Chapter II — What is Taxable at Grocery and Convenience Stores?
- Examples of Taxable Items
- Food Sold for Immediate Consumption
- Photo Processing
- Rentals of Tangible Personal Property
- Cigarettes and Tobacco Products
- Phone Cards
- Over-the-Counter Drugs and Medicines
A good place to begin is to list some examples of items which, when sold in a grocery store, would be subject to the limited sales and use tax. Keep in mind that this only lists examples of items, and is not all-inclusive. Some items will be footnoted and explained further. In addition, some items will not be listed but will be addressed separately.
|Adhesive tape||Aluminum foil|
|Automotive transmission fluid||Automotive antifreeze|
|**Baby care products (oil, lotion, etc.)||Bags (all types)|
|Charcoal||Charcoal lighter fluid|
|Diapers||*Diluted fruit juices|
|Floor wax||Freezer paper and tape|
|*Frozen drinks||Garbage bags|
|Garden supplies||Gift wrap|
|**Hair shampoo||Hair spray|
|Hair coloring||Hardware items|
|Ice chests||Ice cream salt|
|***Ice cream sundries||Insecticides|
|Keys (including duplication)||Light bulbs|
|Mops||Mop replacement heads/handles|
|*Nuts (candy-coated)||Pencils and pens|
|Razors and blades||Sandwiches (except frozen)|
|Sandwich bags||School supplies|
|Scouring pads||Shaving cream/after shave|
|Stationery and cards||Tape|
|Water softener salt||Wax removers|
|Wine (except cooking wine)||Water - when flavored|
|*||Exempt if purchased with food stamps or the Lone Star Card|
|**||Exempt if medicated|
|***||Exempt if sold in packages of six or more|
|Note:||Effective October 1, 2003, fruit drinks containing more than 50 percent juice are exempt as food products.|
Effective October 1, 2003: Retailers who mix two or more food ingredients for sale by weight or volume (e.g., salad) as a single item must collect sales tax unless the mixture has raw animal foods (eggs, fish, meat, or poultry) that require cooking by the consumer per FDA recommendations. The provision does not include bakery items and food that is only cut, repackaged, or pasteurized.
Food Sold for Immediate Consumption
A grocer must collect sales tax on
- All food kept and sold hot, such as barbecued beef, chicken, chili, soups, barbacoa, tamales, tacos, etc.
- All individual-sized portions of food sold with utensils, such as plates, knives, forks, spoons
- If a grocer has a bakery, coffee shop, or deli with a place to sit and eat, then the grocer must collect tax on items sold "through the restaurant" on the items listed just above and on all food items, when sold in individual-sized containers, that is ready to eat, such as chips, cookies, crackers, peanuts, etc.
Prior to October 1, 2003, all individual-size bakery products such as doughnuts and cookies when sold in quantities of five or less by a retailer that provided eating facilities were considered to be for immediate consumption, thus subject to sales tax.
The grocer must collect sales tax on all film processing, negatives, prints, reprints, pictures-on-disk, slides, etc.
Rentals of Tangible Personal Property
A grocer must collect sales tax on the rental of video tapes/DVDs, VCRs, floor-cleaning equipment, and any other rentals of tangible personal property.
Cigarettes and Tobacco Products
Even though cigarettes and tobacco products are taxed under different statutes, they are also subject to the limited sales and use tax.
Newspapers are not taxable. The State Sales and Use Tax Statute Sec. 151.319 (f) defines a newspaper as publications
- Printed on newsprint
- Distributed at intervals of four weeks or less
- Sold for an average price-per-copy of 75 cents or less over a 30-day period through September 30, 2003. Effective October 1, 2003, the average price increased to $1.50 or less over a 30-day period
- For the dissemination of news of a general character and of general interest, including advertising
|NOTE:||Publications distributed free-of-charge which meet the above criteria would also qualify as newspapers.|
The grocer must collect sales tax on the sale of all pre-paid phone cards. Prepaid calling cards became taxable as tangible personal property effective September 1, 1997, per 151.01032 of the Sales and Use Tax Law for the definition of "calling card" and per 151.009 for its inclusion as taxable tangible personal property.
For more information on items on which the grocer must collect sales tax, consult Publication # TX 96-280 — What is Taxable at Grocery and Convenience Stores.
Over-the-Counter Drugs and Medicines
Effective April 1, 2000, over-the-counter drugs and medicines are exempt from sales tax.
To qualify for the exemption, a product must be applied to, ingested by, or inhaled by humans. In addition, the drug or medicine must be intended or marketed for the use in the diagnosis, cure, mitigation, treatment, or prevention of disease, illness, injury, or pain. The over-the-counter drug or medicine must have been issued an NDC (National Drug Code) number. However, the number does not have to appear on the product label in order to be exempt.
Items for animals are not exempt unless purchased with a veterinarian's prescription.
In order to give the auditor an idea as to which products qualify for the exemption, the following is a short list of qualifying products. Again, the products listed below merely serve as a guideline.
|Acne treatment products||Allergy treatment products|
|Anti-asthmatic products||Anti-diarrhea products|
|Anti-fungal products||Anti-nausea products|
|Anti-rheumatic products||Cold remedies|
|Cough suppressants||Dandruff shampoos|
|Dietary supplements/vitamins||Ear care products|
|Expectorants||*Eye care/contact lens products|
|Pain relievers (aspirin, ibuprofen, etc.)||Sedatives/sleep aids|
|Stimulants||Sunburn prevention products|
|Sunburn treatment products||Wound care dressings|
|*||Must be applied to the eye — exemption does not apply if product is merely used to clean the contact lens.|
There could be a fine line between a qualifying product and a non-qualifying product. For example, deodorants are subject to sales tax; however, antiperspirants are exempt. For more information on over-the-counter drugs and medicines, consult Publication # TX 94-155 — Sales Tax Exemption for Over-the-Counter Drugs and Medicines.
Maintained by the Audit Division