Ga. Comp. R. & Regs. 560-12-2-.115

Current through Rules and Regulations filed through October 17, 2024

Rule 560-12-2-.115 - Restaurants

(1)Purpose. This Rule addresses the application of sales and use tax to purchases and sales made by establishments that sell prepared food. Such establishments are generally referred to as restaurants and include but are not limited to coffee shops, cafeterias, short order cafes, luncheonettes, taverns, lunchrooms, soda fountains, food carts, food trucks, itinerant restaurants, catering establishments, and similar facilities.

(2) Definitions. The terms defined in Rule 560-12-2-.104 entitled "Food Exemptions" apply to this Rule. In addition, the following definitions apply:

(a) "Food packaging" means tangible personal property that is used to contain food or beverages. "Food packaging" includes but is not limited to containers, boxes, wrappers, cups, dinner plates, trays, platters, and the accompanying lids.

(b) "Premises" means the total space and facilities in or on which the seller conducts business, including but not limited to parking areas for the convenience of in-car consumption, counter space, indoor or outdoor tables, chairs, benches, and similar conveniences.

(3) Sales of food. Pursuant to O.C.G.A. § 48-8-3(57), certain food items are exempt from state sales tax. Rule 560-12-2-.104 addresses the taxation of food and is summarized as follows:

(a) Prepared food. "Prepared food" is subject to both state and local sales and use tax. The term "prepared food" generally includes meals sold by a restaurant but does not include food items entirely prepared off the seller's premises. "Prepared food" includes the following:

1. Food sold in a heated state or heated by the seller at the seller's location. This includes food heated by the seller at any time before the sale, even if the item is in an unheated state at the time of sale.

2. Food with two or more food ingredients mixed or combined at the seller's location by the seller for sale as a single item.

3. Food sold with eating utensils provided by the seller. Food is considered to be sold with eating utensils provided by the seller when the food is customarily intended for consumption with the utensils provided. The presence of self-service utensils in a restaurant does not make otherwise exempt food taxable unless it is customarily intended that the food be consumed with those utensils.

Example 1: Seller purchases tea prepared off-site and sells the tea in cups. The seller does not add any ingredients and does not heat the tea. The tea is subject to both state and local tax because the cup is a "utensil" according to Rule 560-12-2-.104.

Example 2: The seller purchases and subsequently sells single-serving size bottled beverages. Utensils are not customarily used to consume single-serving bottled beverages; therefore, single-serving bottled beverages sold for off-premises consumption are subject only to local tax.

Example 3: The seller sells bottles of barbecue sauce prepared off-site. The seller neither heats nor adds ingredients to the sauce. Utensils are not customarily used to consume barbecue sauce; therefore, bottles of barbecue sauce sold for off-premises consumption are subject only to local tax.

(b) Food and food ingredients. "Food and food ingredients" sold to natural persons for consumption off premises is not subject to state sales and use tax, but is subject to local sales and use tax.

1. For purposes of the food exemption in O.C.G.A. § 48-8-3(57), "food and food ingredients" does not include prepared food, alcoholic beverages, dietary supplements, tobacco, and items ingested or chewed primarily for medical or hygiene purposes, such as cough drops, throat lozenges, breath strips, and over-the-counter medications.

2. The term "food and food ingredients" includes food that is prepared off-premises. For example, if sold for off-premises consumption without utensils, cakes prepared off-premises are exempt from state sales and use tax, but are subject to local sales and use tax. However, if utensils customarily intended to be used to consume the cake are provided or made available by the seller, the cake is subject to both state and local sales and use tax as "prepared food."

3. "Food and food ingredients" sold for on-premises consumption is subject to both state and local sales and use tax. Thus, a bag of chips sold by a restaurant for on-premises consumption is subject to state and local sales and use tax.

