  Food does not include alcoholic beverages, dietary supplements, soft drinks, or tobacco. 

The Ohio Revised Code section 5739.01 (EEE)(2)(c) defines soft drink as follows: nonalcoholic beverages that contain natural or artificial sweeteners. "Soft drinks" does not include beverages that contain milk or milk products, soy, rice, or similar milk substitutes, or that contains greater than fifty per cent vegetable or fruit juice by volume.

The Ohio Revised Code section 5739.01 (K) defines premise as follows: any real property or portion thereof upon which any person engages in selling tangible personal property at retail or making retail sales and also includes any real property or portion thereof designated for, or devoted to, use in conjunction with the business engaged in by such person.

When is the sale of food taxable?

  • Food consumed on the premises is always taxable.
  • Food sold for consumption off the premises is not taxable. 

What beverages are considered food?

  • A plain cup of coffee or tea is food.

What beverages are considered soft drinks?

  • Beverages that are sweetened (naturally or artificially) OR contain 50% or less pure fruit or vegetable juice by volume.  However, if the beverage contains milk products or milk substitutes the beverage is food and is not taxable.

When are soft drinks taxable?

  • No matter where consumed, soft drinks are not food and are always taxable.

Below is a chart categorizing beverages: 

Beverages

Food

Non-Food

Canned or bottled Coffee/Tea – without milk or milk substitute

 

X

Canned or bottled Coffee/Tea – with milk or milk substitute

X

 

Coffee / Tea – Plain

X

 

Coffee / Tea – Creamer

X

 

Coffee / Tea – Sweetened (including artificially)

 

X

Soda Pop

 

X

Sweetened Energy or Sports Drink

 

X

Fruit Juice (more than 50% juice content)

X

 

Fruit Juice (less than 50% juice content)

 

X

Chocolate Milk

X

 

Water

X

 

Water - Flavored with Sweetener

 

X

Water – Natural Flavors

X