| (2) Sales of food, prepared food, soft drinks, snack
items, or candy sold or served by public or private elementary or
secondary schools, school districts, bona fide student organizations,
booster club or other school support organization, or parent-teacher
organizations and associations are exempt if the items are sold or
served during a regular school day pursuant to an agreement with the
proper school authorities. This exemption includes food, soft drinks,
snack items, and candy sold through vending machines.
(3) Sales of food, prepared food, soft drinks, snack
items, or candy by a parent-teacher organization or association during
a fund-raising sale are exempt if the proceeds do not go to the benefit
of an individual.
(4) Sales of food, prepared food, soft drinks, snack
items, or candy by a group associated with a private or public elementary
or secondary school are exempt if the sale is part of a fund-raising
drive sponsored by the organization for its exclusive use.
(5) Sales of food, prepared food, soft drinks, snack
items, or candy during an event sponsored or sanctioned by an elementary
or secondary school or school district at a concession stand operated
by a booster club or other school support organization formed to support
the school or school district are exempt, but only if the proceeds
from the sales benefit the school or school district.
(6) Sales of food, prepared food, soft drinks, snack
items, or candy by a member or volunteer for a nonprofit organization
devoted to the exclusive purpose of education or religious or physical
training of persons under 19 years of age are exempt if the sale is
part of a fund-raising drive sponsored by the organization for its
(7) Sales of food, prepared food, soft drinks, snack
items, or candy served by hospitals, day care centers, summer camps,
or other institutions licensed by the state for the care of humans
are exempt if sold or served to the patients, children, students,
or residents of the facility. Sales of prepared food, soft drinks,
snack items sold in individual-sized portions, and candy to visitors
or employees of the facility are taxable. Persons confined in correctional
facilities operated under the authority, jurisdiction, or under a
contract with the State of Texas or its political subdivisions are
not exempt and must pay sales tax when they purchase taxable items
such as prepared food, candy, snack items in individual-sized portions,
soft drinks, and taxable items sold from vending machines. Meals and
beverages served without charge to inmates confined in correctional
facilities are not taxable.
(8) Food, prepared food, soft drinks, snack items,
or candy sold or served by a retirement facility to its permanent
residents are exempt. Sales of taxable items to visitors or employees
of the facility are taxable.
(h) Responsibilities of sellers of taxable food and
(1) A seller must collect sales tax on all taxable
sales. The seller is required to obtain a sales tax permit, file sales
tax returns and remit the tax to the comptroller. See §3.286
of this title (relating to Seller's and Purchaser's Responsibilities,
including Nexus, Permits, Returns and Reporting Periods, and Collection
and Exemption Rules).
(2) A seller must collect sales tax on the total sales
price of taxable items, including separately stated charges for preparing,
serving, or delivering taxable items, charges for the room or facility
in which the meals and beverages are served, and charges for the cost
or expense of items such as reusable tables, chairs, tableware, and
tablecloths used by the seller in providing the food service. Reusable
items that are used by the food service provider (not rented to the
customer) may not be purchased tax free for resale.
(A) A cash discount (including a discount coupon) allowed
by a seller reduces the sales price of a taxable item, and the seller
should collect sales tax on the actual amount paid by the customer
for the discounted meals or beverages. For example, a seller should
charge sales tax on the price of the single meal when accepting a
discount coupon that allows the customer to purchase two meals for
the price of one.
(B) Separately stated charges for mandatory tips or
gratuities may be excluded from the sales price if the charges meet
the criteria for exclusion as explained in §3.337 of this title
(relating to Gratuities). Voluntary tips or gratuities left by customers
for food service employees are not subject to sales tax.
(3) A seller of taxable items must keep accurate records
that clearly identify sales of exempt items and sales of taxable items.
The records must separately state charges for the exempt items from
the charges for taxable items. Examples of records include sales invoices,
receipts, and cash register coding records. If a seller's records
do not clearly identify exempt sales from taxable sales, all sales
are presumed taxable.
(4) A seller must pay sales or use tax on the purchase,
lease, or rental of all taxable items unless otherwise exempt under
the law. Examples of equipment and supply items taxable to a food
service business include, but are not limited to, tables, chairs,
reusable place mats, tablecloths, cloth napkins, silverware, dishes,
dispensers such as salt and pepper shakers and glass creamers, garbage
cans and garbage can liners, janitorial items such as mops and mop
holders, grill bricks, aprons, menus and menu inserts, and hand tools
such as cooking utensils, cutting knives, and lime squeezers.
(5) A seller may give a resale certificate to a supplier
for the tax-free purchase of items that are transferred to the customer
with the food or beverages. Such items must not be reusable by the
seller to qualify for the sale for resale exemption. See §3.285
of this title (relating to Resale Certificates; Sales for Resale).