4. The state sales and use tax exemption for "food and food ingredients" is not available to businesses purchasing food and food ingredients. Unless another exemption applies, business entities, including nonprofit organizations, must pay both state and local sales and use tax on all purchases of food and food ingredients.

(c) Food sold in bulk. Food sold in bulk is not afforded special tax treatment, but is taxed in accordance with the rules set forth in this paragraph (3).

Example 1: Seller purchases cole slaw prepared off-site in bulk. Without heating or adding ingredients to the cole slaw, the seller then resells the cole slaw in a bulk size (multi-serving) package for off-premises consumption. The seller makes forks available at no charge. The cole slaw is prepared food since it is sold with utensils and is thus subject to both state and local tax.

Example 2: Assume the same facts as Example 1, except the seller makes no utensils available. The cole slaw is exempt from state tax.

Example 3: Seller purchases tea prepared off-site in bulk. Seller then sells the tea in gallon jugs. The seller does not add any ingredients and does not heat the tea. The seller makes cups available at no charge. The tea is subject to both state and local tax.

Example 4: Same facts as in Example 3; but instead of cups, the seller makes straws available at no charge. The tea is exempt from state tax because gallon jugs of tea are not customarily consumed with straws.

Example 5: Same facts as in Example 3, but the seller makes no utensils available. The tea is exempt from state tax.

Example 6: The seller sells 10-pound bags of ice prepared off-premises. The seller makes cups available at no charge. The ice is subject to both state and local tax.

Example 7: Same facts as in Example 6, but the seller makes no utensils available. The ice is exempt from state tax.

Example 8: The seller makes ice on-site and sells it in 10-pound bags. The seller makes no utensils available. The ice is exempt from state tax because making ice involves neither mixing nor heating ingredients.

(d) Combination meals. If the sales price of a combination meal is attributable to products that are subject to tax at different tax rates, the total price must be treated as attributable to the products subject to tax at the highest tax rate unless the seller can identify, by reasonable and verifiable standards from the seller's books and records that are kept in the regular course of business for other purposes, including nontax purposes, the portion of the sales price attributable to the products subject to tax at the lower tax rate.

For example, a lunch consisting of hot chicken (subject to state and local tax because it is sold heated) and a bag of chips is sold for off-premises consumption for a single price of $3.95. No eating utensils are provided by the seller. The seller must charge both state and local sales tax on the entire sales price of the meal. However, the seller may instead charge state and local sales tax for the chicken and only local sales tax for the bag of chips if the seller can demonstrate with its books and records the portion of the total sales price attributable to the chips, that the chips were not prepared by the seller on premises, that the chips were sold without utensils customarily used to consume chips, and that the chips were sold for off-premises consumption.

(4) Employee meals. Rule 560-12-2-.65 addresses employee meals and is summarized as follows:

(a) The sale of food and beverages by an employer to an employee is subject to sales tax on the total sales price charged to the employee.

(b) Food and beverages provided by an employer without charge to an employee are taxable to the employer. The employer must remit use tax on the cost of the food and beverages as shown in the employer's books and records. In the event that the exact cost of the employee's food and beverages is not represented in the employer's records, the cost shall be deemed to be fifty percent (50%) of the retail sales price of the food and beverages.

(5)Gratuities.

(a) An amount, whether designated as a tip, gratuity, or service charge, is mandatory and subject to tax when

1. negotiated between the seller and the customer in advance of a meal or event;

2. unilaterally added to the bill by the seller; or

3. added to the bill by the customer pursuant to a statement printed on a menu, sign, advertisement, or brochure indicating that tips, gratuities, or service charges are mandatory.

(b) Notwithstanding subparagraph (a)2, when a tip, gratuity, or service charge is added unilaterally to the bill by the seller, the amount added is optional and not subject to tax when the seller clearly and conspicuously states on the bill, menu, or signage located in an area visible to customers that tips, gratuities, and service charges are optional and may be removed from the bill at the customer's discretion.

(6) Purchases by restaurants.

