Chapter I — Introduction
State Sales and Use Tax Rule 3.328 (Optional Reporting Methods for Grocers and Other Vendors) defines retail grocers as: "Persons who sell food at retail to be consumed off the premises where such food is sold, and who sell household supplies and nondurable household goods, but whose receipts from the sale of any other tangible personal property do not exceed 5.0% of their total receipts, are referred to in this section as retail grocers."
Beer, wine, cigarettes, cigars, tobacco products, and motor fuels are considered to be tangible personal property rather than food products and, therefore, must be included in the five percent computation. The receipts from all outlets must be considered as a whole, not individually, in determining the five percent computation.
The sales tax rule outlines three optional reporting methods to reduce the bookkeeping requirements for those grocers who traditionally sell few taxable items and have little tax to report. These are:
- Purchase Ratio Method
- 15% of Gross Sales Method
- Commingled Receipts Method
Through the years, however, the "neighborhood grocer" who sold only food, has given way to the supermarket and the convenience store which sell a variety of products besides food, such as clothing, toys, food for immediate consumption, etc. Consequently, few grocers today qualify under the strict statutory definition of a retail grocer.
As the makeup of the grocery store has changed, so have the various record-keeping systems of the businesses. Many systems in use today provide a more reliable method for auditing for sales and use taxes than the three methods outlined in the statute. However, the Comptroller's Department allows usage of one of the three statutory optional methods unless the retailer adopts a more reliable record-keeping method.
This procedure manual has been written for the auditor. It is to be used as a training tool and as a reference guide. When reference is made to grocery stores, also remember that it applies to convenience stores. When forms are used as exhibits, they are shown with information correctly completed. References to AM Memos, AP Memos, fiche, rulings, and statutes are given when needed. Any schedules included in the manual are for illustration purposes only and are not to be construed as the accepted format. Audit schedules will need to be tailored to the audit situations encountered and to the auditors' needs.
Users of this manual are responsible for any changes that occur after the printing or posting of the manual. References to taxability of individual items, administrative policies, or tax law and rules are provided for the guidance of field auditors and are subject to change due to administrative hearings and actions of courts or the legislature.
Before relying on this information, all users should verify the current status of any information by contacting the Comptroller of Public Accounts. Call toll free: (800) 252-5555. The regular number in Austin is: (512) 463-4600.
To order copies of this manual call (800) 531-5441, ext. 3-3900.
Maintained by the Audit Division