Persons who process food for sale qualify for an exemption on the
wrapping and packaging used to package the food for sale and may give
an exemption certificate to a supplier. See §3.314 of this title
(relating to Wrapping, Packing, Packaging Supplies, Containers, Labels,
Tags, Export Packers, and Stevedoring Materials and Supplies). Examples
of items qualifying for exemption include disposable paper products,
wooden, plastic, and aluminum products that are transferred to the
customer. Other examples include cake boxes, lunch boxes, disposable
cups, paper and plastic containers, bottle wraps, butter chip trays,
disposable paper or plastic plates, plastic knives, forks, and spoons,
paper napkins, soda straws, toothpicks, french fry boxes, stir sticks,
ice cream sticks, disposable souffle cups, hot dog trays, and other
types of disposable trays.
(6) A person processing food for sale is a manufacturer
and may claim a sales or use tax exemption on purchases of equipment
and other taxable items that qualify for exemption under Tax Code, §151.318.
For example, a restaurant may claim an exemption on the purchase of
an oven or a mixer directly used in baking or mixing. See §3.300
of this title (relating to Manufacturing; Custom Manufacturing; Fabricating;
Processing) for further information regarding these exemptions. The
exemption in Tax Code, §151.317 for natural gas and electricity
used in manufacturing is not applicable when the gas or electricity
is used to prepare or store prepared food.
(7) As a matter of convenience, a food service business,
such as a restaurant selling prepared food, may sell prepared food
tax free to a food service employee immediately before, during, or
immediately after the employee's shift. This provision applies to
employees involved in preparing or serving food at the food service
(i) Universities, colleges, junior colleges, or other
institutions of higher learning. Universities and colleges are required
to collect sales tax on taxable sales as explained in subsection (c)
of this section. If a charge for meals is not separately stated and
is included in a lump-sum price to a student for room and board, sales
tax is due on the portion of the lump-sum charge attributable to the
(j) Hotels and other places that provide sleeping accommodations.
Persons that provide sleeping accommodations to the public, including
motels, tourist houses, lodging houses, inns, rooming houses, bed
and breakfast places, must collect hotel occupancy tax under Tax Code,
(1) A hotel must collect tax on prepared food.
(2) If the charges for prepared food are not separately
stated and are billed with the lodging as a lump-sum price, then hotel
occupancy tax, not sales tax, is due on the lump-sum charge. See §3.162
of this title (relating to Hotel Occupancy Tax Base and Collection
of the Tax).
(3) A hotel is not required to collect sales tax on
a separately stated charge for use of a hotel meeting room if the
charge is unrelated to the sale, provision, or service of prepared
food or the sale of other taxable items such as an admission charge
for a taxable amusement service. See §3.298 of this title (relating
to Amusement Services). The charge for the meeting room is subject
to hotel occupancy tax if the meeting room is located in the hotel
building where sleeping accommodations are provided.
(4) A hotel is required to pay sales tax on its purchase
of taxable items (e.g., prepared food purchased from a caterer, soft
drinks, candy, ice) provided to guests free of charge as complimentary
items. However, a hotel is not required to accrue and pay sales tax
on its purchase of exempt food products (loaves of bread, milk, cereal,
fruit) even if provided to guests as free complimentary items.
(1) Caterers are persons engaged in the business of
preparing and serving meals, drinks, or other food products at locations
designated by customers. A caterer is a seller of prepared food and
beverages and must collect sales tax on all charges billed in connection
with the sale of taxable meals.
(2) A caterer owes tax on the purchase, lease, or rental
of such items as tables, chairs, tablecloths, steam tables, and table
decorations used in providing catered meals. A caterer may claim a
resale exemption on the purchase of nonreusable items transferred
to customers and a manufacturing exemption on qualifying equipment,
such as mixers, used to prepare the food. See §3.300 of this
title for information on qualifying equipment.
(3) If a caterer uses a room or facility in a hotel
that is subject to hotel occupancy tax, the caterer is required to
pay the occupancy tax to the hotel. There is no resale exemption for
hotel occupancy tax. In addition, a caterer must collect sales tax
on a separately stated charge passed on to the customer for the cost
or expense of the room (including the occupancy tax) when billed to
a customer as part of the taxable sale of catered meals.
(l) For information on the responsibilities of persons
who sell and serve mixed alcoholic beverages, see §3.289 of this
title (relating to Alcoholic Beverage Exemptions).
(m) Grocery stores and convenience stores. Subject
to the exemptions described in subsection (b) of this section, grocery
stores and convenience stores should collect sales tax on the items
listed in subsection (c) of this section. Taxable items include ice,
candy, packaged soft drinks, and prepared food. Food and drinks sold
in a heated state, fountain drinks, and food sold with eating utensils
are considered to be prepared food ready for immediate consumption
regardless of the location in the store from which the food is sold.
Other food or drinks that can be immediately consumed and that are
sold by a restaurant, lunch counter, deli, or other similar location
within the store are also considered to be taxable prepared food.
For example, a bottle of unsweetened iced tea sold at a grocery store
deli is considered to be ready for immediate consumption and is taxable.
However, a bottle of unsweetened iced tea sold at the checkout lane
of a grocery store is not considered to be food ready for immediate
consumption and is not taxable.