(a) Food packaging. Single-use food packaging used to contain food that is transferred to the customer is exempt from sales and use tax pursuant to O.C.G.A. § 48-8-3(94).

(b) Items for sale. A retailer may purchase food items and other items of tangible personal property for resale without payment of sales and use tax and hold such property for sale at retail in the regular course of business. A toy sold as a component part of a meal may be purchased tax free as an item for resale.

(c) Single-use items provided with meals sold. The following single-use items that are provided or made available to restaurant customers without charge are a component part of a meal sold to the customer and may be purchased tax free for resale: straws, swizzle sticks, stirrers, napkins, doilies, forks, sporks, knives, spoons, toothpicks, chopsticks, tray liners, and pre-moistened disposable cloths.

(d)Food items provided with meals sold. Condiments and other food items that are provided or made available to restaurant customers without a separate charge as a component part of a meal sold to the customer may be purchased tax free for resale.

Example 1: A restaurant places ketchup bottles on dining tables for customers' use. The restaurant may purchase the ketchup tax free for resale.

Example 2: A restaurant puts ketchup packets in bags containing "to go" meals sold to customers and makes ketchup packets available on its self-service island. It also provides ketchup in a dispenser on the self-service island. The restaurant may purchase tax free for resale all of the ketchup in this example.

Example 3: A restaurant provides peanuts or tortilla chips and salsa as a complement to the sale of other food or beverage items. The restaurant may purchase the peanuts, chips, and salsa tax free for resale.

(e) Items used or consumed by the restaurant.

1. Tangible personal property used or consumed by a restaurant is not purchased for resale and as such is subject to tax. Such taxable property includes but is not limited to complimentary meals furnished to employees or customers; tables, tents, chairs, bars, linens, cloth napkins, silverware, glassware, chinaware, serving utensils, table covers, and reusable containers; ice used to chill food or beverages before serving; floral arrangements; and single-use items that are not a component part of a meal sold to a customer. Examples of taxable single-use items include paper towels, plastic serving utensils, aluminum foil used for cooking or storage, toilet paper, plastic wrap, crayons provided for customers' on-premises entertainment, paper placemats, and paper menus.

2. Condiments and single-use items served as a component part of a complimentary meal are considered used or consumed by the restaurant and as such are subject to tax.

3. Single-use containers used to transport complimentary meals are exempt from sales and use tax pursuant to O.C.G.A. § 48-8-3(94).

(f) Duty to keep records. Tangible personal property purchased for resale may be subject to tax unless the retailer can identify, by reasonable and verifiable standards from its books and records that are kept in the regular course of business for any purpose, including nontax purposes, that such property has been resold or is designated for resale.

(7) Delivery. Delivery charges by the seller associated with the sale of food and other taxable tangible personal property are taxable, even if such charges are separately itemized.

(8) Other service charges.

(a) Charges by the seller for any services that are necessary to complete the sale of taxable tangible personal property are taxable, even if such charges are separately itemized.

Example 1: A caterer requires customers purchasing alcohol to purchase bartender and ID checking services. The bartender and ID checking service charges are taxable.

Example 2: A caterer charges a fuel surcharge when delivering food. The fuel surcharge is taxable.

(b) Charges by the seller for any services that are not necessary to complete the sale of taxable tangible personal property are not subject to sales or use tax if separately itemized.

Example 1: A caterer provides coat checking as an optional add-on service to a catered event. The coat checking service is separately itemized on the customer's bill. The service is not taxable.

Example 2: Assume the same scenario as Example 1, but the charge is not separately itemized and is instead included in the total catering charge. The coat checking service is taxable.

Ga. Comp. R. & Regs. R. 560-12-2-.115

O.C.G.A. §§ 48-2-7, 48-2-12, 48-8-2, and 48-8-3.

Original Rule entitled "Restaurants" adopted. F. Sep. 4, 2014; eff. Sept. 24, 2014.