N.J. Admin. Code § 18:24-12.2A

Current through Register Vol. 56, No. 11, June 3, 2024

Section 18:24-12.2A - Threshold test for determining whether utensils are provided by seller

(a) Food sold with eating utensils provided by the seller is subject to sales tax as prepared food.

(b) The threshold test for determining whether eating utensils have been provided by the seller is as follows:

1. Whether eating utensils are deemed to be provided by the seller depends on whether the seller's annual sales of certain types of prepared food make up more than 75 percent of its total sales of food and food ingredients (excluding alcoholic beverages). The 75 percent threshold is calculated as follows:

i. First, calculate the percentage of food provided by the seller as follows:

(1) Determine the numerator, which is made up of the total dollar value of sales of prepared food that is either sold in a heated state or heated by the seller; plus sales of prepared food made up of two or more food ingredients mixed or combined by the seller for sale as a single item; plus sales of food that cannot be transferred to the purchaser without plates, bowls, glasses, cups or other utensils (for example, fountain beverages, salad bar); then

(2) Divide the numerator determined in (a)1i(1) above by the total dollar value of all sales of food and food ingredients, including prepared food, candy, dietary supplements, and soft drinks, but not including alcoholic beverages. Application of the threshold test will depend upon whether the result of that calculation is more than .75 (more than 75 percent) or .75 or less (75 percent or less); and

ii. Second, calculate the annual percentage of utensil usage as follows:

(1) The prepared food sales percentage will be calculated by the seller for each tax year or business fiscal year, based on the seller's data from the prior tax year or business fiscal year, as soon as possible after accounting records are available, but not later than 90 days after the beginning of the tax or business fiscal year;

(2) A single prepared food sales percentage will be determined annually, for all of the seller's establishments in the State; and

(3) A new business will make a good faith estimate of its prepared food sales percentage for its first year. A new business should adjust its good faith estimate prospectively after the first three months of operation if actual prepared food sales percentages materially affect the 75 percent threshold test.

2. Application of the 75 percent threshold test follows:

i. For sellers with a sales percentage of 75 percent or less, utensils are considered to be provided by the seller if the seller's practice for the item (as represented by the seller) is to physically give or hand the utensil to the purchaser, except that plates, bowls, glasses, or cups necessary for the purchaser to receive the food (for example, fountain beverages, dispensed milk, or salad bar) need only be made available.

ii. For sellers with a sales percentage greater than 75 percent, utensils are considered to be provided by the seller if they are merely made available to purchasers. Thus, utensils at a kiosk or common area are treated as utensils provided by the seller.

(1) For sellers who sell items that contain four or more servings packaged as one item and sold for a single price, an item does not become prepared food based on the seller having utensils available. However, if the seller physically gives or hands a utensil to the purchaser, or plates, bowls, glasses, or cups are necessary for the purchaser to receive the food, then the item is considered prepared food.

N.J. Admin. Code § 18:24-12.2A

Amended by 48 N.J.R. 824(a), effective 5/16/2016